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Do you need business insurance if your limited company is based at home?

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UKUpdated 6 October 2026 · Written by BuyMeWhiskey Editorial Team · How we check facts

A home registered address alone doesn't require insurance, but tell your home insurer about business use, check it covers equipment and visitors, and get employers' liability cover once you employ anyone other than a sole owner-director holding 50% or more of the shares.

Check your home policy wording for business use, equipment and visitors, then get quotes for any gaps through an insurance broker.

GOV.UK: Running a business from home

It depends on what happens at home, not the address

Using your home as your company's registered office doesn't, by itself, create a need for insurance. What matters is what the business actually does there and who it deals with. GOV.UK warns that home insurance may not cover your business, for example stock, computers, or customers visiting your premises. It says you may need separate insurance or permission from your mortgage lender or landlord.

Tell your home insurer

When you buy or renew home insurance, the law says you must take reasonable care not to misrepresent anything to the insurer. If your home is also your company's workplace, answer questions about business use honestly. Ask whether the policy covers office equipment, business visitors and stock. Get the answer in writing. A wrong answer can lead to a claim being reduced or refused.

The main types of business insurance

Employers' liability (EL): this is the one that's usually a legal requirement once you employ someone. It must cover at least £5 million and come from an authorised insurer. You can be fined £2,500 for every day you're not properly insured. There are exemptions (see below).
Public liability: covers claims from clients or members of the public who are injured or whose property is damaged. The HSE says it's generally voluntary, but it matters if people visit you or you work at clients' sites.
Professional indemnity: covers claims that your advice or work caused a client a financial loss. Clients' contracts often require it.
Business equipment and stock: covers laptops, tools and stock owned by the company, which a home contents policy may exclude.
Cyber cover: worth considering if you hold client data.

Employers' liability exemptions for small limited companies

The HSE says you don't need EL insurance if your company employs only its owner, and that person owns 50% or more of the issued share capital. Be careful with the family exemption. It covers businesses where every employee is a close relative, but the HSE says it does not apply to businesses incorporated as limited companies. If you take on even one employee who isn't exempt, you need EL cover. You must also display the certificate where staff can see it, or face a fine of up to £1,000.

Business rates and Council Tax

You don't usually pay business rates if you use a small part of your home, such as a bedroom as an office, or you sell goods by post. You may have to pay them as well as Council Tax if customers visit, you employ people who work at your home, or you've altered your home for the business. Check with the Valuation Office Agency.

Common mistakes

Assuming your home policy covers a company laptop or client visits.
Relying on the family exemption for a limited company.
Underinsuring contents. The Financial Ombudsman explains that an "average clause" can cut a claim in proportion to the shortfall.
Forgetting your mortgage lender's or landlord's terms.

An insurance broker can compare business policies. GOV.UK points to the British Insurance Brokers' Association to find one. If a claim goes wrong, complain to the insurer first. Most must give a final response within 8 weeks, and then you can go to the Financial Ombudsman for free.

Average clause: £8,000 claim when insured for 75% of value

Worked example

A one-person consultancy run from a spare room (illustrative). Alex is the sole director and only employee of her limited company and owns 100% of the shares. Clients never visit.

Employers' liability: not required, because she's the only employee and owns at least 50% of the shares.
Home insurance: she tells her insurer about home working, and lists the company laptop or insures it under a business policy.
Professional indemnity: her main client's contract requires it, so she buys it.
Business rates: unlikely, because it's a bedroom office with no visitors.

A year later she hires a part-time assistant. EL insurance becomes compulsory with at least £5 million of cover. Going 10 days without it could mean fines of up to £25,000 at £2,500 a day.

Underinsurance check: her home contents would actually cost £40,000 to replace, but she insured them for £30,000. That's 75% of the true value. Under an average clause, an £8,000 claim could be cut to £6,000, leaving her £2,000 short. This follows the Ombudsman's explanation that some insurers pay only the proportion you were insured for.

Running a small business from home: home insurance, business insurance or both?#

Often both. GOV.UK warns home insurance may not cover business stock, equipment or customers visiting. Tell your home insurer about the business use, then add business cover for whatever the home policy excludes, such as liability or company equipment.

Do I need employers' liability insurance if I'm the only director and employee?#

Not if your company employs only you and you own 50% or more of the issued shares. The HSE confirms that exemption. As soon as you employ anyone else, you need at least £5 million of cover. The family-member exemption doesn't apply to limited companies.

Do I have to pay business rates if I run my company from home?#

Not usually, if you use a small part of your home such as a bedroom office, or you sell by post. You may have to pay them as well as Council Tax if customers visit, staff work there, or you've converted part of your home for the business. The Valuation Office Agency can confirm.

Does increasing my home insurance excess lower the cost?#

A higher voluntary excess usually lowers the premium, because you agree to pay more of each claim yourself. If a quote went up, compare like for like: check the compulsory excess, the cover levels and any add-ons. Only choose an excess you could actually afford to pay.

What is a single item limit on home contents insurance?#

It's the most a policy will pay for any one item, such as jewellery or a laptop, unless you list it separately. Check the limit in your policy documents and declare anything worth more as a specified item. Otherwise a claim could be capped.

Must I use money from a home insurance claim to repair everything?#

Insurers usually decide whether to repair, replace or pay cash, and the policy wording explains how. The Ombudsman says that if the insurer offers to repair but you insist on cash, it will only pay what the work would have cost it. That's often less than you'd pay at market rates.

What happens if I'm underinsured on home insurance?#

If your policy has an average clause, the insurer can reduce a claim in proportion to how underinsured you are. The Ombudsman's example is a home valued at £200,000 when the rebuild cost is £400,000, where some insurers would pay only 50% of a claim. Check your sums insured every year.

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Sources

Figures checked against these sources on 6 October 2026. If a rule changes, we update the page and its date.

General information, not personal financial advice. Rules depend on your circumstances; check the official source or speak to a regulated adviser before acting.