So you’ve decided to start a business from home, fantastic! You get to work in your dressing gown, go out on long lunches, duck out to the shops whenever you like... aside from all the stress, constant decision making and financial burden it is a pretty sweet deal.
When you’re just starting out, every cent counts. You don’t know if you’re going to be successful so you try and avoid unnecessary expenses for as long as possible to minimize the damage if you do fall flat on your face; a scenario which seems entirely possible because you have this niggling feeling telling you that you don’t know what you’re doing.
Here’s the most important advice you’ll ever receive: your business is not unique. Just because your product or service is a completely novel idea does not mean you stop having accounting issues, client management needs or the need for a marketing strategy just like any other business.
What does this mean? You’re not alone!
There are a number of professional advisors who love start ups and will give you their time and knowledge for free because they make enough money from the businesses who’ve been where you are now and who’ve come out the other side. A great ‘middle man’ is one who tells you that you don’t need their services just yet, but will provide you with the information to know when you will.
One of these middle men/women is an Insurance Broker. They spend most of their day talking to business owners, identifying risks and then discussing which risks should be insured, which risks can’t be insured, and which risks you don’t need to insure depending on the business’ circumstances. This service is provided completely free, they’ll only charge you if and when you decided to take up the policy with them.
Even though my business is about insurance, I still contacted my broker to get his specialist advice about what I would my insurance requirements would be, as well as a general indication of costs. A few months later when things were starting to progress I checked in with him again, and it wasn’t until I actually launched the business a month later that we sat down and signed the papers. I also took advantage of the monthly payment option to help with my cash flow.
Here’s a couple of things to be wary of when starting a Home Business.
All home insurance policies carry an exclusion for Business Activities unless you specifically tell them and they agree in writing. Some insurers are even taking it one step further and will not pay for any liability if the premises is being used for business, trade, professional or work purposes regardless of whether or not the actual event was as a result of that business.
What does this mean? Say you're running an online business from your home office. Your graphic designer comes over, slips down the stairs and sues you for bodily injury. Most insurance policies will exclude this because it’s in connection with the business activities, but some insurance policies will also exclude liability if it was your cousin coming for a visit just because there’s a business being run from the premises.
It’s therefore vital that you tell your insurer if a business is being conducted at your home, and that you arrange liability insurance.
Tools of Trade and Contents Used for Earning Income
Direct insurance companies also have exclusions or sub-limits (which limit the amount they will pay) relating to Tools of Trade and they’re catching onto online businesses because Tools of Trade now include Computers. You need to be wary of limits applied to contents used for earning an income, with a policy purchased through an Insurance Broker you usually have cover up to $7,500, whereas a Direct Insurer may limit the amount they’ll pay to a measly $2,000.
If you’re running a business from home which requires you to hold more stock or contents than you’d be prepared to lose then you should speak to a broker and get a Business Package set up.
The main thing to be wary of is that insurance policies are complicated, exclusions can be hidden in several different places so to make sure you’re 100% covered you should always seek professional advice, and advice relating to insurance comes from a licensed General Insurance Broker who won’t charge you until you’re good and ready.