More people than ever run a side business or work for themselves from home, but a standard home insurance policy may not cover business activity. This guide explains insurance for side businesses and working from home: where home cover falls short, what extra you may need, and why telling your insurer matters.
Why home insurance may not be enough
A standard home insurance policy is designed for domestic life, not business activity, and may exclude or limit cover for business equipment, stock and the risks of customers visiting. So if you run a side business or work from home, you cannot simply assume your home policy covers it. Failing to tell your insurer about business use can even affect your wider home cover, which is why it is important to address it properly.
Tell your home insurer
The first step is to tell your home insurer that you work from home or run a business there. For purely clerical work on a laptop, many insurers are relaxed and may cover it at no extra cost, but you should still check. For anything involving stock, equipment, or visitors, the insurer needs to know, as our guide to home insurance when you work from home explains. Disclosure keeps your cover valid.
Business equipment and stock at home
If you keep business equipment or stock at home, your home contents cover may not fully protect it, as there are often limits on business items. You may need to extend your cover or take out separate business contents cover for these items. For a side business holding stock, this matters, since a fire or theft could destroy goods your home policy would not pay for, leaving you out of pocket on your business assets.
Public liability for visitors and clients
If customers, clients or suppliers visit your home for your business, or you visit theirs, you may need public liability cover, which protects you if someone is injured or their property damaged in connection with your business, as our guide to public liability insurance explains. Your home insurance liability cover is for domestic situations, not business ones, so business-related liability usually needs its own cover.
Product liability if you sell products
If your side business makes or sells products, product liability cover protects you if a product you supply causes injury or damage. This is a real risk for the many home businesses selling handmade goods, food or other products. A standard home policy will not cover claims arising from products you sell, so if your side business involves products reaching customers, product liability is worth considering alongside public liability.
Professional indemnity if you advise
If your side business involves giving advice or a professional service, such as consultancy, tutoring, design or bookkeeping, professional indemnity cover may be relevant, protecting you if a client claims your work caused them a loss, as our guide to professional indemnity insurance explains. Even a small, part-time advisory business can face such a claim, so consider whether the nature of your work calls for this cover.
Keeping cover proportionate
The cover a home or side business needs is proportionate to its activity. A freelancer doing computer work needs little beyond perhaps equipment cover and, if advising, professional indemnity. A business holding stock and receiving visitors needs more. The point is to match the cover to what you actually do, rather than either over-insuring a tiny venture or, more dangerously, leaving a growing business relying on a home policy that does not cover it.
Holiday lets and renting out space
Running a business from home is not the only way home and business insurance overlap. If you let out a room, or run a holiday let or short-term rental, that is a business activity needing its own cover, which a standard home policy will not provide, as our guide to holiday let and Airbnb host insurance explains. Whenever your home is used to earn income, check whether specialist cover is needed.
Common side businesses and their risks
Side businesses come in countless forms: selling handmade goods, tutoring, photography, consultancy, baking, crafts, online reselling and more. Each carries its own risks. Selling products brings product liability exposure; advising brings professional indemnity considerations; having customers visit brings public liability. Identifying what your particular side business does, and the risks it creates, is the first step to working out what cover, if any, you need beyond your home insurance, which may not respond to business activity.
Selling online and through marketplaces
Many side businesses sell online, through their own site or a marketplace platform. Selling online can still create product liability if what you sell causes harm, and you may hold stock at home that your home policy limits. Platform protections, where they exist, are not a substitute for your own cover. If your side business sells products to the public, check that you have appropriate product and public liability cover for the goods you supply.
When a hobby becomes a business
There is often a grey area where a hobby starts to earn money and becomes a business. Once you are trading regularly for profit, your home insurance may no longer cover the activity, and you may take on liabilities to customers. It is worth recognising this transition and addressing the insurance, rather than carrying on as if it were still just a hobby. Telling your insurer and arranging suitable cover keeps you protected as the venture grows.
Reviewing as the business grows
A side business that grows may outgrow informal arrangements. More stock, employees, premises or turnover all change the cover you need, and at some point a proper business policy, rather than add-ons to a home policy, becomes appropriate. Reviewing your insurance as the business develops ensures it keeps pace, so that a venture which started small does not end up seriously under-insured as it becomes a significant source of income and risk.
The bottom line for side businesses
A side business or home-based venture is still a business, and assuming your home insurance covers it can leave a serious gap. Tell your insurer, identify the risks your particular activity creates, and arrange proportionate cover, equipment, public and product liability, or professional indemnity as the case requires. Done properly, you protect both your home cover and your growing business, without either over-insuring a tiny venture or under-insuring one that has quietly become significant.
In short
A standard home insurance policy may not cover business activity, so if you run a side business or work from home, tell your insurer and check the gaps. You may need extra cover for business equipment and stock, public liability if clients visit, product liability if you sell products, and professional indemnity if you advise. Keep the cover proportionate to what you do, and arrange specialist cover for activities like letting space.
Where to get help and next steps
Read our guides to home insurance when you work from home, public liability insurance, and holiday let and Airbnb host insurance. This is general information, not financial or legal advice.