Disclaimer – we are NOT insurance assessors or financial advisors! We are providing thought leadership and general information only about an issue in the media currently about business and home insurance issues.
Today’s episode is a must-listen/read/watch check-in to ensure you’re not unwillingly risking everything for the sake of an innocent non-disclosure. This applies to home-based businesses, but much of it applies to commercial premises too. Particularly that you may accidentally be running an illegal business activity from your premises.
Also although focused on NSW Australia examples, similar issues apply globally.
Jane also highlights things to be wary of when taking out your insurance. To find out more about risk and insurance refer to our Tea Time Tip 2 extremely affordable mini-course which includes the risk management matrix for you to apply to your own business. It is included in our FAQBT Business Growth Membership. https://faqbusinesstraining.com/p/ttt2-managing-risk-insurance-course
You also may want to check out our work from home podcast https://faqbusinesspodcast.com.au/s2-ep-21-working-from-home-pros-and-cons-jane-tweedy
Full disclaimer – All information provided today is general in nature. We not insurance or financial advisors. Rather we are making you aware of things you may not know about insurance so you can look into them more and ask your trusted insurance advisor or financial planner! Information is correct at publication on 27 July 2022.
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The ABC articles that kicked this off:
Listen to S2 Ep27 Business and home insurance issues with Jane Tweedy | FAQ Business Podcast
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S2 Ep27 Business and home insurance issues transcript of the FAQ Business Podcast
00:01 Home insurance rejected due to a registered business at the home
Recently, people are in a panic after seeing some news articles about homeowners being rejected over claims for house insurance, because they have had a registered business operating from their home. Even as simple as selling eggs at the farm gate.
00:18 Having business insurance does not make your house safe
Today I’m going to talk about insurance, and specifically recent articles that have been coming out in New South Wales and Australia about home insurance and declines they’ve been getting for claims because of people running a business from that home. It is really important to understand this. Just because you have business insurance doesn’t mean you have house insurance.
00:42 Commercial premises and overseas listeners may have issues too!
Even commercial premises have an issue too. Even if you’re outside Australia, these exact rules may not apply to you, but definitely have a look at the blog transcription or listen in because I know that these inclusions are standard for insurance contracts.
01:04 FAQ Business Podcast intro
Welcome to the FAQ Business Podcast for business owners covering four pillars – actionable education, inspiring leaders, businesses like you and thought leadership, where we challenge your thinking. Hosted by myself, Jane Tweedy, I’m Founder and Lead Trainer of FAQ Business Training, where we want to avoid you getting ripped off or ripping yourself off. We’ll feature an amazing diversity of guests with lots to educate and inspire you. Let’s jump into today’s episode of the FAQ Business Podcast.
01:41 These insurance issues are not new
Hi, I’m Jane Tweedy from FAQ Business Training and this is the FAQ Business Podcast. Here today to talk about insurance, because there are some major issues going all around because of a lack of understanding. These are not new, but people are becoming aware of them.
So I want to talk about insurance first, how it is calculated and how it will impact the quotes you get later. Then we will look at the issues raised recently in these articles.
02:07 The definition of insurance
Firstly, insurance is defined as “an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified (important) loss, damage, illness or death in return for payment of a specified premium”.
02:24 The cost of insurance – the premium
How the cost of this insurance is calculated however, is based on the likelihood of loss, and the amount of the loss incurred as deemed by that insurance company. For instance, a fire may destroy 100% of the home and contents. Nothing may be salvaged. But for most people this catastrophic event is less than a once in lifetime event. Hence, the premium we pay is not too high in comparison to the payout of the compensation that we receive.
02:55 Floods in the Hawkesbury the risk is high, so premiums go up
However, with the floods in the Hawkesbury, for instance, the chance of a home being flooded in some areas is incredibly high. The actuality for some people, has been five times in two and a half years.
This has the effect of raising prices to ensure that the insurers, who are probably terrified now that it’s going to happen again, particularly until the dam water flow issues are controlled.
03:20 Refer Tea Time Tip 2 on Risk and insurance
For more about risk and insurance, including a risk matrix, refer to our Tea Time Tip 2 video and spreadsheet in our online school, which is included in our membership.
03:33 Things to know about insurance quotes
Bear in mind these things about getting insurance quotes:
03:36 Insurance brokers are aligned typically
Insurance brokers are often tied or aligned to certain insurers, so they only give you a small choice. Therefore, about every three years actually go out to a variety of brokers, not just the one.
03:50 Insurers measure risk differently
Every insurer measures risk differently. Some won’t touch you with a bargepole and others will welcome you with open arms. So if you get a rejection, just keep asking. Others might price you really high because they want to price you away from them.
