When do you need commercial insurance?
Running a business from home has become increasingly common, but knowing when your home insurance is enough – and when you need to look at commercial insurance – can be tricky. Here’s what you need to know.
Initio’s home products cover your residential home and any domestic outbuildings used for residential purposes, so long as they’re within your home’s residential boundaries.
Unless agreed otherwise, your policy will usually not cover any part of the home or any outbuilding used for business or commercial purposes, other than a home office.
Does house insurance cover your home office?
If you have a room in your home or an outbuilding that you use solely as a home office for clerical purposes then your policy will cover that part of the home. This is especially true if you’re simply using a space for paperwork, meetings, or computer-based work – something that doesn’t involve much physical activity or storage of stock.
If you have home contents insurance insured with initio, your own home contents cover is also extended to include office furniture and office equipment that is used for earning income. The furniture and equipment are covered for up to $10,000 whilst at the home and for up to $1500 whilst temporarily removed within New Zealand.
When you need Commercial Insurance;
For your Home
As soon as your home business goes beyond a simple home office or consultancy work, you’ll likely need a commercial insurance solution or special terms. If you’re storing stock, using specialised equipment, or running a business that involves physical labour (even if it’s within a garage or basement), it’s likely that standard home insurance won’t be enough. When you run any business from your residence (outside of a home office) we recommend getting in touch for specific advice. Depending upon the type and extent of the business, you may require commercial insurance. An example of such, would be a wood-working business run from the garage, whereas an occupation such as beauty therapy being run from one room can potentially be included in your home policy by agreement with the insurer.
For your contents
If you use tools or equipment from home to earn income, such as a builder’s or mechanic’s tools, it’s important to know that they are not covered under your standard home contents insurance policy. Even if you use these items for personal reasons, they require commercial insurance if they’re also used for work.
A common scenario is when tools are stolen from a car or home. You make a claim, but the insurer declines it because the tools are classified as income-earning equipment. Some may assume they can claim under their employer’s commercial policy, which often provides for ’employee tools.’ However, these claims are usually subject to a much higher theft excess, typically $2500.
To avoid this, it’s best to organise your own commercial insurance for tools and contents used for business purposes. Keep in mind, commercial policies come with higher excesses. Typically, these might look like:
- $500 standard excess
- $1,000 burglary excess (forced entry or exit)
- $2,500 theft excess (no forced entry or exit)
By getting the right cover in place, you can avoid surprises if something goes wrong.
Your liability
Our owner-occupied home policy covers your liability for activities you undertake as a homeowner and our landlord policy covers your liability for activities you undertake as a landlord or provider of short term holiday home accommodation . There is no cover provided for any liability arising from other business activities. If you own or run a business from home, you would need to arrange separate liability insurance cover through a commercial insurance provider or broker, which may include a public and products liability policy, and statutory liability policy.
Case-by-case
Ultimately, each business is different, and insurers will assess whether your business falls under home insurance or requires a commercial policy on a case-by-case basis. If you’re unsure, it’s always best to check with your insurance provider to make sure you’re properly covered.
In summary, once your business grows beyond a simple home office, it’s time to consider a commercial insurance solution to protect your assets and operations.
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