Homeworkers, take cover
Sunday 03 March 1996
Those who fail to inform their insurers that they work from home, however, could experience a nasty shock. Even using a home computer to obtain 10 per cent of your income may invalidate a standard household contents policy because many policies do not cover using your home for business purposes. Buildings cover is less likely to be an issue (unless equipment poses a fire risk), but you should still inform your insurer.
Most household insurers now offer homeworker extensions to their standard contents policies. In some cases these are free; in others there is a small charge of around pounds 25. Typically, these will cover basic office furniture and equipment for up to pounds 1,000 per item, up to a total value of pounds 5,000.
Such an extension is only likely to satisfy the most basic requirements, since pounds 1,000 is not enough to cover many computers. Furthermore, there is no suitable liability cover, for example, if you spill coffee over a litigious business guest to your home. Nor is there any business interruption cover - to compensate for loss of revenue or additional expenses resulting from stolen or damaged equipment.
A standard commercial policy will cover all these areas but is likely to cost a hefty pounds 300-plus per annum (more like pounds 600 or pounds 700 in London). The insurer may also insist on elaborate security measures.
As a result, policies specifically designed for homeworkers have become increasingly popular. Sue Sumner is the owner of Esc Computer Services, a Wolverhampton-based CD-Rom bureau. Since starting the firm in July 1995, Ms Sumner has worked from a converted dining room in her three-bedroom detached house.
Aware that her standard household policy with AA Insurance Services was inadequate, she took out Tolson Messenger's Home Office policy on top, at a cost of pounds 105 per annum (pounds 120, less pounds 15 discount for being a member of the Telecottage Association). This covers, among other things, business contents (up to pounds 7,500), increased cost of working (pounds 7,500), employer's liability (pounds l0m), public liability (pounds 1m) and portable equipment worldwide (pounds l,500). There is also a free 24-hour legal helpline.
The business interruption cover is regarded as vitally important. "If we lost a computer there would be a significant time lag of at least a couple of weeks to get a replacement up and running," she says.
She also singles out the importance of public liability cover, which protects her against injuring members of the public or damaging their property whilst at home or when visiting clients.
ITT London & Edinburgh's Home-Work policy takes a different approach from Tolson Messenger, combining both business and household cover in one package.
Many other brokers and insurance companies have entered the market during the last two years (see table). Independent Insurance's HomeWorkers policy has an unusually flexible underwriting approach and is worth considering for the more unusual risks. In general, however, newer entrants offer little that cannot be matched or bettered by the established players.
Michael Pavey, for example, prides itself on having a pounds 100 minimum premium. Nevertheless, because it uses a system of postcode rating, in some areas it is far more expensive than Tolson Messenger - which charges a flat minimum of pounds 120 nationwide. Furthermore, the former charges an additional pounds 40 per pounds 200 of cover for mobile phones whilst the latter includes them under its standard cover.
The stand-alone policies usually offered by brokers should satisfy the needs of those involved in consultancy work and other services. They do not, however, tend to cater for homeworkers who handle physical goods. Insurance company packages, on the other hand, are normally prepared to insure home businesses involved with physical goods - offering facilities to cover frozen food, goods in transit and product liability.
Homeworker insurance policies
Company. Main Type of Minimum policy contract annual premium
Tolson Messenger Home Business Commercial pounds 120
(0800 374246) stand-alone ITT London & Home-Work Combined pounds 35 Edinburgh business & (Contact local household insurance adviser) UAP Provincial Unity Working Commercial pounds l50 (01539 723415) From Home stand-alone Independent HomeWorkers Combined None Insurance business & (01732 865211) household Lloyds Bank Homeworker Business & pounds 219.84 (01903 823705) household NFU Mutual Home & Extension to pounds 75 (01789 265109) Contents Plus household
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