Whether a choice or a necessity, running a new business from home is inevitable for many entrepreneurs – but few realise that home insurance will not protect their business. Jazz Gakhal, Head of Direct Line for Business, explains why it’s essential to get the right type of cover for your SME.
For many small businesses, says Gakhal, loss or damage – whether intentional or the result of a natural disaster – can spell the end of the company. “If something were to happen to the premises or the property, there’s a risk that you wouldn’t be able to afford to replace the contents or the stock,” she says “So if you’ve invested quite a bit of money in that, for a small business, operating out of your home premises, the chances are that the capital is not available to replace all of that, which could bring the business to a prompt close.”
What’s more, whilst home-working employees are generally covered by their company’s insurance, a company that is actually run out of a home is rarely covered by home insurance. “Generally, I’d say there’s a bit of a lack of awareness around home business insurance. Small businesses that operate out of their home need to be aware that they need to let their home insurer know,” says Gakhal. “If the worst should happen and there was a storm, or a flood, or a fire, home insurance may provide cover for your personal contents but not any relating to the business.”
However, whilst many people may at least be aware of threats like theft, fire and floods, they are less likely to think about business-specific insurance issues. Liability is a big consideration, says Gakhal: home businesses that are visited by clients or make visits to other companies are likely to need public liability insurance, in case injuries occur on their premises or accidental damage is done to others’ property. Entrepreneurs involved in manufacture will need to protect themselves with product liability insurance, whilst companies that have grown big enough to take on staff may need to look into employers’ liability insurance. With potential compensation claims of hundreds of thousands of pounds at risk, business owners should focus on severity, not frequency, warns Gakhal.
Of course, when it comes to mitigating risk, some things are just common sense. Simple health and safety measures like making sure that walkways are clear and carpets are pinned down reduce the chance of accidents, whilst home businesses should avoid attracting the attention of thieves. “If you’re setting up a business in the first instance, and you’ve invested quite a bit of money in technology, maybe it’s a laptop or printers, photocopiers, any of this home office equipment… don’t leave the boxes outside,” says Gakhal. “Otherwise it’s a walking advertisement for anyone coming past the property that actually quite a lot of expensive business equipment has been purchased!”