The Ultimate Guide to Home Business Insurance in Canada

By Arthur Dubois | Published on 18 Jul 2023

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    If you’re running a home-based business in Canada, it’s wise to protect yourself and your business with business insurance. Insurance for home-based businesses may seem like an unnecessary expense, but it can provide financial protection for you and your business from unexpected events. In this guide, we’ll provide a comprehensive overview of home business insurance in Canada, the types of policies available, and tips for choosing the right provider.

    Understanding Home Business Insurance in Canada

    Starting a home-based business can be an exciting and rewarding experience. However, it also comes with its own set of challenges and risks. Protecting yourself and your business from financial loss due to unexpected events is where home business insurance comes into play.

    What is Home Business Insurance?

    Home business insurance is essential for any business operating out of a home. It covers many risks, including property damage, theft, liability claims, and lost income due to business interruption. With the right coverage, you can protect yourself and your business from financial loss and ensure that you can continue to operate even if something unexpected happens.

    Why is Home Business Insurance Important?

    Many home-based business owners think their homeowners’ insurance policy will cover damages or claims arising from their business activities. Homeowners’ insurance typically provides limited coverage for business equipment and liability claims. Many homeowners’ policies will pay a maximum of $2,500 for business assets. Therefore, having proper home business insurance coverage is essential to avoid financial loss and protect your home-based business and your income.

    You could be liable for damages or injuries caused by your business activities without the proper coverage. If you are a sole proprietor, you and your business are considered the same entity, regardless of whether you registered your business or not. Your homeowners’ insurance policy typically will not cover liabilities due to business activities. Being sued could result in significant financial losses, including legal fees, medical expenses, and damages awarded to the injured party.

    Personal Home Insurance vs Home Business Insurance in Canada

    While personal home insurance is necessary for any homeowner, its role and coverage limitations become more complex when a home-based business comes into play.

    Generally, personal home insurance covers the physical structure of the home, its contents, and provides coverage for personal liability such as a visitor’s injury. However, personal home insurance often has certain limits and exclusions, particularly regarding business-related activities or assets.

    Many homeowners might assume their home insurance will protect them if anything happens while operating their home-based business, but this is often untrue. Home insurance policies usually limit or exclude coverage for business-related risks, which could leave home business owners financially vulnerable.

    Below is a comparative table between home business insurance and personal home insurance:

    Home Business InsurancePersonal Home Insurance
    PurposeProtects the business assets and operations, including liability from customer or client injuries, business interruption, and damage or theft of business property.Covers the homeowner’s personal assets and liability. Protects against loss from disasters, theft, and liability from personal injury on the property.
    Business PropertyOften provides extensive coverage for business equipment and inventory.It may provide limited coverage for business equipment but usually does not cover inventory or business property damaged or lost outside the home.
    LiabilityCovers business-related liabilities, such as a customer injury or product-related harm.Usually does not cover business-related liabilities.
    Loss of Business IncomeCan provide coverage for loss of income if the business is interrupted due to a covered risk (like a fire or natural disaster).Does not cover loss of business income.
    Professional Errors & OmissionsMay provide coverage for professional liability, mistakes, or omissions made during business activities.Does not cover professional liability.

    To sum it up, while a personal home insurance policy can provide some limited protection for a home-based business, it usually falls far short of the comprehensive coverage offered by a business insurance policy. A separate home business insurance policy is often needed to protect a home-based business, covering aspects like liability, business property, professional errors and omissions, and loss of income from a business interruption.

    Do all home-based businesses need home business insurance?

    While home business insurance is crucial for many home-based businesses, there are certain scenarios where it may not be necessary.

    Businesses with minimal client interaction, negligible business assets, and low professional liability risk might not require specific home business insurance. However, remember that these situations are the exception, not the rule, and you should carefully assess even minimal risks your business might face.

    For instance, consider a freelance graphic designer or a consultant who uses their personal computer for work, doesn’t host clients at home, and whose biggest business asset is their talent and skills rather than physical equipment. They might believe that they do not need business insurance since there is no client foot traffic and no expensive equipment at risk.

    However, there are always some risks involved. For example, a freelance graphic designer might be accused of copyright infringement, or a consultant might face a lawsuit if a client suffers a loss due to their advice.

    Assessing Your Home Business Insurance Needs

    As a home business owner, you must protect your business and assets with the right insurance coverage.  You can take several steps to get the most suitable coverage for you and your business.