04:08 Making a change means a full policy review
When approaching an insurer with a change, for instance, you’re talking about adding a business to your policy. Bear in mind they’re reviewing their entire policy with you. They may deem that you have to have your insurance cancelled without notice or with very short notice. This is a very real risk and possibility and is facing some people at the moment. For others, the cost of their insurance has gone up. For instance, one quote $3.9k up to $10.5k. It won’t be because of the business, it will be because of the Hawkesbury flood situation.
04:45 Paying a premium doesn’t guarantee you’re insured
Paying a premium doesn’t guarantee you’ve been covered. They can still reject your claim later. So no point paying premiums and not getting covered.
04:54 Direct exposure is not needed to raise premium costs overall
And just remember, just because you might not be directly exposed to one of these natural disasters like earthquakes, bushfire, flood, your premiums could still go up as well. Building costs are also going up, so the cost of insuring a home is going up markedly.
05:10 Movie examples of insurance claims
So before I dive into these article scenarios, look at even things like the movie Erin Brockovich or The Rainmaker, the latter of which was based on a real event, but the story itself was fictional. In Erin Brockovich it wasn’t so much about denying claims as it was about denying responsibility.
However, some may think insurance denying claims isn’t as bad as what it was deemed in those movies like The Rainmaker with Matt Damon, which was seven times they rejected his claim and eventually the case goes in the client’s favour. He wins the case but unfortunately the poor guy dies.
05:50 Recent ABC Articles
There’s been some articles in Australia recently including some I’ll link in the blog from the ABC, about the fact that people are getting claims rejected.
06:01 Selling eggs from farm gate, non-disclosed registered business
So the first one was a few weeks ago. In this instance the man was selling eggs from the farm gate. He was only making $60 or $70 a week. However, he had a registered business with an ABN at his home address.
You could argue that it’s really more of a hobby than a business with that kind of money, depending on how he was marketing, etcetera. But he was selling and he wasn’t making a lot of money from it. So you’ve really got to think more of a hobby. I’m sure it costs more in ‘making’ the eggs, than it did in selling them.
06:35 The house burned down and AAMI declined the claim due to the business non-disclosure
AAMI was his insurer and he went to claim on the insurance because he had a house fire. The house was unfortunately burned down.
The house was completely separate from where the chickens were located and where the farm gate was located. AAMI declined the claim because they decided, that because he had a registered business at the address which he had not disclosed, that they did not need to honour their cover.
The only thing he would be doing inside the house, because I often hear people say, oh, but I don’t use the house. He would only be doing paperwork, loading transactions, etc. He was not selling from the house itself, he was not operating within the house. Totally separate. And yet they denied the claim.
07:25 A separate studio on-site still has the same issue
It had nothing to do with the house or the activity within the house. People think oh, it’s okay in my situation because I have a separate studio that I run my business out of and I have business insurance. It’s not attached, it doesn’t matter. It does matter unfortunately.
07:42 Insurers may deserve the bad rap
The insurance are being quite honestly horrible about this. It’s the kind of thing that does give insurance companies a bad rap because they don’t insure things that they have said are covered because we haven’t disclosed something.
07:58 Royal Commission requires insurers to ask for more disclosure
There was a Royal Commission done last year and the insurers were told that they had to be more clear in their renewals and let people know what things they had to disclose. Because as has come about recently, many are going I didn’t know I had to tell you that I had a business running from home.
08:16 Many not told their home insurer because they think it doesn’t apply to me
Many have not given the information to the insurer simply because they didn’t really know they needed to. Or because they thought I have business insurance. Business insurance is not the same as home insurance. You still have home cover and you have business cover. There is a crossover here though, because the home is still the home. So you have got to disclose that you have that business running from home.
08:43 Could register your business at your accountant’s but … likely to still be rejected
You could register your business maybe at your accountant’s office. Possibly you’d get away with that. But at the end of the day, if you claimed and they rocked up and they saw banners or equipment or a sign or something at the front door, then they’re probably going to still reject your claim, because they can see that you are running your business from home.
So be aware of this issue. It is a major problem and let’s face it, insurers are being jerks about this because, the egg farm thing, for instance, had nothing to do with the fire or the house and therefore really shouldn’t have affected the claim.
09:20 Does running a business from home increase or decrease the risk?
I also have an issue with insurers about whether running a business from home actually increases or decreases your risk of actually claiming.
For instance, in my case, I run my business from home. So if you roll back pre-Covid I was out on the road a lot. All my training was live and in-person. All my coaching sessions were in-person away from my house. So I was away from home pretty much all day, every day.
