Many people run a business from home without realising that it may affect their personal insurance cover.
Working from home does not automatically mean that your personal policy is no longer suitable. In some cases, if you only perform administrative work from your home office, using your computer and telephone, this may be acceptable on a personal lines policy. However, this is usually subject to disclosure and approval from your insurer.
The important part is that your insurer must know what activities are taking place at the insured premises.
When the Risk Changes
The situation changes when your home is no longer only being used as a private residence or quiet administrative workspace.
For example, if clients visit your home for business purposes, liability becomes an important consideration. If a client slips, falls, or suffers injury while visiting your property for a business-related reason, your personal policy may not automatically respond in the way you expect.
This is why it is important to discuss the nature of your home business with your financial advisor.
Selling, Manufacturing or Storing Goods From Home
A commercial policy should be considered if you manufacture, produce, store, or sell goods from your private residence.
Personal household insurance is generally not designed to cover business stock, business equipment, defective workmanship, product-related liability, or loss connected to commercial activity.
For example, if you keep stock at home for an online shop, manufacture products in your garage, or sell goods from your residence, these items may not be covered under a standard personal policy.
The moment business stock, production, or client-facing activity is involved, the cover needs to be reviewed properly.
Hot Works Must Be Disclosed
If any hot works take place at your private home as part of your business activities, this must be disclosed to the insurer where your building or structure is insured.
Hot works can include activities such as:
• Soldering
• Grinding
• Welding
• Cutting
• Any work involving heat, sparks, or open flame
These activities can significantly increase the fire risk at the property. Because of this increased risk, your insurer must be informed and approval may be required.
Failing to disclose this could create serious complications at claim stage.
Rental Properties Also Need Attention
Another area people often forget about is rental properties.
If you own a private residence that is rented out to a third party, it is important to understand what your tenant is doing at the property.
If your tenant is running a business from the premises, storing stock, manufacturing goods, working with tools, or performing hot works, this may affect the risk profile of your property.
As the property owner, you need to make sure that these activities are disclosed and discussed with your insurer.
Review Before There Is a Claim
Insurance is based on disclosure. Your insurer assesses the risk based on the information provided to them.
If your home is being used for business purposes, even on a small scale, it is always better to discuss it upfront than to only discover a problem after a loss has occurred.
At SWL Financial Services, we encourage clients to review their cover when their personal circumstances, business activities, or property usage changes.
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This content is provided for general information purposes only and should not be considered financial advice. Please consult a qualified financial adviser before making financial decisions.
