Many Canadians operate a home-based business. Whether it’s a full-time operation or a part-time side hustle, it’s important to protect yourself and manage your home-based business risks. In this article, we’ll discuss how you can protect your home office, company property and reduce the risk of lawsuits. We’ll also advise on which types of insurance you may need in case the unexpected happens.
Protecting Your Home-Based Business Property
Did you know your home insurance may not cover your company’s property if something happens? In some cases they’ll provide a small amount of coverage. So how can you protect your home-based business property?
The first step is to speak to your broker to make sure this property is insured. In some cases, you may be able to purchase a home-based business endorsement on your regular home insurance. In other cases, you will have to purchase separate commercial property insurance.
Once you have insurance, it’s all about managing risk. There are a few ways to protect your home office, inventory and equipment – with the added benefit of protecting your home!
- Have physical barriers in place like fences, gates or doors and locks.
- Install security features like motion sensor lighting, cameras and alarm systems.
- Make sure your work-related equipment and inventory is stored well (off the ground/floor, protected from the elements if not inside, and out of sight if possible).
- Install water mitigation measures like a sewer backup valve, sump pump, and water alarm.
- Ensure there is adequate fire suppression such as a smoke alarm, fire extinguisher, or even a sprinkler system.
- Operate any equipment or tools safely.
Prevent Lawsuits Against Your Home-Based Business
Here are a few ways you can be sued as a home-based business:
- Someone is injured on your property or due to a product you sell.
- Someone has their property damaged while it’s in your custody or due to something you sell or install.
- You are accused of causing a client financial loss.
- Your business is the victim of a cyberattack or data breach and customers sue you for failing to protect their information.
These are just a few examples of lawsuits that can be brought against a home-based business. To protect yourself and your company, ensure that you minimize the risks. Here’s how you can do that:
- If any client or third party visits your home, ensure there are clean, safe walkways.
- Install handrails wherever needed.
- Take care of snow and ice removal promptly.
- Post signage for risks like a low ceiling or slippery areas.
- Operate any equipment or tools safely.
- Have excellent documentation practices (have a paper trail of everything).
- Keep multiple copies and digital backups.
- Create and adhere to a good privacy policy.
- Create a contract that outlines fees, the process and everyone’s responsibilities (and have it reviewed by your lawyer).
- Choose reputable vendors.
- Password protect all devices.
- Use multifactor authentication wherever possible.
- Use strong passwords.
- Install reputable firewall, antivirus and malware software.
- Encrypt Wi-Fi connections and sensitive data.
- Keep an up-to-date inventory list.
- Follow your industry’s best practices and stay up to date on certifications and training.
Your broker can advise on additional risk mitigation measures for your specific home-based business. You can also hire a consultant to advise on risk management – this is especially important for cyber liability and data protection if you handle more sensitive customer information.
Insurance for Home-Based Businesses
The insurance you need for your home-based business will depend on what you do. In some cases, you will be able to purchase a home-based business endorsement as an add-on to your home insurance. Not all insurers offer this coverage or your company may not be eligible.
Here are some common types of insurance for small businesses:
- Commercial Property – Covers repair or replacement of company property if it’s damaged by an insured peril like fire or theft.
- Commercial General Liability – Covers claims for bodily injury or property damage you’re found legally liable for.
- Professional Liability – Covers legal expenses if you’re sued for causing financial loss to a third party for a mistake or failing to provide a professional service or advice. This is also known as errors and omissions insurance.
- Cyber Liability – Helps cover costs associated with a cyber-attack or data breach.
- Business Interruption – Helps cover costs and lost income if your business is disrupted or forced to shut down due to an insured peril.
- Equipment Breakdown – If your business relies on essential equipment, this coverage can help with repair costs if it suffers an electrical or mechanical breakdown.
If you use your personal vehicle for anything related to work, you may need a commercial vehicle policy.
Your broker is your best resource for ensuring you and your home-based business are protected. Speak with them to find out more about risk management and insurance.
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