09:52 Could stop place being robbed
Then Covid happens and suddenly I’m operating from home in front of the computer. There is a risk of me running the business from home, sure, but I actually think the risk to them is actually reduced. For a start because I’m home all day. I’m not going to be robbed or anything, am I? Because I’m here. Robbers don’t tend to rob a house when somebody’s in it. So there’s much less likelihood if something like that happens, which might protect the content side.
10:21 May stop or slow down a fire spreading
But what about a fire or something? The fact is, if there was a fire, if there was an electrical fault or something, for instance. I can smell smoke, right, I am going to alert the authorities that there’s a fire, so there’s a chance that some of the house could be saved. We have things like fire extinguishers, fire blankets, etcetera. Maybe I could have put the fire out before it got any bigger.
10:45 Could have caused a fire
Now I suppose because I’m at home and I could have caused the fire. Things like putting something on the stovetop and forgetting about it, that could happen. But I would argue, what about something like a stay at home mum that’s at home all day, or anyone else that’s at home all day? Surely there’s no penalty for them for being at home.
11:07 But why is it different from say a stay at home mum?
So why should I be penalised for having a business, at home? So yes, there might be a slight chance because I’m here, that I might cause a fire, but I think it’s offset by the fact I might save a fire from spreading. But also, as I said, what about a mum or something that’s home all day? So I do find that a little bit of an odd one. To me it seems a little bit bogus and really just another excuse.
11:34 Is your business legal and approved?
Another complication though is councils and the legality of running a business. Many people start-up a business with no idea you need approval from your local council in certain situations to run a business from home.
11:51 My council says I can run my remote business no issue
Now, in my particular case, I am Penrith City Council. I can run a business like I do from home, which is really just paper pushing, talking on the computer, etc, and getting into your mind without physically opening it up, so I can operate without any permission being required. I checked this with my local council and it was fine.
12:11 If I have clients coming to my home I would need to get approval
However, there is an exception. If I decided to have clients coming to my house, even a single client, for a coaching session, then I would actually need to get approval from council for that.
So I would go and get a DA, a development approval for a change of use. So I would need to do that to make my business legal. Because businesses operating from home in my area and my zoning are approved only with consent, “permitted with consent”.
Now, for me it’s like, well, it’s a good excuse not to have people to the house. I can’t I’m not insured. But my house is not set up right for it. We don’t have one of the modern houses with the office at the front door or access to the street. So I don’t believe it’s the best set up to have clients coming to my place.
13:00 AAMI policy didn’t matter – clients coming to home deemed too high a risk
However, I did when I have my renewal last year, I called my insurer and I said, hey, currently you’re aware that I run a business from home. I had declared it, because I tell people about this all the time. I said to them, okay, what happens, though, if I want to change, I want to get council approval to have clients coming to my house? And they said, nahah as soon as you have clients coming to your house, we won’t insure you anymore.
And I’m like, oh, okay, so there’ll be a legal business. You let me run a business, but in this case, that business would no longer be acceptable to be covered by you. And I’m not talking about the business insurance aspect. I’m purely talking about the home would no longer be insured. Bear in mind, I could be given bad advice by that person on the phone, but I’ve heard subsequently people getting similar information. So I suspect that’s the case.
In my case, I actually moved to a different insurer in case I wanted to do that down the track. So I’d still go to council, get approval, then go to the insurance, say, yes, I’m now doing that.
14:07 Does the council have a blanket rule about what is, and is not allowed?
So the first thing to check with insurance is that do they have a blanket rule about what businesses they do and don’t cover? Because you may find out, like AAMI’s situation, fine if it’s just a business online that you don’t talk to anyone, but as soon as someone comes to the house, you need it.
14:24 Illegal doesn’t just mean running a meth lab!
The second part, though, about running it is this issue of the legality of the business. So as soon as I say running a legal business, a lot of you are going to think, jump straight to the idea of cannabis or running a meth lab. No. Yes. Clearly those are illegal, and clearly if you do those, you’re doing an illegal activity.
14:45 Technical legality – lacking approval “permitted with consent”
However, what we’re talking about here is not those grossly illegal things. We’re just talking about things like the legality, the technical legality, because your zoning that your house is in, is zoned as a place where that particular activity is permitted with consent. The with consent is the key part there.
15:08 Zoning protects the amenity of each area
So in my house in Penrith, I am in a rural residential zone. So clearly we’re getting close to the rural area, and therefore we have lots of restrictions in place to maintain the amenity of the area.
People buy into an area because they like certain things about it. So we can’t have things too close to the boundary fences. We have to have rural type fencing, those sorts of things. So there’s certain rules we must uphold to. And all of you in your areas will have rules you have to uphold to, and one of which will be the running of a business from your home. I do not agree with the fact, though, that just running a business from home should cause an insurance to be negated.
15:53 Applies to commercial premises too!
