Why Entrepreneurs Still Need Insurance When Running A Business From Home

min read
Written by
Insuranceopedia Staff
On this page Open

The home-based business sector is growing, and for good reason. It’s rewarding to work from home, with many benefits. There’s no office distractions, no commute, and more flexibility in your schedule for a start.

Home-run businesses offer lower start-up costs, but there are still other set-up essentials that can be easily forgotten in the absence of a dedicated office or warehouse space.

In this article, we’ll be taking a look at what you need to consider when it comes to insurance for setting up your business from home, in order to promote long-term success, and safeguard yourself and your company from potential threats to your business.

What is a home-based business?

A home-based business is considered as such when the owner or primary stakeholder’s house is the main base of operations. Any commercial activities that take place from the owner’s place of residence could be considered a home-based business, provided it is a relatively fixed address.

The benefits of starting a home-based business

People who lack the financial resources to start a brick-and mortar business can still pursue entrepreneurship by running a home-based business, with a couple of leading incentives to motivate this decision.


By eliminating your commute, you have more time to spend working. You can plan your work around family obligations, since your office is always available.

You’re able to dictate your time off, have greater control over which areas you focus your investments in, and can make scheduling or operational changes to suit your lifestyle or business goals.

Lower Startup Costs

Home-based businesses still have start-up expenses for marketing, equipment, supplies, and other costs, but they don’t need to lease or buy a commercial location.

This lower overhead can make starting a new business more feasible. Without the added pressure of a rent space to cover each month, you’re free to focus your efforts on setting up a sustainable venture, rather than generating instant return.

When should a home-based business be insured?

You may think that insurance is not necessary if you run your business exclusively from your home. After all, what’s the difference between selling a couple of products out of your garage and running a full-scale commercial operation?

In fact, most industries would benefit from (or require) some kind of insurance. Here are some of the circumstances when business insurance would be considered beneficial, if not essential.

1. Your business is formally registered with the government

Under Australian business laws, you are required to register any new business under a specific set of circumstances, even if it operates completely from your home. This is important for tax regulations, and to assess whether you require any additional licensing.

Home insurance is unlikely to cover any claims made against your business, regardless of whether it’s in your property. Unless your business is still at the point of solely trading with friends and family, or is in its very early set-up stages, you will likely need to formally register it with the government, meaning insurance follows as a logical next step.

2. You provide advice

Professional negligence is a claim that many companies or individuals who offer specialized advice can come up against from their clients, from doctors, to lawyers, to financial advisors. This happens when a client is unsatisfied with the results as a direct or indirect result of the expertise you provided them, and tries to sue for a failure to act, or act in a way that caused them damage.

Likewise, a professional indemnity claim may occur when a client accuses you of failing to perform your job as expected in your field, through professional errors or negligence that caused them financial harm.

If you run your business from your home, it doesn’t mean your clients will never make a claim. Even if there is no basis for the claim, the cost to defend yourself can easily reach thousands of dollars, so insurance is vital, to pay for the cost of financial protection, and cover legal fees.

2. You own expensive equipment to run your business

Whilst you may not have an office to run your business, you probably have at least one laptop, mobile device, or tablet as the center of operations. Should these tech essentials be lost, damaged or stolen due to natural disaster or theft, you’ll lose the invaluable data within them, alongside the cost of recovering them, if not correctly insured.

Some insurance policies will not cover these items if they are used for business. Specific business insurance may be needed in these circumstances.

3. Your business is run online

A poll in 2017 revealed 82% of business owners did not feel at risk of a cyber breach. In the years since this study was conducted, cybercrime rates have skyrocketed. Any business with a digital presence should make it their mission to secure comprehensive cyber insurance.

Hackers often tend to attack smaller companies due to the reduced likelihood of them having robust protection systems in place. If you operate exclusively online and are not adequately insured, you may not have much left to your business after a cyberattack.

The economic impact of cybercrime is expected to pass $10 trillion in 2025, so it’s foolish to assume your online business is immune from this staggering figure.

 4. You sell physical products

It is possible that one of your customers will claim your product has caused an injury or damage to themselves or their property if your company is involved in producing, supplying or selling physical goods.

However unlikely, it’s better to be prepared with the security of insurance, as it can be difficult to cover the costs associated with defending yourself once the ball gets rolling.

There are many different insurance policies available, so take some time to read around and pick which is most relevant to the risks your business is likely to face, taking into account whether your products pose any danger to the health or wellbeing of your customers if not handled correctly, or provided with an adequate warning of the risks.

How to protect yourself from the risks of running a home-based business

Insurance providers will ask all the same questions about your home-based business as if it was being run in an office. It is your duty to provide truthful answers so you can work together to come up with an effective insurance solution that covers all bases.

It’s important to review these options in detail, in order to find the best level of coverage for your business. Familiarize yourself with home-based business insurance if you fall into any of these categories listed above, and shop for a reliable policy.

With insurance under your belt, you will benefit from greater peace of mind, leaving you to get back to doing what you do best, with a recovery strategy in place should anything unexpected happen.

Go back to top