The insurance implications of working from home

Australians are increasingly working from home, with the most recent data from the Australian Bureau of Statistics indicating at least a third of us choose to work from home at least part of the time.

study by future trends research house McCrindle shows there are lots of different reasons why people work from home. In total, 45 per cent of Australians want the flexibility to juggle other things while working, while 25 per cent of us want a better work/life balance. Additionally, 15 per cent want to work without distractions and 12 per cent want the freedom to also look after children while working.

There are also many different models when it comes to working from home. Some people run their own businesses. Others have negotiated to work from home with an employer part-time. Another group works for an employer full time from their home.

Whichever model someone falls under, there are lots of different insurance implications when people choose to work from home. Here, Michael White, who is Steadfast’s broker technical manager, explains what some of those are.

“Home and contents policies do provide some cover for people who work from home, although it’s usually limited to the assets you’re using to do the work. Usually, a computer is the main asset and this is typically covered by your home policy, with a limit of about $10,000,” he explains.

As a result, it’s important to make sure the cover limit in your insurance policy on the assets you use to conduct work from home is adequate.

Says White: “In contrast to a commercial insurance policy, which may be negotiated, this is not the case with home and contents policies, whose limits cannot be negotiated.”

For instance, if your insurer provides cover for a home computer with a value of up to $10,000, you won’t necessarily be able to negotiate for a higher cover level of, say $20,000, even if you have business assets to this value. This has implications for businesses that operate a business with a higher value of assets from their home.

Let’s says someone is running a hairdressing salon from the basement of their home. The home and contents insurance policy won’t necessarily provide cover for expensive equipment such as chairs and basins above the limits specified in the policy. If this is the case, the business owner may look into buying a business pack insurance policy, which may provide more comprehensive cover.

Also, while they include limited cover for the tools of the trade, home and contents insurance policies won’t cover personal and professional liability.

“So, if people are operating a business from home, they need to take out a separate liability cover for that business,” White explains.

In general, White stresses it’s essential to first ensure if you’re working at home, you do have a home and contents policy that will provide cover for assets such as the computer on which you conduct the business.

In addition to that you need to make sure you’ve got liability cover. This will provide protection in the event that, for instance, a courier delivers a document to your home and trips and has an accident while making the delivery.

Important note – This article is provided by Steadfast.

The information provided here is general advice only and has been prepared without taking in account your objectives, financial situation or needs. Steadfast Group Ltd (ABN 98 073 659 677, AFSL 254928)

How to minimise being underinsured

Many Australians, especially those who own businesses, discover they don’t have the cover they need in the worst possible circumstances.

Insurance is one of those subjects that many people glaze over. So, just to test how knowledgeable you are about this important but unsexy topic, see how many of the following you can answer.

Questions

  1. What type of insurance can provide cover if a natural disaster results in my business having to shut down for a period of time?
  2. What type of insurance can provide cover if a client takes legal action against me? In what industries is it mandatory to have this insurance?
  3. What type of insurance can provide a payout to cover costs relating to everything from a broken window to a tax audit to a light-fingered employee?
  4. What type of insurance is legally required if you employ staff? What is the penalty for failing to take out this insurance?

Answers:

  1. Business interruption insurance.
  2. Professional liability insurance (also called professional indemnity insurance). Those working in the medical, accounting, law and financial advice industries.
  3. Business insurance.
  4. Workers’ compensation insurance. It varies from state to state but you’ll typically be at risk of jail time if an employee has been injured (or worse). NSW imposes a ‘double avoided penalty’ equivalent to double the amount you should have paid in workers’ compensation premiums.

One in ten businesses have no cover

If you failed to get all (or any) of the answers right, you can take solace in being a typical Aussie. Survey after survey has shown that Australians don’t have a good grasp on what insurance policies might be relevant to them. Unsurprisingly, Australia is one of the most underinsured nations in the developed world (underinsurance is when an individual or business has no or inadequate insurance to cover their legal liabilities, or the cost of loss or damage to their assets).

The Insurance Council of Australia’s 2015 report on non-insurance in the SME sector showed a non-insurance rate of 12.8 per cent. Paul Nielsen, director and chair of the Council of Small Business Australia (COSBOA), says many SMEs are in denial. “Business owners tend to think it won’t happen to them. Because of this, some SMEs view insurance as dead money,” he says.

Read the full Steadfast article here.

Why small businesses use an insurance broker

Small business owners tend to be born optimists with little inclination to think about what could go wrong. That’s why it pays to have an insurance broker in your corner to safeguard what you’ve worked for.

Paul Harrison’s family-owned shoe shop in Sydney’s Neutral Bay has operated out of various locations for more than half a century. It’s used insurance brokers for the past 35 years.

“When I came on board, we already had insurance but not at the level we needed,” says Harrison. “Most of the insurance we had was good, but it took time. If we made a claim, an assessor would come along; then he’d send you forms to fill out before repairs could begin. All that time you’re not trading.”

Save yourself time

Anyone who has compared car, home or health insurance policies to try to find the best deal knows how time consuming it can be. Choosing a business insurance package is even more complex because of the range of risks requiring cover.

A business insurance broker will not only save you time sourcing the right policy, they can also save time and money if you need to make a claim.

That was Harrison’s recent experience with his long standing Steadfast insurance broker.

“We had a leakage from the residential unit above our premises that ruined our ceiling, stock and floor. With rent and wages to pay, you can’t afford to be out of business for two months. Our business insurance broker was onto it straight away. We were able to replace our flooring within two days and probably missed five days’ trading in all”.

Utilise your business insurance broker’s experience

Small business owners are great at what they do, whether it’s running a café or a consultancy. But they are rarely insurance experts. “What they may not understand is the broad range of risks they face,” says Dallas Booth, chief executive of the National Insurance Brokers Association(NIBA).

A business insurance broker will help identify the risks your business faces, then get the insurance package that matches those risks. “There’s no point buying a business package off the shelf if it only covers some of your risks,” says Booth.

“I don’t think you can do that on your own. You may think you know what can go wrong but you never realise how much [an adverse event] impacts on your business going forward,” says Harrison.

Read the full Steadfast article here. 

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