So you will need to check the zoning for your house and check what’s going on, what businesses are approved there. Also, bear in mind, this actually does apply to commercial premises too. So if you have a warehouse or if you have, say, a fitness centre within an industrial complex, they will be permitted with consent activities, of which yours is probably one. But again, the key word with consent, if you haven’t obtained consent, you don’t have consent to run that business. And I’ve seen this time and time again.
16:24 No approval or “permitted with consent” can mean null and void insurances
There was a situation where a fitness business was in a complex and there was another similar fitness studio in the area, and this business had been running for six years, but it wasn’t actually approved at that location to run that type of business. It had to go through an actual approval from council.
16:41 Landlord of commercial premises may lose their insurance too
So please make sure you do that, because again, your insurances will be null and void. In that case, it will be all of your insurances will be null and void. So if the factory burns down or something that you’re in, your landlord will lose their insurance and you will lose your insurance too. So you’ve got to be mindful of this. (Note this could lead to losing your house too if you had to pay the commercial landlord for the loss you caused.)
17:00 One commercial premises no DA for 25 years!
One of my clients ended up leasing a premises and it hadn’t had a DA on it in 25 years. Not one person that had gone into that premises had bothered to get the DA, and this was in a commercial situation.
17:14 But she had to get for NDIS registration
However, because she was going for NDIS registration, she had to actually take the extra step to get that DA. So it is an issue and it can affect other things other than just insurance when you don’t have the proper registrations in place.
17:31 Disclose again when the event actually happens
Now, again, if I decided to have people coming to my house, even though I’ve declared it as a business, I could have an issue. I would hope I wouldn’t in this instance, because I’ve already spoken to the insurer, moved to that insurer because they said it wouldn’t be an issue. But I would still disclose it again just to make sure, because at the moment, the criteria just say it’s sort of a home office type situation.
17:54 Insurance won’t cover you for illegal activity
Remember, you may be running an illegal activity if your business has not been “permitted with consent” from the council. Which means you may be making your insurance null and void, paying premiums unnecessarily, because you won’t be covered. Even if it’s got nothing to do with the business as to why the house burned down or whatever.
You might be paying five grand a year for house insurance to find out that it’s completely useless, that you’re not going to get a cent back. It is a nightmare and there’s been some really horrible situations recently. So the moral of the story is when you go to set up a business, or even if you have a business now and you haven’t made this step.
18:34 Check zone information online or with your council duty town planner
Whether you’re in a commercial premises or a home-based business. Please go to your council town planner and see what zone you’re in, or what zoning you will be in, and check that you can run the type of business you want to run there and what permissions you will need to make sure that that is a legal activity.
18:52 Can NOT run a retail business from home (salons included)
One particular thing that’s often banned from a home-based business is running a retail premises. You cannot have a shop front open to the public from a home typically. For instance, even if you have a hairdressing salon or a beauty salon, you may have an online store and things like that. You may even have some shelves up in your salon. However, you cannot sell those products from the salon. So you can’t go to the person oh, why they’re here, just buy this. No. Actually you need to sell that online. They can pick it up from there, but you can’t actually sell to them.
So be very mindful of this because this is something that is typically deemed to be not legal in a business in a house in Australia. So as I said, to get around it, you would get the person to buy the item online, and they would pick it up from you, which might be why they’re having to get their treatment there and then. But pretty much no retail shop will ever be approved to be run from a house.
19:54 What about employees coming to your home? You may need approval
I’ve dealt with clients coming to your house. What about employees coming to your home? Same type of scenario. You need to check with what the rules are for your council area. For my situation, I can have an employee, possibly two, that don’t live in my home, come to my home. That’s fine and they can work from there, without me needing to get a further approval from council.
But I’ve seen a number of situations where there are half a dozen people working from the person’s house and they’re not relatives that live in the house. Because of that, you do need to go again and get approval.
And make sure that you’re very clear when you’re getting that approval, things like the off-street parking and things, how that will impact. Because obviously in a situation we’ve got room for those people, not so bad. But if you’re going to disrupt the neighbours by having these people at the house, that probably is going to be pretty hard to get approved.
20:46 Food truck denied insurance as the business is registered at their home
Apart from the egg seller example earlier, the other one that happened this week was one that came up about a food truck. So the insurer has declined to provide home insurance to them, because they have a registered food truck business from their house. So they have a registered business. Clearly, most of the time it’s going to be operated in the truck itself, which will not be on site. Now, during Covid, to be fair, there were some people that were selling from their food trucks, from their house, into their local neighbourhood. And there was some leeway given during Covid that allowed people to do some of these type of activities. However, it still didn’t make your house insurance any safer.
