Does running a business from home affect home insurance?

25th September 2018

You might be happy with how you have insured your home, but this insurance might not remain valid if you transition your home from just a home and into a workplace, too. That's what would happen if you start running a firm from home, but have you considered the insurance implications?

According to research cited by bytestart.co.uk, 2.1 million companies are run from home. That's a high number, and 1,400 new businesses add to it on a weekly basis. However, don't act on your temptation to start a home-based business of your own before taking account of the following...

Do you have the right buildings insurance?

Home insurance has two tenets: buildings insurance and contents insurance. We will soon concern ourselves with the subject of contents insurance, but the current condition of your home's contents wouldn't stay intact for long if you didn't maintain the physical roof over them.

You likely already have buildings insurance that you originally took out at the same time as your mortgage. If the physical building of your home is damaged or destroyed, you could have it repaired or rebuilt due to an injection of funding from your buildings insurance policy.

Naturally, if your residential building deteriorates in this way, this would hamper the building's effectiveness as a corporate base. Nonetheless, it doesn't strictly follow that, if you indeed put the building to this purpose, your insurance would still cover you for damage or worse deterioration.

For this reason, it's a good idea to let your insurer know if you are setting up a business in the insured residence. They might react by imposing a higher premium on your existing policy. It would be a price worth paying for your peace of mind, however. If you fail to so notify the insurer before making a claim, they might declare your insurance invalid and so refuse to pay out.

The Money Advice Service acknowledges that 90% of home insurance policies will already cover business equipment in the residence. However, the site also urges you not to assume that this will be the case with your personal household insurance, so check with your insurer to make sure.

Typically, standard policies do allow the home to be used strictly for clerical purposes, such as office work. However, don't be surprised if your current policy doesn't permit you to receive business-related visitors - like clients - at your home while still being covered.

Laptop, cup and mobile phone on desk

How to be content with your contents insurance

In truth, you shouldn't be startled if turning your residence into a business base affects your contents insurance much more than your buildings cover, as is likely. The "contents" part of this insurance equation refers to loose items - like furniture and jewellery - that are in your home.

Typically, then, if any of these possessions are damaged or stolen, the insurance would enable you to fairly quickly recover the cost of replacing those items. However, your business could require you to give your home extra items that would not be covered by your existing policy.

These items could include extra computers for all of your staff to use, should you be running a business with many employees rather than as a one-person outfit. Though staying at home all day would theoretically lower your burglary risk, the insurer might not take this into account.

Therefore, you might have to accept an amended or replaced policy and a rise in your premiums unless you are willing to work within the restrictions of a domestic policy. Many such policies let you sometimes work from home if you usually work on more traditional bricks-and-mortar premises.

Still, your existing domestic policy might limit what particular items your business is allowed to own while still enjoying coverage. If you are unsure exactly how far the policy stretches, you could get in touch with your insurer to clear your doubt.

Fortunately, if you do have your contents insurance policy extended to cover your use of business devices, equipment and tools, the benefits can be far-reaching. For example, you can cover even such items which you might want to occasionally remove from your residential building. A laptop, plus equipment necessary for use in providing a service at other homes, would be good examples.

When you do arrange for your contents cover to be tweaked, let the insurer know as much information as possible about your relevant circumstances, advises Startups.co.uk. This can reduce the chances of you later trying to make a claim only to realise that you aren't covered for it.