Running a business from home can feel low-risk. You’re not out on building sites or working in a public-facing shop.
You might just be taking client calls from your spare room or packing up stock in the evenings. But even when you’re working quietly behind closed doors, you’re still running a business, and that means insurance is something worth thinking about.
You don’t legally have to take out business insurance as a sole trader.
But if something goes wrong and you’re not covered, you could be held personally responsible. And if you assumed your home insurance would pick up the slack, there’s a good chance it won’t.
Why home insurance usually isn’t enough
Most home insurance policies are designed for domestic risks only, not business use. That means stock, customer data, business laptops, and even injuries to clients or couriers on your property may not be covered at all.
You might see vague terms like “incidental clerical use” in the policy wording. That usually means you’re fine to check work emails from your sofa. But if you’re actively running a trading business, storing goods, or meeting clients – that’s a different story.
Some policies explicitly state that business equipment isn’t covered, especially if it leaves the premises. And if you haven’t declared that you’re using the home as a business base, you may find the whole policy invalidated in the event of a claim.
Always tell your insurer if you’re trading from home. If they can’t accommodate it, you may need to take out separate business contents cover or look for a provider that offers combined personal and commercial protection.
What kind of insurance should home-based sole traders consider?
It depends on the nature of your work, but here are the main types to think about:
1. Public liability insurance
This covers you if someone is injured or their property is damaged because of your business. For home workers, this applies mainly if you have visitors – clients, suppliers, delivery drivers – and something happens while they’re on your premises.
Even if visitors are rare, the risk isn’t zero. A trip over a misplaced box or a loose cable can lead to a costly claim. Public liability won’t cover your own losses, but it protects you against claims made by third parties.
It’s particularly relevant if you’re a therapist, tutor, hairdresser, or anyone who sees clients at home.
See our guide to public liability insurance.
2. Professional indemnity insurance
If you give advice, provide a service, or handle client materials, this one’s worth a closer look. It protects you if a client claims that your work caused them financial harm, whether through error, omission, or just something that didn’t work as expected.
This could apply to freelance designers, accountants, consultants, copywriters, or web developers. For example:
A business coach gives advice that leads a client to make a poor investment
A web developer launches a site with a security flaw that’s exploited
A self-employed VA sends sensitive documents to the wrong person
Even if the claim is unfounded, legal defence costs can add up quickly.
Bytestart covers this topic in more detail in our professional indemnity guide.
3. Business contents and stock cover
This covers your equipment and stock, including laptops, tools, packaging, raw materials, and finished products, against fire, flood, or theft. Some policies also include accidental damage.
The tricky part is valuation. If you’re storing thousands of pounds of stock in your spare room, make sure it’s accurately valued in your policy schedule. And don’t assume your laptop is covered just because you use it personally too.
If it’s used for business, insurers may treat it differently.
Many home-based businesses combine contents with liability into a single policy, which can be more cost-effective.
4. Employers’ liability insurance
If you employ anyone, you’re usually legally required to have this under the Employers’ Liability (Compulsory Insurance) Act 1969. This applies even if your employee is part-time, temporary, or a family member, and even if they work from your home.
There are some exemptions (e.g. immediate family members not on payroll), but it’s not always clear-cut. If in doubt, get proper confirmation in writing from your insurer.
Read our guide to employer’s liability insurance.
5. Cyber and data protection cover
Not everyone needs this, but if you’re storing client data, taking online payments, or managing a customer database, consider it.
Cyber cover protects against data breaches, hacking, and loss of income due to cyberattacks.
It can also help with GDPR-related claims if personal information is lost or exposed. If you’re a sole trader processing sensitive data, especially in sectors such as finance, legal, or healthcare, it’s worth considering.
You can read the UK government’s overview of cyber risks for small businesses on the National Cyber Security Centre site.
Read our guide to data protection.
Read our in-house guide to cyber insurance.
What about part-time businesses?
If you’re running a business part-time, insurers won’t usually treat you any differently, but your policy must reflect your activities.
Some insurers request expected turnover, which enables them to price the policy accurately. If your side business is seasonal or growing slowly, monthly cover might be a better option than locking into an annual plan.
🛡️ Qdos offers flexible cover from £4.58/month, including public liability, indemnity, and home-based business protection. Get a quick quote online and only pay for the cover you need.
In summary
You don’t need business insurance just because you’re working from home. But if you’re running a sole trader business, even part-time, it’s your responsibility to manage the risks. Home insurance usually won’t cover business activities, and even small claims can create serious problems if you’re uninsured.
The right cover depends on what you do, what you keep at home, and whether you have any public or client-facing activities. For many sole traders, a basic liability and contents package is enough.
For others, professional indemnity or cyber protection may be more important.
If in doubt, it’s better to get advice now than try to untangle a claim after the fact.
For more help, see our guide to insurance for sole traders.
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