    Identifying Potential Risks

    The first step in assessing your home business insurance needs is to identify potential risks your business may face. For instance, if you’re running a web design business, you may face the risk of cyber-attacks, which can result in losing important data or even financial losses for your clients. On the other hand, if you’re running a daycare center, you may face liability issues if a child gets injured while under your care.

    Other potential risks you may need to consider are damage to your property due to natural disasters or accidents, theft or vandalism, and errors or omissions in your work that may result in financial losses for your clients.

    Evaluating Your Business Assets

    The next step is to evaluate your business assets and determine the value of your equipment, inventory, and other items. A valuation of your business assets will help you choose the property coverage you need in your insurance policy. Remember that property coverage may cover damage to your physical property and losses due to business interruption or loss of income.

    It’s essential to keep an inventory of your business assets and update it regularly to ensure adequate coverage in case of any losses or damages.

    Determining Your Liability Coverage

    You must determine the amount of liability coverage you need. Liability coverage protects you against claims from third parties, such as customers or clients who may suffer losses or injuries from your business’s activities.

    For instance, if you’re a freelance writer and accidentally publish an article containing false information, your client may sue you for damages. Liability coverage can help protect you in such situations by covering legal fees and any damages that may be awarded to the plaintiff.

    Or, your business might involve providing services in your home, such as hair styling or massage therapy. If a client visits you and injures themselves, they may sue you. Liability insurance can cover the damages a client may be awarded for injuries the client received at your home-based business.

    The amount of liability coverage you need will depend on the nature of your business and the potential risks involved. Working with an experienced insurance agent is essential to determine the right amount of coverage for your specific needs.

    Types of Home Business Insurance Policies

    You’ll find several policy options available to insure your home-based business. The policy you choose will depend on your business type, the income you generate, and the value of your business assets. Assessing your needs before you shop for a policy will help you get one that best suits your circumstances.

    Home-Based Business Endorsement

    A home-based business endorsement is an add-on to your homeowner’s policy. The cost is usually low relative to other home business insurance types, and the coverage is not as extensive.

    This policy is not a standalone policy because it’s specifically for businesses requiring a minimal amount of coverage. It typically includes coverage for business equipment and liability coverage, but coverage limits may be lower than other policies. This type of endorsement can be a good option for freelancers or small businesses that operate on a limited scale.

    Although coverage limits may be lower than a standalone policy, home-based business endorsements offer reasonably extensive coverage for smaller businesses. This type of policy provides insurance for damage to your business property, including coverage for repairs and replacement due to events like windstorms, fire or flooding. With this type of policy, you may get business interruption insurance and protection for data breaches.

    If you’re a freelance graphic designer working from home for example, you have a computer, printer, and other equipment for your business. If a fire damages your home, your homeowner’s insurance policy may cover the damage to your home, but it may not cover the damage to your equipment. A home-based business endorsement can provide additional coverage to protect your business assets.

    Home-based Business Insurance Policy

    You may need a more comprehensive insurance policy if your business generates significant income. A home-based business insurance policy is a standalone insurance policy that offers broader protection than the home-based business endorsement. It includes coverage for lost revenue due to a covered loss.

    Your home-based business insurance policy may offer coverage for the following:

    • The inventory you have on your premises or that you store off-site
    • Theft or damage to your property caused by a customer or others
    • Liabilities you may incur due to products or services you provide
    • Damage to your equipment from an incident your policy covers
    • Customer injuries

    For example, suppose you run a daycare center out of your home. You have several employees and serve families in your community. You could be held liable for medical expenses if a child is injured. An in-home business policy can provide the liability coverage you need to protect your business in the event of a lawsuit.

    Business Owners Policy (BOP)

    A business owner’s policy (BOP) may be a good option if you’re a small business owner with more substantial coverage needs. A BOP is a cost-effective way for small business owners to get comprehensive coverage. It usually includes business interruption, commercial general liability, and commercial property insurance coverage.

    A BOP is ideal for business owners with assets or inventory they need to insure against loss,  who may be subject to a third-party lawsuit, and who rent, lease, or own a commercial property.

    For example, if a fire damages your store, you could lose income while you’re closed for repairs. A BOP can help you cover your lost income.

