Running a business from home: What is and isn’t covered by insurance?

Working from home has many benefits: it’s quiet, flexible and you can always roll up to work in your PJs. But it’s important to maintain boundaries between your work life and your home life — both in a physical sense, and in how you insure them.

It’s not uncommon for business owners who operate from home to expect their home and contents cover to apply to their business as well. But often, Home Insurance policies — including the ones offered by AAMI — won’t cover business activities. FYI, AAMI defines a ‘business activity’ as:

• any activity you undertake that you are paid an income for, with the exception of casual babysitting, or
• any business-related activities that you’re legally required to register for GST purposes.

So, if you're running a business from home, you might find it useful to consider whether some form of Business Insurance is right for you.

FYI, terms and conditions will apply to any sort of coverage, which is why it’s important to read up on your Product Disclosure Statement (PDS).

Understanding your home business insurance needs

To help you figure out the level of business insurance you need, think about the things you might require coverage for.

• Do you have the financial resources to withstand an interruption to your business? If so, for how long?
• If you have employees, will you be able to pay workers’ compensation?
• Will you have employees or customers visiting your home?
• Does your business create, manufacture or supply a particular product? Is this product usually stored at your home?
• What kinds of electronic equipment or tools does your business rely on?
• Do you use any vehicles for business purposes?
• Do you live in an area that may be affected by extreme weather events or natural disasters?

Types of business insurance

Public and products liability

This generally provides cover in the event that you are found to be legally responsible for personal injury to a third party or damage to their property. For example, if someone is visiting your business — such as a customer, employee or delivery person — and is injured on the premises. Or, alternatively, if your product causes harm or illness, coverage for products liability can help.

Business interruption insurance

At AAMI, we call this ‘Back in Business’, which is a feature of our Business Insurance cover. If an insured event, like a fire or storm, damages your home and this in turn interrupts your business activities and revenue, this policy may provide coverage for:

• property damage
• theft
• glass breakages
• cash
• portable valuables, or
• any items you may have in transit.

Portable and valuable items

Like home and contents insurance, business insurance policies generally cover your belongings while they’re at the insured address. So, what happens if you head out to a meeting, or travel, and the things you take with you are accidentally damaged or stolen?

Cover for portable and valuable items is designed for these scenarios. It generally provides coverage for the items you carry with you when you leave home, such as your laptop and mobile phone. With AAMI Portable and Valuable Items, you’ll need to specify items on your policy over $1,000 if you’d like to insure them for their full replacement value.

Property damage

This provides cover for physical loss or damage to your business property from insured events.

Theft

If your business is affected by theft, attempted theft, armed hold up or an assault, this can help cover your business contents and stock.

What does home and contents insurance cover?

Though home and contents cover doesn’t cover business activities, it may include coverage for tools of trade.

AAMI’s Home and Content Insurance provides cover for tools of trade and equipment used for business activities, excluding home office equipment, for a maximum of $2,000. This means that if tools or equipment used for any business activity (e.g. a camera used for wedding photography) are affected by an insured event, they may be covered. Read the PDS for more info.

Combining business insurance with home and contents insurance

Some insurers — including AAMI! — offer customers the option of combining their business and home insurance policies. We call this Business@Home Insurance.

Business@Home Insurance enables you to choose the cover that best suits your home and business. You can opt to cover (among other things):

• your home and contents
• personal valuables
• commercial and private vehicles
• business interruption, and
• public and products liability.

More about AAMI Business@Home Insurance

At AAMI, we cover many types of home businesses including:

• Business and financial services
• Consultants
• Designers
• Photographers

However, we recognise that every business is different. Our specialised business consultants are available to put together a Business@Home quote for you. To get in touch, call 13 22 44 (Monday to Friday, 8.30am-6pm AEST) or request a call-back.

How to make a claim

If you’re an AAMI customer, you can lodge your claim 24/7:

• using the AAMI app
• online, or
• over the phone by calling 13 22 44.

Document your business assets

When you make a claim, you may be required to provide proof of value and ownership documents. This could include receipts, valuations or photographs of your business assets. Plus, keeping receipts can come in handy for your tax-time deductions.

You might even find it helpful to set up an inventory for these items. Keep a record of your assets by noting down:

• when and where they were purchased
• how much they cost, and
• serial numbers, if applicable.

You might opt to keep your inventory simple, by keeping this information in a notebook, or you could try an app or spreadsheet. Whichever you choose, make sure you keep a backup.

Keeping a detailed inventory of your business assets might also mean you’re less likely to be underinsured. Underinsurance occurs when your coverage isn’t adequate enough to cover what you’re insuring in the event of an insured incident. This means you may need to pay for any extra costs if you need to make a claim. However, by updating your inventory and reviewing your cover regularly, you’ll likely be more aware of the costs to repair or replace your home, business items and other belongings.

Read more:

• Do I need business insurance if I run my business from home?
• Is my home office set up tax deductible?
• How do I insure my business against the risk of natural disaster?

Insurance is issued by AAI Limited ABN 48 005 297 807 trading as AAMI Business Insurance. Any advice has been prepared without taking into account your particular objectives, financial situation or needs, so you should consider whether it is appropriate for you before acting on it. Please read the relevant Product Disclosure Statement before you make any decision regarding this product. The Target Market Determination is also available.