Research released by Direct Line for Business has revealed many businesses based from home are running the risk of not being able to cover the cost of a crisis, with 28 per cent stating they have no form of business insurance at all.

The research revealed that the majority of business owners have not thought of the consequences to their lives if something were to go wrong. Many may find themselves strapped for cash in the event of their business being unable to trade, as only 12 per cent have some form of business interruption cover.

Businesses based at home also fall short when it comes to protecting their assets if liable for an accident or product fault.

Only 32 per cent have public liability insurance and just 11 per cent have product liability cover, leaving them vulnerable if anyone was to make a claim against them.

Kate Syred, head of Direct Line for Business said: “With so few businesses being protected from a liability claim, or an unexpected pause in trading, this research highlights the need for business owners to think about specific business insurance. Without it, dreams of being a business owner could quickly become a nightmare.”

Many business owners based at home incorrectly think their normal home insurance covers them in the event of a claim for their business. While the research found that 82 per cent have home contents insurance, only 34 per cent have office contents cover and only 18 per cent are covered for the loss of their tools, mobiles and equipment.

According to Kate Syred, business owners who rely on their home insurance may be in for a shock when making a claim.

She said: “Many people set up a business from home because it’s a cost effective solution. However, you still need insurance for protection in the event of something going wrong. A standard home insurance policy may have limited, if any, cover and many businesses relying on this could find it difficult when it comes to making a claim.”