When your client’s side hustle needs coverage
As Canadians look for ways to boost their own personal income during a tough economy, brokers must be proactive in asking their clients if they have started a side gig, one expert warned.
Whether they are dog-walking, starting an e-commerce store, or launching a home-based salon, clients with side hustles must inform their insurers about their new home-based gigs, lest they be uninsured if a claim occurs.
A recent H&R Block survey found 28% of surveyed Canadians were taking on side hustle jobs in 2023, up from 13% a year prior. Of those taking on side gigs, 44% are not declaring income from those jobs on their taxes.
Apart from a visit from the tax man, they could be risking another important aspect of running their business — getting insured.
Coverage options
“The key is to keep your home insurance providers up to date because one of the questions they ask is, ‘Is there a home-based business at your house?’” Matt Hands, VP of insurance at RateHub said.
“It affects not only your home insurance, because that will get more expensive, [but] they’ll probably [also] want you to have a higher liability [coverage]. But then they can also offer you a commercial policy or a small business policy.”
Coverage for a commercial policy will differ based on the type of business or services your client offers.
Someone who runs an Etsy or Amazon shop, for example, may need product liability insurance in case a product they made or sold hurts their customer or damages their property.
“It’s going to vary what level of coverage you have based on the type of job you have,” Hands said. “If you’re making jewellery at home and you’re sending it out, it’s probably pretty low-risk and you can get a small policy.
A dog-walker or pet-sitter, on the other hand, must consider general liability insurance. This would cover them if they received a bodily injury or property damage claim against them while the animal was under their care.
“Dog-walking can be a little bit riskier because of the inherent risk associated with handling animals.”
Home-based salons or services rendered from a house will require another level of coverage in case a client is injured onsite, for example.
“If somebody slips in your property and your home insurance company finds out the reason why the person was visiting your house was because of a home-based business… your insurance company is probably immediately going to reject that claim,” Hands said.
They may even void your policy entirely.
As a side hustle turns into a main hustle, clients must consider worker’s compensation insurance for any contracted employees they bring into the fold.
That’s why Hands recommends clients consult with a broker about what additional coverage is needed, if any. “It’s going to very much ebb and flow based on who your provider is, and what the rules around that are, and the type of business.”
Trusted advisors
Usually, this conversation would come up during policy renewals. That’s when brokers are best-suited to ask their clients about any changes to their home insurance.
But brokers must keep a watchful eye on claims trends on behalf of their clients. Especially so, as clients begin to start side gigs at a higher rate than before.
“If your brokerage started seeing there were clients that had a home-based business undeclared, and maybe there were a couple of cancelled claims, there probably [should] be a discussion internally that would say, ‘Maybe we should reach out to our existing clients and just do a check in,’” Hands said.
This proactivity means brokers are lowering their own errors and omissions (E&O) risk in the event a client’s claim is denied because their side hustle is uninsured.
“A good broker is going to make sure they’re asking the questions and they’re documenting everything, because documentation is the most important thing with brokers, especially if there’s ever a dispute,” Hands said.
Feature image by iStock.com/South_agency
