Do Home-Based Businesses Need Extra Insurance?

What’s the difference between working from home and running a home-based business? When you work from home, you’re doing work for an employer, but without the commute to an office (in this case, your employer likely owns all of the items you use to do your job day to day, such as your laptop or company cellphone). In contrast, if you have a home-based business, you own your own company, and your primary office is located in your home (even if your business regularly requires you to be on-site at various locations, such as a client’s home or office). Or, you may have a side hustle, working to make a few extra bucks on top of your day job.

The need for separate, specific home-based business insurance that protects you and your company can range from “a good idea” to “absolutely necessary,” depending on the type of home-based business you operate.

Key takeaways

• It’s important to know the difference between working from home and having a home-based business—especially regarding home-based business insurance.

• The maximum annual income earned to be eligible for home-based business insurance is $150,000.

• You may have a main employer, but also operate an unrelated side business, which may need to be insured separately.

• Insurance for home-based businesses provides coverage that extends beyond typical home insurance or renter’s insurance policies.

• Insurance for home-based businesses protects entrepreneurs from loss or damage to their business assets and certain liabilities.

• It is important to notify your insurance company if you are operating a business from your insured home.

What is a home-based business, and how does it differ from working from home?

If you’re running a business or entrepreneurial venture out of your home, this qualifies as a home-based business—whether your “office” is a separate room or simply your dining room table. This means that businesses that range from companies selling handmade or second-hand items to small accounting or graphic design firms are all considered home-based businesses.

Working from home (or working remotely) is different in that you have an employer. You’re not working for yourself, but for a company that’s based outside of your home and that allows you to work remotely, away from its offices. You may be working in another office or while travelling (it doesn’t necessarily take place at home).

Does my home insurance cover my home-based business?

Your home insurance policy will typically provide you with coverage for the home itself and for your personal property. And it will offer liability coverage for accidents that might occur on your property. Like all insurance policies, however, home insurance has limitations and exclusions which might not extend to your home-based business activities and items, such as the equipment you use or the inventory you keep on the premises. 

It’s a smart idea to double-check your current home insurance policy and then evaluate it to see if you need additional insurance products, in order to avoid leaving your business uninsured or underinsured.

Some options to consider are:

Add-on endorsements: If you already have homeowner’s, condo, or rental insurance, you can choose to add a home-based business endorsement to your current policy. These endorsements may provide some coverage for small business owners for their equipment, inventory, and liability related to entrepreneurial activities. However, it’s important to review the coverage and determine if these add-on endorsements are a good fit for you. Contact an insurance advisor if you have any questions about your policy.

Professional liability insurance: Does your home-based business offer professional services, consultations, or advice? If so, professional liability insurance (also called “errors and omissions insurance”) can protect you from claims of errors or negligence made by your clients. If a client were to file a lawsuit against you, this type of insurance might cover (in whole or in part) your legal fees.

Cyber endorsement: In today’s digital age, your home-based business likely relies on technology such as computers, cloud services, smartphones, and smart home devices. While these tools offer convenience, they also store personal information online, creating potential access points for cyberattacks that can cause financial, personal, or emotional harm. Eligibility for personal cyber coverage for home-based businesses requires specific conditions to be met. Speak with an insurance advisor to learn more.

Home-based business extension: Available through RBC Insurance, this endorsement is designed to fit the needs of entrepreneurs who operate small businesses from their primary residence. Adding this product to your home, condo, or tenant policy will cover you for property damage and personal liability, and your business contents. Many types of entrepreneurs and home-based businesses are eligible for this endorsement. Coverage is subject to the terms and conditions within specified limits outlined in the policy. An insurance advisor can help you determine if this is the right addition to your policy.

Business Insurance: Home-based business owners who feel the above-mentioned endorsements and insurances still don’t provide adequate coverage can consider business insurance. This is usually a customized business insurance package that may include employer’s liability insurance, business tools and equipment insurance, commercial auto insurance, and more. Consider discussing your unique situation with an insurance advisor. They’ll help you find the best solution.

Why protect your home-based business with a home business extension?

Discovering that your basic home insurance policy doesn’t cover you, your home, or your business when you really need it is a terrible feeling. Many typical home insurance policies do not cover damage due to business activities deemed “risky” (for example, a home business that prints T-shirts using a heat press). Planning ahead by opting for an add-on home-based business extension may protect you in instances of:

• Third-party bodily injury (to clients, delivery people, or employees), also known as “personal liability”

• Property damage

• Inventory loss

• Theft or damage to office/business equipment (such as computers or office furniture)

• Loss of income due to a pause in operations stemming from an insurable event, such as a fire

What businesses qualify for home-based business insurance coverage?

