Starting a business from home: what insurance do you need?

If you’re starting a new business, using your home as the primary business premises can come with a range of benefits.

Firstly, you won’t be have to pay for, or be tied to, an expensive office space. You also won’t have to waste money or time on commuting to and from work, and you can choose your own hours – rather than having to follow an office’s opening times or public transport timetable.

However, running a business from home doesn’t remove all of the legal considerations you’ll need to make when trading as a business. In particular, you’ll need to make sure you’re correctly and adequately insured.

There several types of cover to look into as a home-based business owner – some of them are crucial, while others are nice to have for added security. Find out below which ones you might need or want, as well the ones you don’t need to worry about.

Professional indemnity insurance

What is it?

Professional indemnity insurance can also be referred to as either professional liability insurance or simply PI. It covers you in the event that you make a mistake or provide inadequate services or advice while working with a client.

Claims that are covered by PI insurance include: libel and defamation, negligence, misrepresentation, errors, omissions, breach of confidence, loss of information, loss of money, and more.

You’ll be covered for the legal cost of defending your business against any claims, as well as for the compensation that may be owed to a client.

Should I get it?

It’s easy to say that you will never make the mistakes listed above, but accidents can happen to even the most cautious businesses – and even if you manage to avoid mistakes entirely, that won’t necessarily stop a client from making a claim against you.

If you deal primarily in knowledge and skills – offering a service of consultancy: as an architect, accountant, IT professional, trainer or designer, for example – you should think seriously about getting this cover.

In fact, some clients will refuse to work with you unless you have it.

Public liability insurance

What is it?

Public liability insurance covers you if a customer or client suffers an injury, or has personal property damaged, as a result of frequenting your business premises.

This insurance can cover both the legal costs incurred if a customer makes a claim, as well as the compensation owed to the claimant.

Should I get it?

If members of the public come to your place of work – your home, in this case – or if you visit theirs, this should be a key policy for you.

While a hairdressers, stylist or tattooist may seem most likely to accidentally injure a customer due to the nature of their service, nobody is entirely exempt from that risk. A customer who trips on your rug and breaks their ankle can just as easily make a claim as someone whose scalp is accidentally burned by hair dye.

At the same time, if you damage a customer’s wall while setting up equipment, or even if you just spill a cup of tea over their laptop, you could be open to a claim. It’s best to get cover, even if the risk seems minimal.

Product liability insurance

What is it?

If you’re running a product-based business, it’s a possibility that an item you sell will cause injury or illness to a customer; or it could cause damage to their personal property.

Product liability insurance covers the legal cost of any of these cases, as well as the compensation your customer may win as a result of a successful claim.

Should I get it?

It’s easy to assume that you’re products won’t cause any harm or damage, but accidents happen.

What if you sell an electronic product with a dangerous fault you haven’t spotted, or a toy with small parts that come away more easily than they should. What if your food product makes someone sick, or your skincare causes a reaction?

Whatever the case may be, whether you manufacture the products yourself, repair them, repurpose them, or sell them with a brand name, you could be liable. Product liability insurance is a necessary protection.

Employers’ liability insurance

What is it?

If an employee is injured, gets ill, or has their personal property damaged as a result of working for your business, they can claim compensation from you.

Employer’s liability insurance is designed to cover this, along with any legal costs that you might incur.

Should I get it?

If you have employees – or plan to hire them soon – the simple answer is yes, absolutely.

Whether your staff are full-time, part-time, casual workers or contractors, you are legally required to have employer’s liability insurance. Not having it in place will result in fines of up to £2,500 per day.

The main exception to this is in cases where your employee – or employees – are closely-related family members – a spouse, parent, child or sibling, for example. In that case you may not need the insurance, however it is advisable to make sure that claims are covered without causing financial problems for you.

Buildings insurance

What is it?

Buildings insurance covers damage to the building you are living in – but not the things inside it – in the event of an unexpected incident: a flood, fire, storm or burglary.

Should I get it?

As if your home isn’t already important enough, when you make it the headquarters for your business it becomes doubly so.

You’ll likely already have buildings insurance cover as part of your home insurance package. However, you’ll need to check your policy carefully as some don’t cover rooms being used as office space.

You may need to amend your building insurance policy slightly, or replace it altogether, to make sure you have the cover you need.

Contents insurance

What is it?

A second branch of home insurance, alongside buildings insurance, contents insurance covers the possessions you keep in your home, including: furniture, electronics, jewellery, money, and more.

These items will be covered against loss, damage or theft. You can also choose to include items that you take out of the house in your policy. If you travel with your laptop, for example, it can be protected.

Should I get it?

As with buildings insurance, you’re likely to already have contents insurance in place. But as above, your policy may need to be amended, improved or replaced to make sure it also covers business devices, tools or equipment.

Check your policy to find out whether it covers everything you need it to. It is also worth getting in touch with your insurer as soon as you can to let them know your plans, so they’re aware that your insurance will include business items.

Providing as many of the details as early as possible will help to avoid any potential problems later on, if you need to raise a claim.

Personal accident insurance

What is it?

If you get into a serious accident, it’s possible that you’ll be out of action for a while.

Personal accident cover provides you with money for day-to-day living while you’re out of work, as well covering the cost of any medical expenses.

Should I get it?

If your business needs you in order to keep going, whether that’s closing deals or managing workflows, it might stop making money while you’re away and recovering. If this is the case you may lose your own wage, and the payments offered by this insurance could be a real saviour.

While this cover will only be called into action in an extreme circumstance, if you’re a solo founder without senior staff members who could take over in your absence, it’s definitely worth thinking about.

Choosing insurance policies

When it comes to choosing an insurance policy, its important to consider the level of cover you believe you’ll need.

Your professional indemnity insurance, for example, will only pay for client compensation and legal costs up to a certain amount – and this amount will depend on what you agreed to when buying your insurance.

Do some research into claims typically made in your industry and by your target customer to get an idea of the level of cover you might require. It may be that clients expect you to have a certain level of cover.

When finding the right insurance for you, it’s also worth shopping around for a comprehensive small business policy which includes all that you need in one go – you may find this to be a more cost-effective option than taking out a variety of separate policies.

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