Original blog post is from insurance claims expert, Allan Manning from the LMI Group:
https://www.allanmanning.com/warning-on-sme-home-business/
Recently you may have seen the article on the ABC News in respect of a home claim being denied by an insurer due to the fact the insured was running a business from their home. In this case, selling eggs.
With rising living costs more and more people are looking for a side hustle or in other cases a person starts up a new business venture from the kitchen table. Thinking about it, LMI - started from the kitchen table in my home back in February 1999 and operated from there until May 2000 [Same for Macedon Ranges Insurance from Sept 2020 until late 2022!]
While many insurers will allow an office risk to be included under the home and/or contents policy, many do not allow any other sort of business activity. For example, one broker's wife runs a dry flower arrangement business from their home. On hearing of the claim being denied on the news, he checked with his own home and contents insurer and was advised that they would not honour any claim once the full use of the home was known to them. I want to stress that this was not a claim arising out of the business activity but any claim including say storm damage to the roof.
How can they do this do you ask?
If an underwriter can demonstrate that the occupation of the risk is something that is not acceptable in their underwriting manual and they would never have accepted the risk had they known that the risk was greater (in their mind) than a normal home and contents risk then they are entitled to cancel the policy ab initio (from the beginning) and refund the premium.
If on the other hand the insurer would have accepted the risk then they are only entitled to impose the same conditions they would have had they known of the true occupation. For example, an increase in premium or a higher deductible.
In most cases of home businesses, but not all, the risk to the physical property is not increased. I doubt it would be for someone with a chicken coup or with a small amount of dried flowers. Many home owners would have this for their own consumption. On the other hand, someone doing spray painting or welding on a commercial basis may well be increasing the property risk.
The bigger risk is in public and products liability.
So if there is any sort of home business activity including Airbnb, renting out clothing or other goods, providing storage for cars, boats or other property, or any other type of business… your home insurer (or at the very least – your broker) should be advised to ensure that genuine cover is in place BEFORE a loss occurs.
Some insurers are quite happy to offer home business insurance for certain types of business activities, other insurers have a much firmer stance so it's important that you are insured with the right provider for your circumstances.
To discuss further please don’t hesitate to reach out to our team - Kate Fairley