Qualifying for home-based business insurance is simple and straightforward. Your insurance advisor will ask you: 

• About your business’s annual gross sales

• If the home occupied by the insured is a principal residence

• If the business operates solely out of the home and at no other location

• If employees and/or customers frequently visit the home

• About the nature of the activities being performed in the home while running your home-based business

This list isn’t inclusive, but it does include some of the basic requirements for home-based business insurance coverage. For example, some insurance providers won’t insure home-based businesses dealing in products or services sold outside of Canada, and some providers can restrict in-home daycare or babysitting services. Alternatively, your home-based business may be too large (based on income, number of employees, or cross-border reach) to qualify for this type of insurance. Your insurance advisor can assist you in reviewing all the requirements and making the best choice.

FAQs: Insurance for home businesses

Does home insurance cover my home-based business?

Home and renter’s insurance policies don’t typically cover a home-based business. Entrepreneurs who work out of their home often need to obtain extra coverage, so their business, inventory, and office equipment and/or tools are covered against loss or damage.

Do I need extra insurance to run a business from my home?

Yes. A home-based business policy or an add-on endorsement is usually required to make sure  you are adequately covered in case of theft, damage, or liability claims, and it may be a requirement of the insurance company to insure your property.

Is my work laptop covered by home insurance?

If you work from home and use your employer’s laptop, it will typically be covered by your company’s commercial policy. If, however, you run a home-based business, your computer may be insured under your standard home insurance policy.

Do I need additional insurance when I work from home?

For the work-from-home (WFH) set, additional insurance (beyond your own home or renter’s insurance) isn’t usually required. Talk to your employer about its WFH policy and its own commercial insurance policy’s coverage for remote workers to be sure you’re covered working from home. Talk to your own insurance advisor if you still have questions.

Call an RBC Insurance Advisor to check if you qualify for home-based business insurance and to find the best solution for you.

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Whether you’re putting in new light fixtures or building the swimming pool of your dreams, it’s important to ensure your home insurance policy protects your investment. Read on to find out what you need to know about home insurance during your renovations.

Key takeaways

• Many Canadians assume their home insurance stays the same during renovations, but this varies greatly depending on the type and scope of the renovation. It’s important to review your existing policy before starting any work on your home.

• The details of your planned renovation can increase your home insurance rates.

• Additional coverage for the duration of your home renovation is available, so you’re protected in case of personal injuries, lawsuits, or lost and/or damaged materials.

• Speak to your home insurance provider about your plans before you start your renovations, so they can provide you with your coverage options.

• Confirm your contractors are adequately insured before they start their work.

Six ways to ensure you and your home are protected during a renovation

1. Review your home insurance policy before starting your reno

Homeowner’s insurance typically protects your home and personal belongings against events such as fire, wind, and theft. But many insurance policies don’t offer protection during a home renovation. In the unfortunate event your kitchen reno causes a burst pipe that leads to water damage in your basement, for example, your insurance claim could be denied.

Make sure you look closely at your current coverage and limitations to avoid any unpleasant surprises. Consider factors such as deductibles and exclusions, and reach out to your insurance advisor at any time if you have any questions. It’s important to understand the breadth of your home renovation insurance coverage.

If you’re considering a major renovation, such as a first-floor addition or extension, removing a load-bearing wall, or opening an exterior wall, talk to your insurance advisor about a product that protects you against the risks associated with these types of major projects. RBC Insurance’s Major Renovation Endorsement, for example, protects not only your investment in your renovations, but also your entire home. Without it, uninsured work can impact the coverage of your existing home policy, leaving you vulnerable to significant risks and losses.

2. Notify your insurance provider about any upcoming renos

It’s essential—and with many policies, you’re actually contractually obligated—to keep your insurance provider in the loop. Before you start renovating, let them know the scope of work, the estimated timeline, and any significant changes you’ll be making to your home. Here are some things to keep in mind.

• Cost to rebuild your home: Insurance rates depend on various factors, including the cost to rebuild your home exactly as it once was (this is called “replacement cost”). If you remodel and improve a part of your dwelling, it’ll probably raise your home’s value and, therefore, the cost to rebuild your home. These increased costs can be reflected in increased insurance rates.