21:31 May increase your risk, and therefore may be a reason to not insure
So because the food truck is stored at your premises or whatever at night, if it is just remember that. Because that potentially does increase the risk. Because if people can see a food truck, or there was an example of a gaming truck that got completely ripped to shreds. That is increasing the risk that there will be some damage to your property and things like that by somebody coming to rob you.
So major issue here, about telling it honestly what you’re doing. So even if you think, oh, but I’ve got a food truck, it doesn’t actually live here, I don’t use it here, you’re still running the business from home technically. You’re still doing the paperwork.
22:10 I’ve worked for a few insurers and seen the insurance industry in action
So I have worked for a couple of insurers. So one was years ago, I was involved in a mortgage backed fund, so nothing to do with the actual insurance side, but it did have enough of exposure to see kind of what was going on in the insurance world.
And after I left there, I also went to the Earthquake Commission. So in both of those roles, I was exposed to the insurance industry. And the sort of ideas that came about from these movies like Erin Brockovich and The Rainmaker, unfortunately, were not far from the truth.
22:46 First loss home insurer who did honour claims
So EQC was a first loss home insurer, or the Earthquake Commission was the first lost home insurer. What that meant was you would pay a premium to your insurance company to insure your home in the event of an earthquake or certain natural disasters. EQC would be the ones to pay out the first $100,000 for the house and $10,000 worth of contents. That was something that became quite good because sometimes the insurers would have a policy of denying claims and we didn’t. We have that mentality and morality to say, no, this is a legitimate claim. Here they go.
23:21 Some people do make fake claims and are rightfully declined
However, there was always people that tried things on. There was one person that claimed for earthquake damage in three separate earthquakes, like ten years apart. Yeah, we can see the cobwebs and stuff in the gaps. We know that you’re lying. So there’s a legit reason to decline. They can decline, but it’s when you don’t have a legit reason. It’s very frustrating.
23:42 Not just the Australian insurance system that is broken
What you do see in these movies like Erin Brockovich or The Rainmaker, you know that it’s not just the Australian system that’s broken. Clearly, the American system and that’s broken too. It’s just the way the whole insurance system works.
23:55 Where ever you are make these checks!
So you absolutely need to check no matter where you’re located. If people come to your home, or if you have a retail operation, or you have a registered business from your home, you need to check with your insurer, whether your home insurance will remain valid.
24:13 What about if you’re a tradie?
What about if you’re a tradie and you’re doing something like arc welding in your garage? You are doing things that are potentially going to have sparks flying and there is a risk there of actually causing a fire. So that is going to have far greater risk. So the chance of a home insurer wanting to ensure that type of risk, is probably pretty low.
(Note if you’re a tradie like a plumber always working at other people’s houses and premises, you still will need to check with council and notify your home insurer if the business is registered from home, or you store anything at home/on the property, or if you do administration etc from the home – don’t think you’re miraculously exempt – you’re not!)
24:34 Food businesses have tough regulations to obtain council approval (in NSW)
But in Australia, the two industries that are often the most problematic, one is kind of more obvious, but one is less so. The first one, of course, from a health and safety type perspective to the consumer, is food. So they want to make sure that your food standards are at a set level. Because people are eating the food, they’re ingesting it, there’s going to be problems if they get sick. So they want to make sure that the food is of high enough quality, which means it’s got to come out of the kitchen that is of high enough quality. Some of the things that they check for are quite interesting.
Things like weep holes on the outside of houses. Australia has brick homes. You can have a brick towards the bottom of the house, which has holes in it, but bugs and things can come through those holes.
25:21 Beauty salons which have skin penetration are also strictly monitored
The other one that can be the lesser known industry is beauty. And penetration, and, oh, gosh, I’m going to get lots of hits on this episode because of that word penetration. Like my exposure podcast got lots because of the word exposure. So amusing, it’s like it’s not even visual, so why would people be so enthused about it? But anyway.
The thing is with this, is that when you have skin penetration, there is a chance, of course, of causing damage to people, causing them massive infections and things like that. So they want to make sure that your premises are up to a certain standard. It is really important to know these things.
26:02 Food rules changed a few years before Covid in NSW
So in Australia, or certainly in New South Wales sorry, the rules changed about three or four years ago now. It’s actually quite a while, Covid you lose track of time, but they changed the rules. And what that meant was that the New South Wales Food Authority, that used to look after all the food related checking and stuff, they actually offloaded that home-based business checking to the local councils.
So it used to be, for instance, that if you were in Blacktown and the other side of the street was The Hills, if you were on the Blacktown side, it was so hard to get approval to do a business because you had to still get approval from council and they wouldn’t give it. Because they were really strict about the commercial. Like you basically had to have a commercial kitchen.
On the other side of the street, Hills were much more loose about it and you just needed to let them know I’m running a business and they go, yeah, cool, that’s it.