    Commercial Insurance Policy

    A commercial insurance policy may be necessary for larger or more complex businesses. This type of policy provides broader protection than a BOP and includes property, liability, and business interruption coverage. It’s suitable for companies with higher coverage needs.

    For example, let’s say you own a manufacturing company with multiple locations. You have a large amount of equipment, several employees, and significant inventory. If a natural disaster damages one of your factories, the cost of repairs could be substantial. A commercial insurance policy can provide the coverage you need to protect your business assets and keep your business running smoothly.

    Key Insurance Coverages for Home Businesses

    Starting a home business can be an exciting venture. However, it’s important to protect your assets and finances as a business owner. One way to do this is by investing in the right type of insurance coverage for your business. Here are some of the critical insurance coverages you should consider for your home business:

    Property Insurance

    Property insurance for your business protects your business assets, such as equipment, inventory, and furniture. It covers losses of your business assets due to fire, theft, water damage, and other specified causes. 

    Your homeowner’s insurance policy will cover damage to your home’s physical structure and personal contents as long as the source of the damage is a risk included in the policy, such as a fire or theft. The homeowner’s policy may not cover your home business assets and will not cover any income loss you experience if your home is damaged and you can’t operate your business.

     So, it’s essential to compare homeowner’s insurance policies to get the best homeowners’ policy for your needs. Some homeowners’ policies will allow you to put some of your home business assets on your policy as an add-on while other policies don’t. 

    Commercial Insurance

    There are different types of commercial insurance. The two most common are commercial general liability insurance and commercial property insurance. 

    Commercial general liability insurance covers bodily injury or liability claims by third parties. For example, if a client visits your home office and slips and falls, commercial general liability insurance can help cover the costs associated with their injuries. It also covers legal expenses claims against you that result from false advertising, business operations, or harm caused by products you sell or manufacture. This type of insurance is essential for any home business, as accidents can happen anytime.

    Commercial property insurance covers physical damage to your commercial property and any attached structures. Damages from flooding, fire, weather-related events, vandalism and theft can be covered under a commercial property insurance policy. Coverage extends to your inventory in most cases as well.

    Professional Liability Insurance

    Professional liability insurance, or errors and omissions insurance, is a must-have if your home business involves consulting, design, or other professional services. Professional liability insurance offers protection against claims arising from professional services or advice you provide. For example, if a client claims that your advice caused them financial harm, professional liability insurance can help cover the costs associated with the claim. This type of insurance is not usually part of a home business insurance policy, but you can purchase it separately.

    Business Interruption Insurance

    Business interruption insurance covers lost income if your business is forced to close temporarily due to a covered loss, such as a fire or flood. It helps you cover ongoing expenses, such as salaries and rent. This type of insurance is particularly important for home businesses, as a loss can significantly impact your finances.

    Cyber Liability Insurance

    In today’s digital age, cyber-attacks and data breaches can happen to any business. Cyber liability insurance provides coverage against these types of losses. It covers your business and customers’ legal fees, notification expenses, and recovery costs. Cyber liability insurance is a must-have if your home business involves storing sensitive information, such as client data or financial information.

    Investing in the right insurance coverages can help protect your home business and give you peace of mind. Speaking with your insurance agent is essential to determine which coverages suit your business needs.

    Tips for Choosing the Right Home Business Insurance Provider

    Running a home business can be a great way to earn a living while enjoying the flexibility of working from home. However, protecting your business assets and income with the right insurance coverage is vital. Choosing the right insurance provider can be daunting, so you must do your research to ensure you’re getting the best coverage at an affordable price.

    Researching Insurance Providers

    When choosing an insurance provider, comparing multiple business insurance quotes is essential. Look for providers specializing in home business insurance, as they will better understand your unique needs. Here are three trusted insurance brokers offering home business insurance in Canada:


    Zensurance is a financial technology company specializing in insurance for businesses. The company is an insurance broker that works with over 50 insurance companies. Their professionals will help you determine the best policy for you and then comparison shop among their insurance providers to get you the best deal. Their use of technology and the company’s business volume helps keep costs low for their customers.


    Surex is an online insurance provider that offers its services in 11 provinces and territories in Canada. You can get up to 10 personalized insurance quotes to compare at a time. The company offers a full suite of insurance products, including home, auto, tenant, and business insurance. Because they offer so many different types of insurance, you could save money by bundling insurance products. Surex has over 45,000 customers; its primary focus is excellent customer service.

