How Home-Based Business Insurance Works in Canada

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Article Contents
Picture of By <span>Vitalii Starov</span>
By Vitalii Starov

Updated on April 10, 2025

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Picture of By <span>Vitalii Starov</span>
By Vitalii Starov

Updated on April 10, 2025

Visit author page

4 minute read

Article Contents

Running a business from home provides plenty of perks, such as flexible hours, no lengthy commute, and the comfort of working in your own space. However, transforming your living room into a partial home office and your garage into inventory begs the question: do you need home-based business insurance? 

While regular home insurance can cover some business activities, it won’t be enough to mitigate the risks of running an online store or providing consulting services. This article will discuss why business insurance matters, what coverage is available, and what considerations to make.

Insurance for Home-Based Businesses At a Glance

  • Getting home-based insurance can provide protections that your standard policy can’t. It can provide peace of mind, financial protection, and help mitigate liability risks.
  • Any business can qualify for insurance, but how much coverage you get will depend on your annual gross sales, the nature of your business, and if employees or customers visit the home.
  • There are many different types of home-based business insurance policies, so it’s best to shop around for one that best suits your needs.

Do I Need Insurance for My Home-Based Business?

Yes, you need insurance for your home-based business. Here’s what it covers:

  • Sole proprietors
  • Self-employed individuals
  • Businesses with up to two employees operating out of their home

But what encompasses a home-based business? You’ll need coverage whether you have customers or clients who visit your home, inventory stored in your dwelling, or equipment to run your business. Even side businesses can face significant risks, as there are entities to protect, like handmade goods or computers. Note that insurance for working from home is different from home-based business insurance.

Unique Risks for Modern Home-Based Businesses

Thanks to technology and evolving work models, more Canadians are running businesses from home with ease and flexibility. In 2022, there were 1.19 million small businesses in Canada, many of which operated out of a home base. Still, you might not anticipate certain risks, including the following.

Cybersecurity and Data Breaches

As technology evolves, so do the skills of those who use it unethically. Thriving businesses are prone to becoming targets of phishing emails, malware infections, and hacked Wi-Fi networks, as hackers often steal personal data and financial information. These attacks can significantly damage your reputation and cause legal consequences.

Inventory and Equipment Damage

While a regular home insurance policy will cover fire, theft, and water damage to your personal items, it may not cover losses you experience with business equipment like handmade products or expensive tools.

Client Delivery-Related Liabilities

If clients visit your home office, you can be liable for any injuries they experience. Slipping, for instance, won’t be covered by your regular home insurance policy.  

Business Interruptions

Natural disasters and power outages can suddenly halt your business operations, leaving you to recover lost income without the help of an insurance plan.

Professional Liabilities

Suppose you run a service-based business like a consultation firm, coaching company, or design agency. Even the slightest misunderstanding can lead to costly claims, and regular home insurance won’t cover the legal repercussions of your clients claiming you cost them financial losses.

What is the Best Insurance for a Home-Based Business?

Ultimately, the best insurance for a home-based business will depend on what you do. While there isn’t a single suitable policy for every business, there are flexible options you can customize to your services, including the following.

A home-based business endorsement makes a good add-on if you already have a home insurance policy. It’s best for hobby-style businesses, early-stage startups, and freelancers with minimal equipment, as it offers limited coverage for tools and liabilities. 

It may not suffice for in-person client meetings at your home or if you have a sizable inventory. 

If your business hosts in-person client consultations, CGL is your best bet. It can protect you financially if a client gets injured on your property or if a product causes them harm. CGL can cover legal fees and settlements. 

If you’re a consultant, IT professional, designer, accountant, or other service provider, there may come a time when clients claim your products or services caused them financial losses. Should that be the case, professional liability insurance can cover legal defences, settlements, and judgments.

For product sellers, drop shippers, content creators, and crafters, commercial property insurance can help protect physical assets. It can cover damage and losses to equipment and tools such as CPUs, specialized equipment, and other inventory.

Nowadays, even bigger businesses run operations at home, and technology plays a significant role in a business’s success. However, these technologies can fall victim to cyberattacks. Fortunately, cyber liability insurance can protect businesses managing sensitive client information on cloud-based systems by protecting against data breaches and covering the fallout of potentially hacked systems.

What’s Covered By My Home Vs. Business Insurance Policy?

Many independent Canadian business owners mistakenly assume that their home insurance covers business activities. The reality is that home insurance can only cover personal belongings, structural damage, and personal liabilities involving guests, not clients. 

With a business insurance policy, you’ll get coverage for day-to-day risks like:

  • Lost income due to a covered event like a fire or natural disaster
  • Product liability if something you sell causes harm or damage
  • Data breaches, hacking, and digital threats
  • Damage to business equipment like computers, tools, and products
  • Professional liability for errors, omissions, or negligence

Let’s review an example of how home and business insurance differ to get more perspective. Suppose you use a personal laptop to run secondary business tasks like recording inventory, and it gets stolen or damaged. Your home insurance won’t provide coverage for this incident.

Then, say a client sues you for a service error because of setbacks resulting from your laptop problem. Only business liability insurance will cover legal costs. 

Key Advice from MyChoice

  • Get the right level of insurance for your home-based business. If you don’t have a business-registered vehicle, you won’t need a policy covering business fleets.
  • Seek professional advice from a commercial insurance broker who can help you decide what policy best suits your operations. 
  • Consider adding a rider to your existing home plan if you’re in the early stages of growing your business. It’ll provide the appropriate amount of coverage for lower-risk operations.

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