So you still had to go to the Food Authority in both cases, but now the councils are in charge of what the Food Authority used to do, and they are really strict. So now The Hills are probably even more strict than Blacktown was.
27:07 Grazing business are still food businesses!
So it is really important that if you are running any form of food business, including things like grazing businesses which popped up everywhere during Covid, you need to have approval to do things.
27:19 Even side hustles (even kid’s businesses) – the same rules apply
Don’t just have these little side hustles and think that everything is going to be okay. If your house burns down and you lose your house because of this, it is not okay. Okay? So please, I beg of you, make sure that you check these things out. Make sure you get the approvals you need to do to run your business. Make sure you factor in those approvals and things in the pricing so that the customer pays for that cost.
And that’s why there’s often fights in groups on Facebook when someone puts up a really cheap cake. The real cake makers will jump in because they know that the person can’t have a legitimate business and be charging that kind of money. So that is something to be very, very mindful of.
28:02 Councils will monitor and administer the regulations to their own interpretations
All the council checks are different. I mentioned weep holes earlier. Things like some will require you to have a separate kitchen. Some of them it will not be good enough that it’s in your main kitchen area, it may need to be segregated. So things like that will need to be addressed.
So please make sure for your council area check, what applies for your area, okay? Because they are all different. And that’s another issue.
28:26 If you move – remember to check, reapply for DA if needed
You may have moved location. So what might have been perfectly acceptable in one location, and you may not have had to get specific approval. Like in my case, you might not have had to get specific approval because it was just something that, yeah, we allow you to run that type of business, that’s fine. No issue.
In the new area. If you had, say, even one staff member coming to your house, you may have an issue with that. Even if you had a single staff member coming to your house, one council might have an issue, whereas the previous one didn’t. So what you might need to do is go and get approval for that.
29:02 Commercial premises still need approval from council (“permitted with consent”)
I did touch on this earlier, but I just wanted to highlight separately about commercial premises. Commercial premises are not exempt from a lot of the stuff I’ve already talked about, obviously not the house issue as such, unless you’ve registered your business at your house still and it’s not actually at the factory. But it’s the same thing about non-disclosure, and it’s the same thing about running an illegal business. Okay? So if you haven’t got approval to run your business, and you need it from that locality, you need to get it.
29:33 Corporate employees working from home – not an issue … yet
The one that hasn’t necessarily been tested yet probably is corporate having their employees work from home. What are the implications of that? And I don’t think that’s even been addressed or even commented on yet. So that’s going to be an interesting one to see how that filters through in the market.
And because we’ve got another wave happening in Australia, businesses like Westpac and the Telcos are telling their employees not to come to work. They’re saying work from home. So when the workforce isn’t at work and they’re at home, what are all the rules about having all those people at home?
So it’ll be interesting to see what happens if things do change on the employment front. Where before it was you had to declare if you had a registered ABN and a business running from home, but now it might just be, are you working from home? Which is a whole different thing.
30:23 Check home/building and contents covered for you or your landlord
So whether or not you’re running a commercial premises or a home-based business, you need to make sure that your building and contents insurance, whether for you or your landlord, is going to be covered.
You need to make sure that your business insurance and your business risks are also covered. You might want to check whether your contents are insured under your business or potentially even covered under your home insurance.
30:48 Talked about storage facilities in the work from home podcast
If you have something like a sub lease at a storage facility. You remember I talked about Kennards in my working from home podcast about a month ago (episode 21).
30:57 Let your business insurer know you have an additional location
Then make sure that you have checked that you can run that business from there. Make sure you’ve let your insurer know that you have another place of risk, that you have business at this particular location as well.
But things like making sure whether or not you are pick packing there, for instance, or are you just literally just, the stuffs there quickly and take it away. So you’re just picking up and dropping off and that’s it? Or do you actually have tables set up? Are you actually doing business there as such?
31:30 Adhere to the storage facility rules or risk voiding insurance again!
Because if you’re spending time packing orders and things there and you’re spending hours there in a day, that again is a different model than just grabbing something quickly once a week. Okay? So make sure you consider how you’re using the storage facility, make sure you’re adhering to their rules and regulations, and make sure as I said, you’ve also spoken to your business insurer to make sure they’re aware of the risks that you have by having that outsourced facility in your mix now.
But remember, the key thing is, is your business legal? So can you do the activities that you want to do from the situation where you’re located. Because if it’s not legal to do that activity from that location. If your storage facility specifically says you cannot work from there. Then do not work from there. Because you are going to be performing an illegal activity which is going to null and void insurances. Which is going to cause you a whole world of hurt.
32:27 Moving to a new place and making it legal
I mentioned earlier about the moving LGAs. So if you move from one council area to another, please check your new requirements and remember to get your business reregistered or rechecked because the new area is going to be different from the old one.
