Does your home-based business need a home-insurance add-on or commercial property insurance?

Imagine a pipe bursting and flooding your home office or a power surge damaging your essential equipment—these are just a few risks home-based businesses face. Without insurance, you could find yourself responsible for covering these unexpected losses entirely on your own.

Home-based business insurance fills the gaps left by your regular home insurance. While home insurance covers your home and personal items, it usually doesn't cover business equipment, inventory, or liability. If your laptop is stolen, your inventory is damaged, or a client gets hurt during a visit, these won't be covered without the right insurance.

To cover these needs, most home-based business owners choose either a home insurance endorsement add-on or commercial property insurance.

But which option is right for you? Let's break down the two options based on coverage and specific needs.

What is a home insurance endorsement add-on?

A home insurance endorsement add-on for your business is an extension of your personal home insurance coverage. It’s designed for small-scale, low-risk businesses that operate from home, like freelancing or consulting. This add-on gives extra protection for business items like equipment and inventory. It may also cover some liability for running a business from your home.

A home-based business insurance add-on covers:

• Business property like laptops, printers, and office furniture.
• Some limited liability in case a client visits your home and gets injured.
• Some inventory

It typically suits low-risk operations, such as administrative work or e-commerce businesses with small inventories. However, for larger or higher-risk businesses, a full business insurance policy is recommended to get a full business insurance policy to make sure you're fully protected.

Who needs a home-based business insurance add-on?

Here are some examples of who might benefit:

• Freelancers and consultants 
  If you’re a freelance writer, graphic designer, or business consultant who mostly relies on laptops, basic office equipment, and online client communication to get your work done, a home insurance add-on can cover your essential tools and provide peace of mind.
• Online sellers and crafters 
  Running an e-commerce store or selling handmade goods from home as a side hustle? If your inventory is small and your business operates without physical customer interactions, the add-on can protect your products and materials without the need for expensive commercial insurance.
• Tutors or coaches 
  Whether you provide virtual lessons or occasional one-on-one sessions at home as a tutor or coach, a home insurance add-on can help cover liability if a client visits your home.

Read more: Got Craft? What You Need to Know About Insuring Your Home-Based Craft Business

What is commercial property insurance?

For home-based businesses, you can often add coverage to your home insurance policy, but limits apply. For example, some policies may cover up to $30,000 for on-premise business property and $7,500 for items off-premise. Larger businesses with higher risks or extensive inventory may need a standalone commercial property insurance policy.

Commercial property insurance helps protect a business's physical assets, like buildings and equipment. It's important for businesses with expensive tools, stock, or higher risks. If something unexpected happens, like a fire or theft, this insurance can help cover the costs of repairing or replacing what’s damaged. It may also cover lost income if your business has to stop operating because of the damage.

Commercial property insurance:

• Protects business tools and equipment, such as machinery, cameras, or specialized baking tools.
• Covers inventory stored at your home, like finished products, raw materials, or supplies.
• Can include liability protection for customer interactions at home.
• May offer coverage for business interruptions, ensuring you don’t lose income if you need to temporarily stop work due to damage.

Who needs commercial property insurance?

Here are some examples of businesses that might benefit:

• Home bakeries: If you run a small baking business from home, using specialized ovens and equipment, this insurance can protect your tools. It’s also a smart choice if customers regularly visit your home for pickups.
• Photographers or videographers: If your business depends on high-value equipment like cameras, lighting, or editing tools, commercial property insurance guarantees these essentials are protected against theft or damage. This is especially important if, as a photographer or videographer, you’ve set up a home studio, as your standard home insurance may not cover business-related assets.
• E-commerce businesses with larger inventories: For online sellers managing a significant quantity of products or materials, this policy helps protect their investment in stock.
• Small-scale manufacturers: Whether you create furniture, clothing, or handmade goods, this insurance covers the tools, equipment, and materials you need to keep your business running.

Read next: Running a Home-Based Business – What you Need to Know

Home insurance add-on vs. commercial property insurance: How do they compare in cost?

When it comes to protecting your home-based business, the right insurance depends on your needs and budget. Commercial property insurance is tailored for growing or higher-risk businesses, offering more comprehensive protection than a home insurance add-on. But how do they stack up in terms of cost?

• Home insurance add-on 
  It’s the cheaper choice, usually costing between $25 and $50. It’s ideal for smaller businesses because it only adds what you need to your existing home insurance.
• Commercial property insurance 
  This policy is more expensive. However, it offers more comprehensive protection, covering a wider range of risks. Canadian businesses typically spend between $83 and $250 monthly for commercial property insurance with a coverage limit of $1 million. For mid-sized companies, annual costs range from $1,800 to $10,000.

Making the right choice

Start by thinking about the size of your business, the replacement value of your tools and inventory, and your exposure to risks like customer visits or liability. If your business tools and inventory are valued under $5,000, a home insurance add-on may provide enough coverage.

However, if your business has higher-value assets, generates significant revenue, or involves frequent customer visits, commercial property insurance is a better option to make sure you’re fully protected.

The right coverage means your business can bounce back if something unexpected happens. Speak with your insurance provider to explore your options, be sure to shop around for the best rates, and protect your hard work.