Home businesses should check the insurance policy to make sure they are covered


CALGARY – When Ana Maria Moreno decided to quit her career in social work to start a home business last year, she found herself faced with a daunting to-do list that included everything from logo design to marketing strategy through customer awareness.

CALGARY – When Ana Maria Moreno decided to quit her career in social work to start a home business last year, she found herself faced with a daunting to-do list that included everything from logo design to marketing strategy through customer awareness.

The Calgary woman – who runs her business from her own kitchen, making and selling empanadas and other traditional foods from her native Colombia – acknowledges that checking her insurance policy was the farthest thing on her mind.

“I didn’t think about it. I had all these people telling me I had to advertise, I needed a logo, I should work on a brand. It was a lot,” said declared Mereno. “I was just busy cooking. I definitely haven’t thought of everything.”

There are thousands of home-based businesses in Canada, ranging from hair salons and consulting firms to daycare centers, many of which are run by new business owners.

Experts say new business owners should know that the typical home insurance policy offers only a small limit of coverage for books, tools, and instruments needed by a business or profession. But it’s easy for entrepreneurs to get so wrapped up in the day-to-day demands of their new business that they never even think about insurance, said Patricia Sheridan, director of insurance brokerage firm Burns & Wilcox, based in Toronto.

“We see it a lot. I think most of the time it doesn’t occur to them,” Sheridan said. “It’s usually not the first thing people think of when starting a business.”

Not all home business operators will need specialized insurance coverage. Depending on the type of business, home business operators may or may not need a separate business insurance policy or an extension of their existing home insurance policy.

But it’s worth a phone call to find ask, Sheridan said. The last thing a business operator wants is to find out too late that their owner’s policy does not allow their specific type of business activity on the premises.

“The implications are that if they don’t have any other coverage for their business and they think they’re just covered by their home insurance policy, their home insurance policy could void them if they find out. “said Sheridan. “Or if there is a claim, they might not cover it.”

Anne Marie Thomas, director of consumer and industry relations at the Insurance Bureau of Canada, said the insurance needs of individual businesses vary widely.

“If you’re a one-person business knitting baby toques, the risk of liability for the business is minimal. It’s you, the knitting needles and the yarn,” she said. “But if you have a business where you have customers coming in and out of your house, that’s an increased liability risk for the insurance company.”

One scenario that should be considered by every home business operator includes the possibility of a customer falling and injuring themselves while walking up the stairs to the home. Another is the risk of being sued because of a problem with a product or service provided by the company. Personal liability on a home insurance policy would not cover these situations, but commercial liability insurance would.

Some home entrepreneurs may also have thousands of dollars worth of product or inventory in their basement. It’s worth talking to your insurance company about it, Thomas said.

Any business that involves building or fabricating something within the confines of a house could also present liability issues, Thomas added.

“To go to the extreme, if you’re building firecrackers in your house, that’s something an insurance company is probably going to say, ‘I don’t think so,'” she said.

Every business and every insurance policy is unique, which is why it’s important for new entrepreneurs to talk to their brokers and be upfront about their specific situation and needs.

Thomas recommends that home business operators contact their insurance representatives as soon as the business is launched and stay in touch regularly as the business grows and evolves. Setting up a comprehensive risk management plan doesn’t have to be a complicated process and can provide the necessary peace of mind, she said.

“With insurance, you better have it and not need it, then need it and not have it,” she said.

This report by The Canadian Press was first published on December 2, 2021.

Amanda Stephenson, The Canadian Press


Comments are closed.