You might have had a DA for your old place, but now you need a DA for your new place potentially. Or it may just simply be a notification. But it’s absolutely a must that you do this because otherwise, again, you’re paying premiums for no point because it will be null and void.
33:00 Also need your business insurances like public liability $20m cover
Remember, you also need your business insurances, your public liability, in case somebody gets hurt interacting with you or your business. They trip over your handbag, they fall over a step at your premises.
You also need potentially things like professional indemnity insurance, but with the public liability just before I leave that, remember, go for $20 million worth of public liability insurance. Because the costs involved, if someone did, they trip over a bag, broke their back, they’re unable to work, they’ve got pain and suffering, they’ve got hospital bills, etcetera. You can bet your bottom dollar $20 million is not going to necessarily go far.
So don’t mess around with bothering to get $5 or $10 million worth of cover. Go straight to the $20 million mark. So that’s something that’s very important.
33:50 May need professional indemnity insurance
Also bear in mind some businesses will need to have things like professional indemnity insurance because you’re providing advice and things, in case that advice is wrong or something like that. Also bear in mind other things like the jurisdiction that you’re dealing in.
34:05 Consider territorial and jurisdictional limits on business insurance
For instance, because I have a global online business, I have consumers in America or customers in America. I need to be careful then because ensuring in the North American market is very difficult at the moment for an Australian. Make sure that if you’re selling to us, if you’re doing courses and things online where somebody from the US can buy the US is known as a litigious country, so there’s a chance that they are going to try and sue you.
34:30 You may even have an issue if you’re on a US based platform
Things like if you’re selling on platforms like Udemy or Etsy, even Teachable that I use for my online school. Even just running a platform on Teachable, not even selling to the US, only selling to Australian customers, could still see you have issues with this USA problem, so make sure you’ve checked that out and check the wording.
I had so many issues reading the wording of my contract, because they talked about territorial and jurisdictional coverage and things. (Note North America is often excluded from Australian contracts.)
34:58 Check the exclusions in your insurance policy at a MINIMUM
Some of it is about where you operate from, some of it’s about where you operate to, there are a whole bunch of things like that, that gets very messy. So make sure that you know what you’re covered for and what your exclusions are. So very much check the exclusions line on your policies.
35:14 Directors and officers insurance and realising limitations of cover
When I recently did mine (renewal) also got manager and director liability insurance, and it was quite interesting because what was previously in my public liability or professional indemnity was kind of now in this management and officers liability one. I was like, this is very confusing, because I wouldn’t have known it wasn’t there, if I hadn’t have taken out the other policy, which was a little bit rough.
35:38 One client approved to have 220 swim school kids at her home pool per week!
But do bear in mind with so many things, when I was talking about legal activities and things at home. One of my clients had a lap pool between her house and her neighbour’s house, and she had approval from her local council to have 220, not kidding, 220 kids, coming to her house for swim lessons outside. That is insane.
Now it was only 20 minutes a session, one kid per session. But then there’s a kid, an instructor. There’s the mum and maybe a brother or sister sitting on the couch. And then the next family would come in, so it’s still be maybe ten people there at a time. But it was incredible that they had that approved.
36:18 Approval may be easier than you think OR they can force you to close
So remember, don’t be too scared of this, because it may not be as bad as you think getting the approval. But the other thing is you can be shut down. One client was basically given less than 30 days notice that she had to shut down her business because she hadn’t sought approval for it. When she did go to seek approval, they went hell no, you can’t do this, you cannot do this anymore. And that was it. And she was forced to address the issue because a neighbour had complained.
There are also issues sometimes. I don’t know if The Hills still do it, but they used to do a thing where they had a red light area and if someone got complained about that type of business in your area, then everyone in your area running that business could be shut down. So that was a bit of a pain.
Obviously councils don’t want to be bugged, so because somebody else complained about someone in the area, they don’t want you to be the next person that gets complained about. So they kind of stop things in advance.
37:14 Can be running an illegal activity from anywhere
Also remember that you can be running an illegal business in a warehouse or something like that, even from a third-party facility. So it’s not just at home that you could be running in a legal activity and make insurance null and void. It’s just that at home, it’s your home. There’s a lot more risk there to you and your family.
37:35 Check back to source – your council, town planner, zoning plans …
So if you are having any concerns about this topic. Please go back to source. Check with your local council about zoning and regulations and things. Check back to your insurance policy about what is and isn’t included in there. Also check at the different levels of government and things what rules might be in place and laws might be in place that may stop you from having a legal business.
