Running a business from home is a convenient choice for many entrepreneurs. It gives you flexibility and precious family time, and helps to keep overheads low. However, anyone who owns a home-based business – no matter how small – faces the same risks as any other company. Use our tips to see if it’s time to get business insurance for your venture to protect yourself from damages and liability.
Home office vs. home business
Simply put: a home office is covered by personal insurance, a home business is not. Anything in your cosy study is covered by your homeowner’s insurance if you occasionally work from home, however the moment it becomes your primary place of business, you have to notify your insurance company. For example, if your home is burgled and the thieves take both personal belongings and business items – e.g. your three sewing machines and a few leather handbags from your fashion business – then an insurer could reject your claim because you did not declare your home business.
Evaluating your risk
There are a few key areas of risk you need to watch out for. Ask yourself:
- Does your business have customers or clients who come to your house? E.g. for appointments, alterations, pick-ups.
- Does your business require special equipment? This could include a laser cutting machine, laptop or commercial kitchen equipment for a catering business.
- Are you using your car for business purposes such as deliveries, location recces or meetings with clients?
- Does your business make or manufacture anything?
- Do you offer a professional service? This includes accountants, engineers, auditors, architects, doctors and lawyers – anyone who is a formally certified member of a professional body.
- Do you store a lot of data – including personal details from customers and back-up data?
- Do you have employees working for you at your home?
How to cover yourself against risks and claims
If you answered “yes” to any of the questions above, it might be time to consider specific insurance for your small business. Here are the types of risk and claims you will be covered against:
- Personal liability: Should a client or customer visit your home for business purposes and get injured – e.g. trip over equipment and fall – personal liability protection can cover you against a lawsuit.
- Equipment cover: Remember that most insurers will only insure each household item against theft and damage to the value of R2 500. If you business equipment is worth more than R2 500, you have to protect it with business insurance.
- Business car cover: If you are in an accident on a business-related trip – e.g. visiting a client’s factory out of town – your personal car policy will not cover the damages.
- Product liability: Anything you make – whether jewellery or food – can carry a risk. E.g. if you sell prepared frozen meals and customers got sick from eating your food, you could be sued.
- Professional liability: If you provide professional services (accountant, lawyer, tax advice), you need cover if there are any malpractice claims against you.
- Data/cyber insurance: Your personal insurance will not cover the loss of business data – say if you back-up hard drive or computer is damaged in a fire. If you are storing client information (names, addresses, email addresses, even credit card details – which you should never store!) or your proprietary business information (supplier names or confidential pricing related to your home-based business) is put at risk by a data breach, this type of insurance will cover you to repair the vulnerability and any legal action from affected customers.
If you have one or more employees at your home-based business, it is your duty to protect their safety by registering with the government’s Workmen’s Compensation Fund. Employers who pay their annual Workers Compensation fees are protected from being sued by employees who are injured at work, while employees are protected from financial loss. Read all about Workmen’s Compensation on Labour.gov.za.
Tailor-made small business insurance from Santam
Santam understands that every small business is unique. Through our special small business insurance offering (focussing on retail, administrative and manufacturing businesses), we will help to ensure that your start-up is properly covered in an emergency such as a fire or theft. Starting from just R162 per month, you will also be covered for product liability and client legal liability up to R3 000 000.
Read more about our small business insurance here or speak to your broker about your business, its risks, and your coverage needs.