Who knew selling eggs at the garden gate could void your home insurance?

Apparently not many people, including the Victorian homeowners who have found themselves at the centre of an insurance nightmare that should prompt everyone with a side hustle to check their coverage.

It seems having an Australian Business Number (ABN) registered to your home address may render your home and contents insurance invalid if you have not declared the business to your insurer. And that applies even if the business is unrelated to any cause of property damage or loss.

Victorian homeowners Justin Uebergang and Verity Metcalfe found out the hard way when an electrical fault sparked a blaze that burned their home to the ground last year. They were stunned when their claim was rejected because their insurer found there was an ABN registered to their address. The company said the couple had not declared they were operating a business from home when they took out insurance, and they would not have offered them cover had they known of this additional risk.

For their part, the couple said they didn’t consider it relevant as no part of the business took place in the house and the fire was not related to the business.

The case has been picked up by a no-win, no-fee law firm, and recent reports on the ABC about the dispute have sparked waves of concern, particularly from the many people who have started side gigs during the pandemic.

Ducking for cover

Before long, stories emerged of people who had called insurers to check their status only to find policies withdrawn, including a man who operated a mobile bike repair business registered to his house, a couple who parked a food truck in their yard but did not cook any food on the premises, and a pensioner selling eggs from home.

With inflation spiking, the number of Aussies trying to make a bit of money on the side is only going to increase. In the past financial year, more than 165,000 new businesses were registered in Australia, according to the Australian Bureau of Statistics, with the overwhelming majority – 84 per cent – non-employing businesses, often people monetising a hobby.

And what about the millions of Australians who have been working from home on and off during the past two years? Legal eagles say that WFH is regarded differently to operating your own business. And while some consumers may be scrambling to see the difference – particularly for sole traders working on a laptop – it only matters what your insurance company thinks. So, it’s always best to check.

Know the risks

Consumer law advisers have said home office-based businesses that take up less than 20 per cent of the home’s floor space, with no clients coming and going, may not be considered as high risk as operations that:

• Produce goods.
• Use specific or specialised machinery.
• Engage in activities that may increase the risk of incidents such as property damage, fire, theft etc.
• Are visited by customers.

The Insurance Council of Australia has underlined the importance of declaring any business or commercial activity no matter the size or type, as each insurer assesses risk differently.

Another issue is garden-variety ignorance. People may have taken out home insurance years before starting a microbusiness, and have forgotten the terms. To address this, some insurers have begun proactively flagging the issue in home and contents renewal documents.

It’s also worth remembering that people operating a business from home may also need additional small business insurance protection including public liability, product liability and professional indemnity insurance.

In the meantime, as the case makes its way through the legal system, former Wallaby and new independent senator David Pocock has taken up the issue, writing to Financial Services Minister Stephen Jones to ask for the issue to be examined. Stay tuned.