Home-based business insurance in Canada: is your home policy enough?
Why most Canadian home insurance policies limit or exclude business activity, the choice between an endorsement, a home-based business policy and full CGL, and a worked cost comparison.
Usually not. Most Canadian home, condo and tenant insurance policies exclude or sharply limit liability arising from business activities and cover only a small amount of business property. If clients visit your home, you sell products, or you do work at customers' premises, you need either a home-based business endorsement on your home policy, a standalone home-based business policy, or a full commercial general liability (CGL) policy, depending on how large and risky the business is. Tell your home insurer about the business either way: an undisclosed business can complicate claims that have nothing to do with it.
This guide is part of the business insurance quote checklist. Premiums below are illustrative.
Why a home policy is not business insurance
Home policies are priced for household risks. The wording typically:
- excludes liability arising from "business" or "business pursuits", sometimes with narrow exceptions such as occasional babysitting or a student's part-time work
- limits business property, such as stock, inventory and equipment, to a low amount or excludes it
- excludes property held for sale
- may exclude damage caused by business operations, such as a kiln fire in a pottery studio
The exact wording differs, so read the definitions and exclusions in your own policy or ask your insurer in writing.
The three options
| Option | Typical scope | Good for | Watch out for |
|---|---|---|---|
| Home-based business endorsement on your home policy | Adds limited business liability and higher business property limits | Very small, low-risk businesses: tutoring, bookkeeping, online sales of low-risk goods | Liability may be limited to incidents on your premises; often a revenue cap; products and off-site work may be excluded |
| Standalone home-based business policy | A small commercial package: liability, business property, sometimes business interruption | Businesses with some client visits, inventory or off-site work | Check products-completed operations and professional services exclusions |
| Commercial general liability plus property | Full commercial cover, separate from the home policy | Larger businesses, employees, work at clients' premises, higher contract limits | Costs more; you may still need the home insurer to know about the business |
Many home-based service businesses also need professional liability, because none of the three options covers financial loss from advice or errors. See CGL vs professional liability.
Worked example: which option fits
An illustrative Ottawa-based graphic designer with $85,000 revenue and an illustrative home-based baker in Laval with $40,000 revenue:
| Designer (Ottawa) | Baker (Laval) | |
|---|---|---|
| Client visits | Rare | Customers pick up orders |
| Products | None | Food sold to the public |
| Off-site work | Occasional client meetings | Market stalls in summer |
| Main exposures | Professional errors, data | Food-borne illness, slip at the door, market stall injuries |
| Best fit | Endorsement or none for liability; professional liability is the key cover | Standalone home-based business policy or CGL including products |
For the baker, illustrative quotes:
- Home endorsement: $180 a year, $1 million liability on premises only, excludes products
- Standalone home-based business policy: $520 a year, $2 million liability including products, $10,000 business property
- CGL with products for markets: $690 a year, $2 million, additional insured for the market organizer
The endorsement is cheapest but leaves the main risk, an illness from a product sold, uncovered. The market organizer also requires $2 million and additional insured status, which only the last two options provide. Between those, the extra $170 buys additional insured wording; ask whether the standalone policy can add it, which might be cheaper. In Quebec, add the provincial tax on the premium to each figure before comparing; see tax on premiums.
Questions your insurer will ask
- What does the business do, and roughly how much revenue does it bring in?
- Do clients, customers or suppliers come to your home? How many a week?
- Do you have employees or helpers working at your home?
- Do you store inventory or equipment, and what is it worth?
- Do you work at clients' premises or at events?
- Do you sell products you make, import or resell?
- Is any part of the home used only for business?
Answer accurately. A description that understates client visits or sales can lead to a reduced or refused claim; see disclosure and misrepresentation.
Don't forget the car and the lease
- Car. If you use your personal vehicle for deliveries, client visits or carrying equipment, tell your auto insurer. Personal auto policies are rated for personal use, and delivery or commercial use may need a different rating or endorsement. Employees using their own cars for your business create a separate exposure that non-owned automobile liability addresses.
- Tenants and condo owners. A residential lease or condominium declaration may restrict business use or require you to carry liability insurance. Check before clients start visiting.
- Municipal rules. Some municipalities require a home occupation permit or licence for certain activities. A permit may come with an insurance requirement.
When to move up to commercial cover
Signals that you have outgrown an endorsement:
- a client or venue asks for a certificate of insurance with a $2 million limit and additional insured status
- you hire employees or regular helpers
- revenue passes the cap stated in the endorsement
- you start making or importing products
- you work at clients' premises regularly
At that point, collect quotes for a standalone policy and a CGL using the quote preparation checklist, line them up as in the worked quote comparison, and check what a venue or client actually requires using the certificate of insurance guide.
Frequently asked questions
Will my home insurer cancel my policy if I tell them about my business?
Some insurers will add an endorsement, some will refer you to a business policy, and a few may decline the risk. Not telling them is riskier, because the problem then appears at claim time.
Is my laptop covered at home?
Personal property cover may apply to a laptop, but business equipment is often limited. Check the business property limit and whether the laptop is used mainly for business.
I only sell online. Do I need liability insurance?
You may still have product liability exposure for what you sell, and marketplaces sometimes require it. Consider a policy that includes products, especially for children's goods, cosmetics and food.
Does an endorsement cover me at a craft fair?
Often not, because many endorsements limit liability to your premises. Check the territory and whether off-premises activities are covered.
Sources
- Insurance Bureau of Canada — explanations of home-based business insurance
- Financial Services Regulatory Authority of Ontario — Ontario insurance consumer information
- Autorité des marchés financiers — Quebec insurance consumer information
- Business Development Bank of Canada — guidance for small and home-based businesses
