Running a business from home? Get the right insurance
For years the number of people choosing to work from home, either as self-employed professionals or to run their own business, has been on the increase. With low cost, accessible broadband often included as part of a phone package, and cheaper IT and office equipment, the costs associated with running a business from home have become more affordable.
According to the latest Labour Force Survey from the Office of National Statistics (ONS), around 2.5% of workers are classed as home business workers, with the ONS calculating that around 2.1 million of us work from home on a permanent basis.
With another scorching summer predicted, it is hardly surprising that our minds sway towards excluding commuting from our daily lives, replacing it instead with a short walk to the study or, as has become the fashion in past years, a converted shed/ office at the bottom of your garden. While this sounds appealing, it is also fair to say that few who take this route fully understand the financial implications of such a move, or think about how they might cope if sickness or an accident that left them unable to work.
Home and contents insurance cover needs to be reappraised. Surprisingly your home’s insurance premiums may not increase, as in effect you are improving the security of your property by being at home all day. However you might need to increase the amount of cover on your contents policy, as this would now include extra equipment and potentially stock or cash.
Many specialist insurance companies offer insurance packages specifically designed for those running their own businesses from home or for those who are self employed. These specialist packages will often include Employers Liability Insurance (ELI) and Public Liability Insurance (PLI) as standard.
The current law in the UK makes it compulsory to have ELI if you employ others. Working from home (self employed or sole trader), you may think that this insurance does not apply to you. In research from insurer More Than, a massive 73% of UK sole traders admitted that they were unaware of the full implication of Employers Liability Insurance.
Even if you work alone, employing someone on a temporary or casual basis, such as a cleaner or holiday help would expose you legally and financially should that person injure themselves whilst carrying out a job on your request. If you do employ any staff in such a capacity, you need to ensure your business insurance covers it. However, if you don’t employ any staff, check your policy to make sure you aren’t paying for employer’s liability cover.
Optional covers, but worth considering depending on the nature of your business, are Public Liability Insurance (PLI) and Professional Indemnity Insurance (PII).
PLI is relevant in case of a need to pay damages to members of the public for death, injury or damage to property or vehicles arising as a result of your business. A good example of a business needing this cover would be a family run bouncy castle business. You need to make sure you are paying for the right amount of cover. Some insurers will quote you for a level of cover of between £1m and £5m but you may only need £1m of cover. It is always best to shop around to make sure that you do not pay excessive premiums for a level of cover that you do not require.
PII protects against financial liabilities to third parties arising from acts that could be deemed negligent whilst operating your business. It is particularly important for tradesmen and professionals who give advice or manage aspects of other businesses, such as IT or accounts.
Neither PLI nor PII are compulsory but apart from the need to protect yourself and your business, you may find that you may have to provide proof of insurance in order to secure a job or client. Lack of the correct insurance could therefore impact on potential earnings.
Other insurance needs that you may decide to pay for would be premises insurance. Whilst you would already have building and contents insurance for your home, it will not usually cover business operations.
If you are storing your stock at home then consider contents and stock cover. Tradesmen’s tools are notoriously expensive, not just leaving you heavily indebted if they are stolen, but you could be risking loss of income if you cannot afford to pay for new tools.
Many of the self employed do not consider what would happen if they were unwell or had an accident that prevented them from working. Sickness and accident policies cover these eventualities but are normally only for the shorter term, hence why they are relatively cost effective. For longer term cover there is Income Replacement Insurance or Permanent Health Insurance. For many self employed the costs associated with such cover often makes these policies cost prohibitive.
The bottom line when running a business or working from home is that you must check all the fine detail and small print contained in the policies. Remember, most people are under-insured when it come to buildings and home contents. Do not make the same mistake with your business.
Simply Business provides impartial, instant online quotes for all types of business insurance. We have specialists in insurance for home businesses and tradesmen from leading insurers.
Compare business insurance quotes
This article was originally published on Simply Business. http://www.simplybusiness.co.uk
