5 min read

Home vs Commercial Property Insurance: Differences & Similarities

Home Leisure February 22, 2024

Having a portion of the family home double as business space is not a new concept. But with more businesses now supporting remote or hybrid work schedules, the lines between personal and commercial property are more blurred. This is why it is crucial for anyone working from home to understand the differences between Homeowners and Commercial Property Insurance. Dialdirect offers tailored solutions for both, ensuring you're covered no matter where or how you work.

The shifting landscape of work

By the end of 2022, South Africa had 710,000 small formal businesses1, up from 590,000 in 2010 and 680,000 in 2019. More than half of these businesses have between one and 20 employees. And while there is no indication of how many of these are home-based businesses, just over 30% reported working fully remotely2. But working from home isn't limited to small businesses. Following the COVID-19 pandemic, many corporations now allow some employees to work from home some of the time.

This shift in how we work benefits both employer and employee, but it also has significant implications on the type of insurance needed. Traditional Homeowners Insurance may not adequately cover the unique risks associated with home-based businesses and remote work. This gap underscores the importance of considering Commercial or Business Property Insurance,which offers broader coverage for business assets, liability protection, and protection against business-specific risks.

Understanding Homeowners Insurance

Traditional Homeowners Insurance typically consists of two distinct products: Building Insurance and Home Contents Insurance. Building Insurance is designed to protect your home against damage from various events. But this only applies to the structure of your home, including walls, roof, and permanent fixtures like built-in kitchens and bathrooms. Covered events include:

Natural disasters such as storms, floods, or earthquakes.
Fire, including resultant smoke and water damage.
Vandalism or intentional damage to your property.

Home Contents Insurance is meant to cover the contents of your home; and belongings such as furniture, electronics, clothing, and other personal items. Covered events typically include:

Theft and burglary following a break-in.
Damage from disasters, but only for the replacement or repair of your home contents and personal items.
Accidental damage to personal belongings.

As a homeowner, you need both types of insurance to enjoy comprehensive coverage of both your home and your belongings.

Imagine a severe hailstorm damages your roof and shatters a window. Rainwater seeps in, damaging your sofa, a rug, and television. In this case, Building Insurance would cover the repair costs of the roof and window. Meanwhile, Home Contents Insurance would step in to cover the cost of replacing or repairing the damaged sofa, rug, and television.

Commercial Property Insurance Explained

Just as Homeowners Insurance is essential for any homeowner; Business Property Insurance is essential for business owners. The standard cover would include a range of physical assets and operations-related risks, such as:

Business-Owned Assets: Protects items like buildings, fixtures, and fittings against damage or loss due to events such as fires, theft, or natural disasters.
Physical Business Space: Includes coverage for owned or leased office buildings, warehouses, factories, and shops against structural damage from disasters, vandalism, accidental damage, and certain water damages.
Property Owners’ Liability: Designed to protect the property owner from legal and financial responsibilities to third parties following an incident or accident on the property.

However, Commercial Property Insurance can be tailored to include and exclude specific coverage. So, it would be possible to include Business Interruption coverage and cover for inventory and equipment.

Let’s look at Jane, an accountant who runs her small practice from a dedicated office space in her home. An electrical fault causes a fire in her office, and while it is quickly extinguished, there is still considerable damage. The printer and copier are destroyed, as are the blinds. And powder from the fire extinguisher has damaged her laptop and two standalone monitors, and the office will need to be repainted. Her Commercial Property Insurance was tailored to also cover her office equipment and furniture, so all repairs and replacements will be covered by her policy.

If Jane only had Homeowners Insurance, her claims might not have been approved since it offers limited coverage on electronic equipment.

Key Differences between Homeowners & Commercial Property Insurance

Understanding the key differences between Homeowners and Commercial Property Insurance is crucial for property owners. You shouldn’t assume that one type of insurance covers all events, assets, and structures.

Element	Homeowners Insurance	Commercial Property Insurance
Coverage Type	Primarily covers residential properties. It includes the physical structure (building) and the contents within the home.	Covers commercial properties, including the building and some business-owned assets. Can also cover inventory, and loss of income and business interruption if included.
Liability Protection	Offers personal liability coverage for injuries or damages on the property, like a guest slipping on a wet floor.	Provides liability protection more suited to business needs, covering injuries to customers, suppliers, or damages related to business activities.
Events Covered	Generally covers events like natural disasters (floods, earthquakes), fire, theft, and vandalism, specific to residential risks.	Covers a broader range of events including fire, theft, natural disasters, and business-specific risks like equipment breakdown and business interruption.
Assets Covered	Covers personal belongings like furniture, clothing, and electronics. High-value items might need additional coverage.	Covers business assets such as office equipment, machinery, inventory, and external signs. Often provides for higher coverage limits due to the nature of business assets.
Business Interruption	Not applicable as it is designed for personal living spaces.	Often includes or offers the option for business interruption insurance, covering loss of income due to business closure or rebuilding after a disaster.
Customisation & Add-Ons	Limited to personal property needs, like additional coverage for high-value items (jewellery, art, etc.).	Highly customisable with options for specific industry needs, such as equipment breakdown, professional liability, or cyber liability coverage.
Premiums & Pricing	Generally lower than commercial property insurance due to the nature of the risks involved.	Tends to be higher, reflecting the broader coverage and higher liability limits typically required for businesses.
Risk Assessment	Focuses on residential risks like location, construction type, and fire protection availability.	Evaluates business-specific risks, including industry type, business size, location, and operational hazards.

This table provides a clear comparison of Homeowners and Commercial Property Insurance, highlighting their distinct features and coverage areas.

Special considerations for home-based businesses & remote working

Home-based businesses and remote working introduce specific insurance needs that standard Homeowners Insurance might not fully address. It's crucial to understand these differences and consider additional coverage to ensure adequate protection for both personal and business assets.

Homeowners Insurance primarily covers personal property and liability, but it may not extend adequately to business-related activities. Key limitations include:

Business Equipment Coverage: Homeowners' policies might offer limited coverage for business equipment, which might be insufficient for expensive or specialised business assets.
Business-Related Liability: Standard Homeowners Insurance doesn't cover liabilities arising from business activities. This includes injuries to clients or suppliers on your property, or damages caused by your business operations or products.
Business Interruption: Loss of business income due to disruptions at home (like fire or flood damage) is not covered under homeowners' policies.

For comprehensive protection, home-based business owners should consider the following additional insurance options:

Commercial Insurance: This adds much more comprehensive coverage, including business interruption, stock deterioration, and business vehicles.
Errors and Omissions Insurance: If you offer professional services, E&O Insurance will protect you if a mistake you make causes a financial loss for a client.

While Homeowners Insurance is essential, it often falls short of covering the complexities of a home-based business. Assessing the specific risks of your business and securing additional Commercial Insurance coverage is key to protecting against potential legal and financial risks associated with running a business from home.

Get a Business Property Insurance quote from Dialdirect

As the boundaries between home and work continue to shift, so too should your insurance. Whether you're safeguarding your family home or protecting a thriving business, Dialdirect has the expertise and solutions to meet your needs. Contact us today for a Business Property Insurance quote with customised coverage.