Small businesses are the backbone of our economy here in Canada, representing 97% of all the companies in the country. Many of them operate out of their owners’ homes, making a home business insurance policy necessary for a lot of Canadians.
That’s why we made a crash-course introduction to understanding insurance for home-based businesses in Ontario, plus the coverage you can expect from us.
Home insurance for a home-based business
At aha insurance, we’re happy to add coverage for a home-based business. It just becomes an add-on to your standard home insurance policy in most cases. All it needs to do is meet some basic home business insurance requirements to make sure it doesn’t need a dedicated commercial insurance policy instead, which would cover a much wider set of business-related risks.
Take a look at this checklist to see if your home business qualifies for this kind of policy:
- The business needs to be owned and operated by the person under the home policy, or a family member living in the same residence.
- The business owner needs to be the sole proprietor, but spouses living at the same address can be partners.
- You can’t run any other businesses or run off-the-books operations for the insured business.
- You need to include the name of the business and the owner’s name on the policy’s declaration page (we’ll help with that).
- The business needs to operate within your home and nowhere else.
- The address needs to be used primarily as a residence since this is an add-on for home insurance.
- You can’t import foreign products (except for supplies) or repackage physical goods.
- The business can’t operate or sell outside of Canada, or else the cost for risk jumps way up.
- The business can’t have employees.
- Income can’t exceed $250,000 CAD.
- The space in your home needs to serve as your principal place of business.
- The space needs to be used on a regular basis to earn business income or to meet customers.
- The space within the home is only used to earn business income.
If you live in a condo unit then you may need to check your condo insurance policy to make sure that operating a business doesn’t violate the terms of your agreement.
That’s a decent-sized list, but it makes sure that your home-based business is suited to this kind of insurance policy that a standard rider can accommodate. All-risk insurance isn’t enough either, because it covers dangers to your home structure, not a business operating within it.
If your business is too large or risky for a simple rider, then you’ll need to get a full-fledged commercial insurance policy (most likely for liability). Basically, this screening process just prevents people from trying to insure manufacturing operations in spare bedrooms, which is always a bad idea. It ensures that your business doesn’t increase the risk of damage to the home, to your business, or to yourself.
For example, even service-based businesses without physical products carry a certain amount of liability risk, making it impractical to cover a business operating or selling outside of the country under a home insurance policy. It’s not just physical spaces and inventory that needs to be insured—it’s also about covering the liability of your business in case something goes awry on the legal side.
Note: Business liability insurance is different from personal liability insurance. They cover completely different risks, with one protecting your business from litigious customers and the other protecting you from people who sustained an injury while on your property.
Is home insurance tax-deductible?
You should definitely speak to a tax professional because this isn’t formal advice—but you may be in luck! According to the Canada Revenue Agency, you can deduct a portion of expenses for the business use of a work space in your home, including:
- Heating.
- Home insurance.
- Electricity.
- Heating materials.
This doesn’t include all of your home—just the part used for your business. You’d need to establish how much of your home the dedicated work space is in relation to the whole home, and then deduct that amount from related home expenses. For example: if your work space accounts for 10% of your home’s floor space, then 10% of your home insurance costs would be tax-deductible as well.
Again, don’t take this as professional advice, but this should get you started. Talk to an accountant about your specific circumstances and the nuances of the Canadian tax system.
How do home office insurance quotes work?
Working from home isn’t just for budding entrepreneurs, either. Plenty of people take on freelance work that they do right in their homes. This has made home office insurance quotes part of the norm these days, especially since the COVID-19 pandemic took off.
Getting a home office insurance quote only takes a few steps, and they’re pretty easy:
- Emailing or calling us directly.
- Telling us about your home-based business.
- We’ll walk through the eligibility of the business with you (listed above).
- If it all checks out, then we’ll get you covered pronto!
Home office insurance quotes work as an extension of home, condo, or renters’ insurance policies, so they cover freelancers and small businesses with sole proprietors and no employees. If things grow beyond that, then you’d need a proper commercial policy to cover the risks of things like:
- Higher income.
- Liability.
- Employees.
- Inventory.
- Cross-border dealings.
Do I need home office insurance as an employee?
If you’re just an employee working remotely, then no—not in Ontario. Your employer may need to look into liability insurance that covers remote work, especially if you operate any specialist equipment, but that’s not your responsibility as an employee.
If you’re a full-time independent contractor then it’s likely that you’ll need some kind of home office insurance. The reason for this is because independent contractors in Ontario run their own businesses, technically, even if they only work with a single client.
Contractors need to look after their own liability, and liability is what insurance covers. From there, speak with your existing provider or call us up to see if your home-based business warrants a full commercial policy or an add-on to your home policy (which we covered above).
What a home office insurance policy covers
While every situation is unique, home office insurance helps fill in the gaps left by traditional home insurance and the needs of most home-based businesses that haven’t grown beyond the owner(s).
Typically, home office insurance policies will cover:
- A business liability limit of $1,000,000 or $2,000,000 (damaged equipment or personal injury), but not professional liability coverage (errors and omissions).
- Personal umbrella liability coverage between $1,000,000 and $5,000,000.
- $50,000 for business property on the premises, or $10,000 off the premises (but not personal items covered by contents insurance).
- Your money, just as (or if) it’s already covered under your base home insurance policy.
- Business credit, debit cards, forgery, or counterfeit money just as (or if) it’s covered under your base home insurance policy.
- Accounts receivable up to $10,000.
- Valuable papers and records up to $10,000.
- Business income including extra expenses up to $10,000.
- Professional fees up to $10,000.
It is very important that you be as up-front as possible with your insurance broker, as the last thing any entrepreneur or consultant needs is to find out you don’t have insurance coverage that will pay for something after you experience a loss.
Call us directly at 1(855) 242-2440 to get an accurate insurance quote for your home-based business. If we determine that our policy is not adequate for your needs, then we’ll point you toward a commercial policy to insure your business appropriately.
