Do You Need Business Insurance if Working From Home?

What types of business insurance do home workers need?

Most home-based businesses need some combination of public liability, professional indemnity, and business contents cover. If you employ anyone, employers’ liability insurance is legally required.

What does each type of cover protect?

Under the Employers’ Liability (Compulsory Insurance) Act 1969, you must have at least £5 million of employers’ liability cover if you employ anyone, even part-time or a family member. The penalty for not having it is up to £2,500 per day.

When is business insurance legally required?

Employers’ liability insurance is the only type that is always legally required, but other types become a practical necessity depending on your business activities.

Which situations create a legal or contractual obligation?

If clients or customers visit your home, public liability insurance protects you against injury claims. Many commercial contracts and client agreements require you to hold a minimum level of public liability cover before they will work with you.

Professional indemnity insurance is mandatory for some regulated professions including accountancy, financial advice, and legal services. Even if your profession does not require it, any business that provides advice or services should have it.

Some landlords and mortgage providers also require you to have specific insurance if you run a business from a residential property. Check your tenancy agreement or mortgage terms before setting up.

The HSE provides detailed guidance on which employers need liability insurance and what exemptions apply, including sole traders with no employees.

What is the difference between self-employed and remote employee cover?

Self-employed people need their own insurance for every aspect of their work. Remote employees are usually covered by their employer’s policies, but gaps still exist.

Where do remote employees have gaps?

Your employer’s liability insurance covers work-related incidents, but it does not cover your personal home, your own equipment, or any side business you run. If you use personal devices for work, check whether your employer’s policy covers damage or theft.

If you are self-employed, no employer is providing liability insurance, income protection, or equipment cover. Arranging all of this is your responsibility, and the costs are tax-deductible as a business expense.

If you work for an employer but also do freelance work on the side, you need separate business insurance for the freelance activity. Your employer’s policy covers their work, not yours.

Do you need to change your car insurance if you work from home?

If you drive for any business purpose beyond commuting to a single fixed workplace, you need business car insurance. Personal car insurance covers social, domestic, and pleasure use plus commuting, but not business travel.

What counts as business use?

Driving between client sites, delivering goods, attending meetings at different locations, and any travel that is part of your work all count as business use. Simply driving from home to a single office does not.

If you make deliveries as part of your business, you may need specialist courier insurance rather than standard business car insurance. This covers the goods you carry as well as the vehicle.

For occasional business trips, temporary business car insurance can cover you for the specific days you need it without changing your annual policy.

What are the most common insurance gaps for home workers?

The biggest gap is assuming your home insurance covers business equipment and activities. It does not, and an uninsured claim could leave you personally liable for tens of thousands of pounds.

Which gaps catch people most often?

Using your car for business on a personal policy is the most expensive mistake. If you have an accident while driving for work on a personal policy, your insurer can refuse the claim and void your cover.

Under-declaring the value of your business equipment is another common problem. If you insure £2,000 of equipment but actually have £5,000 worth, you will only be covered up to the amount you declared.

Not telling your home insurer about business activities is also risky. If your insurer discovers you are running a business from home without declaring it, they can void your entire home insurance policy.

Review your cover at least once a year. As your business grows, your equipment value, client base, and risk profile all change, and your insurance should keep pace.

Our guide on car insurance costs explains how different use classes affect your premium and what business use adds to your quote.

How much does business insurance cost for home workers?

Most home-based businesses can get adequate cover for £300 to £1,000 per year, depending on the type of work and level of cover needed.

How can you reduce the cost?

Bundling multiple types of cover into a single policy is usually cheaper than buying each one separately. Many insurers offer combined packages for small businesses that include public liability, professional indemnity, and business contents.

Getting quotes from specialist small business insurers as well as mainstream providers gives you a better comparison. Specialist providers often understand home-based risks better and offer more tailored cover.

Increasing your excess reduces your premium, but make sure you can afford to pay it if you need to claim. For most home businesses, a £250 to £500 excess is a good balance between affordability and premium savings.

Our guide on lowering your car insurance premium covers cost-saving strategies that also apply to business car insurance.