Up and down the country, countless kitchens, dining rooms and spare bedrooms now double as places of work. Those of us that can have settled, comfortably or otherwise, into the routine of home working. And it seems increasingly likely that even beyond the pandemic, for many this will continue.
I would wager though that few of us have considered whether this new normal might affect our home and contents insurance, or the terms of our mortgage or tenancy agreement.
If you check your home insurance policy, you will almost certainly find that it provides cover for domestic and non-commercial activities only. In other words, it does not cover work-related activities. But don’t panic. At the beginning of lockdown, on behalf of their members, the Association of British Insurers (ABI) sought immediately to reassure office-based workers who suddenly found themselves working from home:
“The ABI (Association of British Insurers) is reassuring people that its home insurance members are offering enhanced help and support to all their customers who may be affected by the impact of Coronavirus (COVID-19).
“This means that if you are an office-based worker and are working from home as a result of the pandemic, your home insurance cover will not be affected.
“You do not need to contact your insurer to update your documents or extend your cover.”
Initially, this was due to end on 31st October, subsequently extended to 31st December. But with home-working the continuing norm for many, the ABI has recently announced their members’ pledge will continue until its first anniversary on 19th March 2021. Following hot on the heels of that announcement, however, the government has introduced the new Tier 4 and a tightening of restrictions elsewhere, necessitated by the new coronavirus strain. With vaccination still many months away for most of us, a further extension of the insurers’ pledge is likely to be announced in the new year.
The situation with contents insurance is perhaps not quite so clear. Many policies do include a small element of cover for home business equipment. However, your employer’s business insurance will likely cover accidental loss or damage to their property while it is in your home. You should request confirmation of this from your employer.
Note that business stock is different from business equipment, and the nature of your work may mean that you have brought stock home with you. As your home is unlikely to be listed as a named location on your employer’s business insurance policy, they will need to address this with their insurer.
Many people have, at their own expense, purchased new furniture or equipment to facilitate home working. While there is no specific requirement to notify your insurer, these additional items may have an impact on the level of contents cover you require. If necessary, contact your insurer to increase this.
Generally speaking, mortgage lenders are not interested in knowing if you work from home a day or two per week. But if you work primarily from home, this can change how your property is classified, ie whether it is residential or commercial.
To be clear, for most people there will not be a problem. If you are simply working from a home office, most lenders will still class that as residential. The test most apply is whether more than 40% of the property is used for commercial purposes. If so, they will almost certainly want to apply a commercial mortgage rate.
Of course, a sizeable proportion of the population lives in rented accommodation. If you are a tenant, your tenancy agreement may say that the property can only be used as a private residence. There may also be a specific prohibition on using the property for business use. There are several reasons for this, but typically it is because your landlord wishes to avoid:
- upsetting the neighbours;
- increased wear and tear and damage to the property;
- the tenancy turning into a business tenancy.
You should inform your landlord that you are working from home. In the current environment, for most tenants, there should not be a problem. Indeed, if your ability to continue working means that you are not in arrears with your rent, that should be sufficient to keep your landlord happy!