    Square One

    Square One is an insurance brokerage specializing in home insurance. It serves Alberta, British Columbia, Manitoba, Ontario, Quebec and Saskatchewan. Square One offers various home insurance policies, including home business insurance. Square One provides the only fully customizable home business insurance plan in North America. The company offers the option of adding your home business insurance to your existing Square One home insurance policy for a low monthly premium.

    Comparing Quotes and Coverage

    Once you’ve found a few potential providers, request quotes from them and compare the coverage and pricing. Look for policies that provide the coverage you need at an affordable price. It’s important to note that the cheapest policy may not always be the best option, as it may not provide adequate coverage for your needs.

    When comparing coverage, look for policies that cover the specific risks associated with your business. For example, if you run a home daycare, you’ll need coverage for accidents and injuries that may occur on your property. If you sell products online, you’ll need coverage for product liability. Make sure to ask the provider about any additional coverage options that may be available, such as business interruption insurance or cyber liability insurance.

    Understanding Policy Exclusions and Limitations

    Before signing up for a policy, make sure you understand all the exclusions and limitations in the coverage. These may include specific risks that aren’t covered or requirements you must meet to qualify for the policy. For example, some policies may exclude damage to your property as a result of a catastrophe or because you did not perform necessary maintenance of your facilities.

    It’s important to ask questions and clarify any concerns before committing to a policy. A good insurance provider will be happy to answer your questions and help you understand the coverage options available.

    By taking the time to research and compare insurance providers, you can find the right coverage for your home business and protect your assets from unexpected risks and losses.

    Maintaining and Updating Your Home Business Insurance

    Regularly Reviewing Your Policy

    Reviewing your home business insurance policy regularly is essential to ensure it provides adequate coverage for your business needs. Review it at least once a year and adjust it as your business grows or changes.

    Updating Your Coverage as Your Business Grows

    If your business grows, you may need to update your coverage to reflect your growing assets, employees, and business activities. Contact your insurance provider to review your policy and make any necessary updates.

    Filing Claims and Handling Disputes

    If you need to file a claim or have a dispute with your insurance provider, contact them immediately. Keep detailed records of all conversations and correspondence with your provider and provide any necessary documentation to support your claim or dispute.

    Home Business Insurance in Canada: The Bottom Line

    Investing in the right home business insurance policy is crucial to protect your assets, customers, and reputation in the event of unexpected events. Following the tips in this guide and understanding the different types of home business insurance policies, you can choose the right provider and policy to fit your business needs.

    FAQs About Home Business Insurance in Canada

    How Much Does Home Business Insurance Cost?

    The cost of home business insurance can vary widely depending on the type and amount of coverage you need. Factors affecting the cost include your business type, location, and size.

    Is Home Business Insurance Tax Deductible?

    Yes, home business insurance premiums may be tax-deductible as a business expense. However, consulting a tax professional for specific details on your situation is essential.

    Do all home-based businesses need business insurance in Canada?

    Not all home-based businesses need business insurance in Canada, but it’s strongly recommended. Business insurance can protect against financial loss due to lawsuits, damages, or other risks. Even small, home-based businesses can be exposed to risks, like a customer or client getting injured on the property or loss or theft of business equipment. The type of business you’re running from home can also determine if you need specific types of business insurance, such as professional liability insurance.

    Do I need business insurance if I work from home as an employee in Canada?

    If you’re working from home as an employee, you typically wouldn’t need to have your own business insurance. Your employer’s insurance usually covers you. However, you may need to review your home insurance policy to ensure it covers any company property you have at home, like laptops or other equipment. Also, some home insurance policies may have clauses about working from home, so it’s always good to check with your provider.

    Does running a business from home affect home insurance in Canada?

    Yes, running a business from home can affect your home insurance. Many home insurance policies don’t cover business activities or business-owned items. If a client or customer injures themselves on your property, for example, your home insurance might not cover the associated costs, leaving you liable. In addition, if your home business involves storing a large amount of inventory or high-value equipment at home, this could exceed the personal property coverage limits of a standard home insurance policy.

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    Arthur Dubois is a personal finance writer at Hardbacon. Since relocating to Canada, he has successfully built his credit score from scratch and begun investing in the stock market. In addition to his work at Hardbacon, Arthur has contributed to Metro newspaper and several other publications