The home-based business boom creates risks for SMEs

The home-based business boom creates risks for SMEs

By BizCover
12 August 2024
Partner Content

Now that hybrid and remote work has become the new norm for many people, owning or renting business premises is no longer strictly necessary to run a small business.

Recent data from FinTech company Thriday shows that more than 50 per cent of small-to-medium businesses now choose to start and continue operating from home. According to the data, only 22 per cent of those surveyed said they would consider moving to a fixed office location away from home.

This shift begs the question: what risks might home-based businesses be facing?

Reward and risk

While running your own business from home has many benefits—including earning extra income, reducing operating overheads, and improving work-life balance—there are risks that aspiring entrepreneurs and SMEs should also take into consideration.

For those currently running or thinking of starting their own home-based business, online small business insurance service BizCover reminds entrepreneurs that although you may operate from home, you are still running a business that opens a new world of risks. Because of this, BizCover recommends considering policies to help protect your business against financial losses.

Investing in insurance when you’re self-employed can be a smart move. When working for an organisation, these considerations are already taken into account. But, as a small business owner, you may wish to consider what insurance options best fit your needs. Otherwise, your business could be liable for a significant financial payout if a successful claim is brought against you for an uninsured event.

Professional service providers often consider the following policies:

Professional Indemnity insurance

If you offer a professional service - such as financial advice, architectural design, or copywriting services - then you may wish to consider Professional Indemnity insurance.

Working from home can be a great choice for anyone who works primarily online and offers professional services to clients. However, you can still be at risk of third-party claims due to alleged or actual negligence in your professional services or advice. Think about miscalculations, failing to miss deadlines or not meeting your clients' expectations to name a few. This is where Professional Indemnity insurance can help you.

Public Liability insurance

This type of insurance could be important if you visit or have clients who visit your home for meetings or appointments. Public Liability insurance covers legal fees and compensation costs if a third party such as a customer, supplier or member of the public, claims against you for injury or damage to their property as a result of your negligent business activity.

Cyber Liability insurance

If you choose to start your own home-based business, chances are you’ll be relying heavily on technology to help you get things done. While the continuous evolution of modern-day technology has provided more opportunities for home-based entrepreneurs, it comes with inherent risks.

Cyber threats are a real and growing problem around the world, and the consequences can be devastating for small business owners. Cyber Liability insurance is designed to cover losses from claims arising from data breaches, business interruption and remediation costs following an actual or threatened data breach. Most insurers offer a 24/7 hotline to help you navigate through a cyber-attack which is particularly useful for smaller businesses with no IT expertise.

How insurance saved a small business $450,000

A computer programmer was hired by a client to debug their software. While the programmer was carrying out this process remotely, they inadvertently deleted all the information in the client’s database. This information included important information such as customer records, accounts receivable and pending jobs.

The error caused significant disruption to the client’s business and loss of income.

Fortunately, the computer programmer held Cyber Liability insurance, and the insurer was able to settle the claim with the client for $450,000 plus $72,061 in defence costs. If the programmer had not held insurance, then this could have been a potentially devastating financial hit to their business.

This case study shows that simple mistakes can be financially devastating for small businesses. This is why many SMEs choose to take out business insurance that can help protect them in the event of a third-party claim.

BizCover has multiple business insurance options to help home-based businesses get protected. Compare quotes from selected leading Australian insurers and discover just how much you could save in minutes. Visit bizcover.com.au or call 1300 805 821 today.


This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.

The provision of the claims examples are for illustrative purposes only and should not be seen as an indication as to how any potential claim will be assessed or accepted. Coverage for claims on the policy will be determined by the insurer, not BizCover.

© 2024 BizCover Pty Limited, all rights reserved. ABN 68 127 707 975; AFSL 501769

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