• Risk of extensive alterations: Significant renovations—such as converting a basement into a one-bedroom apartment—can increase the risk of damage to your home during construction. Your insurance costs may increase during the renovation period, then return to normal after the project is completed.

• Risk of unoccupied homes: Renovations that require you to move out during the project will likely cause your insurance rates to increase. Empty homes carry more risk, because something could go wrong when no one is around to take action.

• Benefit of protective systems: Putting loss-prevention systems in place, such as reinforced roofing, storm shutters, and burglar alarms, can reduce your home insurance rates. So can upgrading electrical, heating, and plumbing systems.

Your insurance company can help you figure out how to adjust your policy for adequate coverage during the renovation or let you know if you qualify for any discounts. You don’t want to be underinsured in a worst-case scenario, such as a flooded home or a house fire.

3. Get adequate coverage for renovation materials

There’s always a risk that the building materials and supplies in your home can be stolen or damaged during a renovation, so it’s a good idea to make sure your insurance policy covers these materials and supplies.

Building materials and supplies aren’t cheap, and the last thing you want is to pay twice for them. Extra insurance protection can keep your budget on track and lower the stress of unexpected incidents.

4. Understand what liability coverage is

Renovation sites can be dangerous with obstacles such as tools, raw materials, and cables, and surfaces can be uneven, unstable, or slippery. For these reasons, workers, visitors, and even passersby can slip or trip and fall, causing serious injuries.

It’s important to have enough liability coverage to help protect yourself against any possible lawsuits from accidental injuries that may occur during your home renovation. This coverage may pay for personal injury and can help cover your legal defence if you’re sued.

RBC Insurance’s Major Renovation Endorsement includes liability coverage (along with coverage for many other things). Speak to your insurance provider well before you start your renovation, so you know exactly what’s included in your policy.

5. Get your contractor’s proof of insurance

If you’re hiring contractors or subcontractors to work on your home renovation, ask to see their certificate of insurance. Contractors should have provincial worker’s compensation insurance to protect their workers if they get injured on the job. They should also have general liability insurance in case they make mistakes and/or cause damage to your home.

If a contractor accidentally burns down a part of your home, for example, their insurance will likely cover the fix—if they have proper coverage.

But the costs of injury and/or damage could fall to you if your contractor isn’t appropriately insured. It’s best to review your contractor’s coverage with your insurer to ensure there are no gaps. Consider hiring someone else if their coverage isn’t sufficient.

6. Keep records and receipts from renovation expenses

A paper trail can be your best friend in any home renovation. Safely store important documents such as contracts, invoices, and photographs, and record project dates. This documentation will come in handy if you have a dispute with your contractor(s) and need to file an insurance claim. 

Your home is one of your most prized possessions. It’s better to be safe than sorry when it comes to protecting any investment you make in it.

Speak to one of our RBC Insurance Advisors to ensure your home renovation is adequately covered and protected against unexpected risks and losses.

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A streamlined and secure system can help prevent the frustration and panic of looking for something you need at a moment’s notice. And, in the event of an insurance claim or a significant life event, proper storage will help you and the trusted people in your life find what is necessary during times of need.

Quick access and security are key considerations when it comes to keeping a document safe. Whether that’s digitizing backup documents or safekeeping physical and original documents—passports and birth certificates, for example—for identification, we’re sharing tips on how to help keep your essential documents safe.

Key takeaways

• We all have various types of important documents that need to be protected.

• Identification, insurance, financial, legal, health, housing, vehicle and employment documents are important to keep secure and in a safe place.

• You can store important documents in a safety deposit box, a filing cabinet, or a fireproof lockbox.

• Backups of important documents can be password-protected on digital cloud services.

• Always shred important documents you no longer need.

What important documents should you store safely?

Identifying what’s important is the first step. We’ve listed below many kinds of paperwork that need document organization for safe storage. 

Personal identification and proof-of-identity documents

Some of these documents are OK to have on you when you leave the house on your daily outings (for example, a driver’s licence is necessary to carry while driving), but others, such as  your social insurance number, should be memorized and never carried around in your wallet or purse.

