Do I still need small business insurance if I work from home?

Rhino Trade Insurance 27 February 2023

Running a small business from home is the dream for many of us. And it’s easy to see why.

Being the boss of a home-based business brings you freedom, control and, if everything goes to plan, plenty of cash.

Having said that, running a small business from home isn’t always a breeze. You need to grind just as hard as those who go out to offices and sites – if not harder. Plus, you still face risk, so should take steps to ensure your business is protected against factors beyond your control which threaten to drain your hard-earned profits.

With this in mind, Rhino is here to explain what types of insurance you need to cover your small business if you work from home.

Policies you must have as a small business

Employer’s Liability Insurance

Employer’s Liability (EL) Insurance is the only insurance policy you need by law in order to operate a small business from home in the UK. You need it in place if you hire any employees, even if it’s only on a casual or short-term basis.

Employer’s Liability Insurance is there to protect you, the business owner, if any of your employees become injured or ill as a result of working with you and bring a claim against your business. If this happens, Employer’s Liability Insurance will pay out to cover the costs associated with the claim, including things like legal fees and compensation costs.

You’ll be fined up to £2,500 per day if you don’t have EL insurance. You can even be fined for not displaying your certificate correctly, so we think you’ll agree it’s pretty important.

Policies you should consider

Public Liability Insurance

Public Liability (PL) Insurance is a type of cover which pays out if a claim is brought against you by a member of the public for physical injury or property damage. These claims can be costly to defend, which is why it’s so important to have good PL insurance in place.

Any type of business where customers enter your home is unfortunately ripe for a PL claim.

For example, a beauty business, artisan (e.g. potter), home baker or computer repair business would all see clients coming through the doors of the home. Even if it’s just to pick up an order, once they’re over your threshold they could slip, trip or otherwise come to harm. Frustrating though it can be, they’d be well within their rights to bring a claim for compensation against your business should this happen.

Public Liability Insurance may not be a legal requirement in the UK, but many clients won’t work with a small business unless they have it, so it’s not really an insurance type you can do without.

Gadget cover

When you’re working from home, we bet you use a tablet or laptop and mobile phone in the course of your business. You might use other equipment too, such cameras or other portable electronic devices.

If any of these pricey gadgets is damaged, lost or breaks down, you’ll be looking at footing a bill to replace them before you can continue earning your living.

Insurance to protect your gadgets is a smart option, because it means you can quickly reclaim the cost of your electronics and deliver what you’ve promised your clients without any delay or dent to your bottom line.

Professional Indemnity Insurance

Do you offer any type of advice in your line of work?

If it’s a yes, then Professional Indemnity Insurance is a must. In a nutshell, this type of insurance protects you if a customer loses any money as a result of your advice, plans or designs.

For example, if you run a one-man (or woman) accountancy practice and give a client some dodgy advice which results in them making a bad investment and losing out financially, they might bring a claim against you.

Another example – if you’re a contractor who’s drawn up some designs for interior work which ends up damaging a weight-bearing wall, the customer again is likely to seek damages so they can sort out the mess.

Sounds like a nightmare, right? Don’t sweat about it. In such cases, Professional Indemnity Insurance will cover the costs of such claims, including legal fees and compensation.

Tax Enquiry Insurance

Now, we’re not saying this will definitely happen to you, but small businesses can find themselves the subject of tax investigations by HMRC.

Tax Enquiry Insurance is an especially important insurance for tradesmen and self-employed contractors, who might need to defend themselves against incorrect classification under the recent IR35 reform.

If HMRC come a-knocking, it’s generally time-consuming and costly to defend your business against fines and back payments. Tax Enquiry insurance ensures that you won’t need to pay things like accountant’s bills and legal fees out of your own pocket – it’s all covered by your insurer.

So, if you’re running a small business from home and don’t fancy forking out potentially thousands (or more) defending yourself against incorrect tax decisions, this is an important type of small business insurance for you.

Van Insurance

You may work from home, but if you use a work vehicle then you’re going to need specialist coverage in case something unfortunate happens while you’re out and about.

Whether you use it to pick up goods or materials, hop in it to ferry orders to customers or use it for anything else work-related, your car or van is likely integral to the smooth running of your business.

A regular motor insurance policy won’t cut it for what is technically a commercial vehicle, so a separate policy for your van or work car is a must for anyone who runs a small business.