37:59 In Australia refer SEP (state) and LEP for the local council
Every council area takes on a State Environmental Plan (SEP) from the state that they then apply to the Local Environmental Plan for the area or the LEP. So each LEP does different and their interpretation in the way that they do it is different. So if you do need help with this and you are located in New South Wales, you can reach out to me, and get in touch with me and either I might be to assist you or send you to someone else that can. If you’re outside the area, like I said, do your homework and look for somebody to help you.
38:31 Some industries for business insurance are having issues getting cover
Like I said earlier, insurance are getting tough in a lot of areas, whether it’s the coverage. Things like website development. Don’t even ask me why that’s an issue.
38:40 Some businesses are being asked for more risk assessment and documentation by the insurer
Businesses like a nail salon are being asked to show their risk management matrix, their risk assessment matrix, and the mitigations they’re taking place. The workplace health and safety documentation. So when you do your next renewal, you may find you’re asked for these things as well.
38:56 An insurance renewal, change, disclosure may lead to a full reassessment
Also bear in mind when you go to have a renewal that you may find a problem, and the problem may come about because they actually reassess the entire thing. So they decide, is this insurance cover available to you at all anymore? Because they might say no, in which case you might have to get a new insurer quick smart.
39:18 Could increase insurance premium costs markedly
But the other thing they can do is put the cost up markedly. They can put the cost up because they can say that it’s costing us a lot more to look after businesses in the Hawkesbury area and therefore you might be paying a lot more money.
39:35 No point paying premiums if claim would be refused!
But there’s absolutely no point of paying ten grand a year for 20 years for them to then decline you when it comes time to needing the money. So do remember, just because you’ve paid your insurance does not mean that you are covered. Just because you’ve paid your own premium does not mean you will get a claim accepted.
39:54 Insurance contracts fine print is a must read!
Please make sure you’re very aware this is one time, unfortunately, because they are really, really long, you really do need to read the fine print because you need to know what you are and aren’t covered for.
40:06 Must disclose certain renovations
Things like when you’re renovating your house, you’ve got to disclose when you’re doing certain renovations that you’re under renovation. So make sure you do this, because again, you are going to be voiding your insurance. There are so many things when it comes to insurance.
40:20 Tea Time Tip 2 Risk and Insurance
Like I said, we do have a Tea Time Tip, which is one of our sort of training series videos on risk and insurance. So please check that out. It’s for a small fee and you will get a copy of the matrix that you can then use and apply in your business as well. So it’s really helpful tool that you can use.
40:39 Thanks for listening today on a tough topic
Thank you so much for listening to us today. This was Jane Tweedy. I know it’s a topic that can be a bit contentious, but so many people at the moment are having issues when they have gone and reached out to their insurer, they’re actually finding, uh-oh I’m not covered.
40:55 DO NOT put your head in the sand. Deal with this now!
Oh no, I’ve got to move insurer. Better to find that out now than when they have to claim, their house has burned down and they get told no. So much better to find out now than to find out in that awful situation. So please, please, I beg of you, make sure that you have looked at this, that you know whether or not you’re exposed to a risk that you’re not sure about.
So risk doesn’t all have to be dealt with, but in this case, you at least need to know what the risk is, and whether or not you can accept that risk or whether you need to do something about it. And in most cases, you’ll need to do something about it.
41:32 Good luck in getting this sorted
So good luck to you and I hope that no one has any awful issues in getting this sorted. But unfortunately, I know at the moment some people have already had some issues. So good luck to you and we hope to have you back again on the FAQ Business Podcast.
41:54 Please subscribe to our podcast!
Thank you for listening to today’s episode of the FAQ Business Podcast, available on all good podcast services. You can subscribe today via FAQBusinessPodcast.com.au directly on Apple, iTunes, iHeartRadio, or Spotify. Subscribe. Follow. Share and where able to, review our podcast. Or leave us a comment on either YouTube or our blog page. Thanks for helping us to help you. The small to medium businesses who are growing, and want to make a difference. Look forward to connecting with you again on the next episode of the FAQ Business Podcast.
Today’s podcast episode featured our host Jane Tweedy. Her details are as follows:
Jane is a Professional Certified Coach with International Coaching Federation (PCC with ICF), business advisor and trainer. She loves working with growing small to medium business owners who are doing the right thing, to help them do it right! Currently, Jane offers at least 50 live sessions a year to train small business owners.
Jane offers a variety of services to clients and her online school and membership site went live late 2021. Jane’s focus for 2022 is building the membership and online school out further, and offering implementable small group training – something she finds is often the missing link.
If you are interested in training, speaking, or anything else Jane has to offer, please connect via email@example.com or via the contact forms on our websites.
faqbusinesstraining.com.au – our main site with a great blog
faqbusinesstraining.com – our new online school
faqbusinesspodcast.com.au – our podcast site
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