Proof-of-identity documents include:

• Passport (fine to have on you for a trip, but store safely when not travelling)

• Social insurance card and number (don’t write the number down and make sure you leave your card at home)

• Birth certificate and adoption records

• Marriage certificate or divorce decree

• Citizenship-related documents

• Driver’s license

• Government-issued photo identification card

It’s important to make copies of all your identification documents and store them at home, in case you ever misplace them.

Financial and legal documents

Keep your financial and legal paperwork stored safely (yet easily accessible) for banking, custody settlements, and estate planning. Be sure to include:

• Will and estate planning documents

• Power of attorney and health-care proxy

• Bank account information

• Investment and retirement account details

• Tax records and returns

• Child custody agreements

• Life insurance documents

Health-care records

What important documents you choose to store here will vary. You might not need an emergency room form for that time your turkey-carving went sideways, but do include anything relating to your overall health and well-being. Health records to include are:

• Health insurance information, including your health card and any insurance information (such as details about the benefits you receive through work)

• Medical history and prescriptions

Property and housing documents

Whether you own or rent, there’s a surplus of paperwork that’s important to keep close for reference or insurance claims:

• Homeownership documents such as your deed or mortgage

• Lease or rental agreements, including rent receipts if your landlord supplies them

• Property insurance policies for home and/or rentals units and properties

• Appraisals

• Property tax bills

• Renovation receipts and remediation letters for structural changes (such as rewiring to remove old knob and tube) in case you need to show proof to your insurance company

Vehicle records

Vehicle ownership comes with a slew of documents you need to keep organized. Have these records on you when you are driving and store the copies of them at home:

• Vehicle registration and title (keep these in your vehicle)

• Auto insurance policies

• Vehicle identification number (VIN), which you can also find on the driver’s side dash of the windshield

Do hang on to maintenance and repair history documents. While these don’t need to be stored in your vehicle, they’re good to keep, as they provide an overall picture of the reliability and safety of your car.

Education and employment records

That diploma cost a pretty penny and is worthy of safekeeping. Many careers, such as real estate and teaching, require you to renew or update your licensing and certifications, which is why keeping your education and employment records secure and handy matters. Education and employment records include:

• Academic transcripts and diplomas

• Professional licences and certifications

Where should you store important documents?

Different types of documents warrant different types of storage. Whatever way you choose to organize and store these papers, it’s good practice to keep them away from heat and humidity. Store important paper documents in plastic sleeves (though, steer clear of polyvinyl chloride,  a.k.a “PVC,” which can cause materials to break down very quickly).

If you find in your organization that you no longer need a receipt, bank statement, or other important document, use a paper shredder before discarding it. Check with your municipality on how to best dispose of shredded paper in your specific area, as the rules vary by region. 

Consider these storage options as you tackle your document organization.

Safety deposit box

Original documents—proof of identity, certificates, social insurance cards, and property documents—are items that can go in a safety deposit box. It might be worth sharing access to your safety deposit box with a trusted family member or a friend. In the event that you pass away or are injured, they will have quick access to your important documents. Talk to your bank about opening a safety deposit box at your home branch.

Fire and waterproof lockbox or safe

If you need to keep confidential or important documents at home instead of at a bank or a financial institution, consider a fire and waterproof lockbox or safe to keep things protected in the event of a fire or a flood. You can generally purchase these at big box hardware stores, office supply stores, or from various retailers online.

Filing cabinet

The filing cabinet has been around since the 1890s—and for good reason. It’s the workhorse of efficiency and document management, but you need to take care where it’s stored, to make sure your documents stay safe. We recommend storing yours in a cool, dry location, so your papers remain structurally intact and legible.

Cloud-based storage

Living in the 21st century has its perks, and digital storage solutions are a great option for housing backups of your important documents. Ensure you use password protection (there are sites to help you generate strong passwords with a series of characters and numbers) to add a layer of security to personal documents. You can store passwords in a notebook you keep in your safety deposit box or locked in a safe.

But, no matter what steps you take to protect your documents and identity online, you’re still at risk. Cyber insurance helps to reduce the financial impacts of cyber crime by covering legal costs, the costs of an investigation, or the costs to restore stolen or corrupted data. This coverage can easily be added to your RBC Insurance home insurance policy.

On your person

Some things you have to carry around as you’re out and about, because they’re used daily. Keep your driver’s licence or identification card securely on you when you’re not at home.

Important documents aren’t the only things you’ll want to keep safe in your home. Speak with an RBC Insurance Advisor to learn how the right home insurance can help keep you and your family protected.

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