As a broker, I see that a significant share of smaller Ltds and limited partnerships (bt.) operate not in a rented office or their own industrial building but in the private house of the owner or the managing director: the registered office is the home address, the storeroom or workshop is in the garage, and the machinery and materials are on the plot. In such cases two contracts exist side by side – the owner's home insurance and the company's property insurance, if there is one at all – and a gap can easily remain between the two. Home insurance protects the household, while the company policy is not taken out on the private individual's house – and it is when a loss occurs that it turns out that neither contract pays for the company machinery standing in the burnt-out garage. In this article I go through what belongs under which contract, in whose name it has to be taken out, and why the legal basis of use matters.
- Home insurance covers household contents: Hungarian policy conditions typically exclude property used for earning an income, or cover it only as a separate property group, with a separate sum insured and if it is stated on the proposal – this varies by insurer.
- The company's machinery, tools, stock and IT equipment belong on the company's own property insurance, with the address of the private house as the insured location; the building stays on the owner's home insurance.
- Under the Companies Act, only a property that the company is entitled to use can be its registered office – a written lease or use agreement also clarifies, for insurance purposes, who insures what and who is liable for what.
Two persons, two sets of assets, one address
Under the Hungarian Civil Code (Ptk.), an Ltd is a legal person separate from its members, with its own assets: the machinery, the stock and the company laptop belong to the company, while the house, the garage and the plot belong to the private individual – even if, in practice, the two ‘persons’ are one and the same human being. Under Section 6:440 of the Ptk., an insurance contract may be concluded by a person who, by virtue of a property relationship, has an interest in avoiding the insured event, or by a person who concludes the contract for the benefit of the interested person; an indemnity insurance contract concluded in breach of this rule is null and void. The owner therefore has an interest in the house and the company in its own equipment, and a loss is indemnified to the person in whose assets it occurred. I see two typical mistakes: the private house is ‘written into’ the property insurance taken out in the company's name, even though the company has an interest in the building only as its user – if the building is nevertheless to be covered under the company policy, the owner as a private individual must be named as the insured for the building, and the company, as policyholder, can take out the cover for the owner's benefit; or the owner relies on the home insurance for the company goods stored in the garage, and when a loss occurs, the exclusion of property used for earning an income in the policy conditions decides the outcome. The division of roles described in the article on the policyholder and the insured comes to a head here: anyone can pay the premium, but the indemnity goes to the insured, and it is the insured who must have the interest.
What does home insurance say about the business's assets?
Home insurance policy conditions typically define the insured contents as ‘household contents’: items that serve everyday living and are in the personal use of the insured persons. Property used for earning an income – the business's machinery, tools, stock of goods and office equipment – typically does not fall within this scope. The approach varies by insurer: some policy conditions exclude property used for earning an income, some cover it only up to a small limit, and some cover it as a separate property group with a separate sum insured, if it was stated on the proposal. One Hungarian insurer's home insurance conditions, for example, name property used for earning an income as a third group alongside household contents and valuables, with its own sum insured; under the same conditions there is no recommended value for this group, but the insurer may examine underinsurance. Home insurance policies rarely cover stock of goods or third-party property received from customers. In addition, running a business in the home may be a material circumstance affecting the risk: policy conditions typically require changes in material circumstances to be notified in writing within a short deadline, and some policy conditions exclude damage arising from fire- or explosion-hazardous activities carried out in the insured building – the details vary by insurer. The liability section of home insurance, for its part, covers private-life, household and property-owner's liability: if a customer is injured in the garage workshop, that is damage connected with the business's activity, which the liability cover of home insurance typically does not cover. I have written about this boundary in more detail in the article on the boundary between home insurance and commercial property insurance.
The company policy: equipment and stock at the private house's address
The company's property insurance works at the address of a private house in the same way as in a rented industrial building: the insured location of the policy is the address of the house – the garage, the outbuilding, the plot – and the insured property groups are machinery and equipment, and stock. The company typically does not insure the building, because it does not own it; the exception is tenant's improvements carried out with the company's money – the floor, electrical wiring and shelving of a workshop converted from the garage – which can be insured under the company's policy. When a quote is requested, the insurer typically asks about the legal basis of use, the nature of the building and the activity: welding, painting or storing chemicals in a residential building is a different risk from office work – if the insurer was not told about something, it may, in the event of a loss, invoke a breach of the duty of disclosure, and it may be released from paying if the undisclosed circumstance contributed to the loss. Specifying the insured location precisely also matters: if only the home address is stated but the machinery is in a separate structure on the plot, a dispute may arise after a loss over whether the cover extends to the outbuilding; the article on the insured location covers this question in detail.
A lease or use agreement: not only the court of registration needs it
Under Section 7 of Act V of 2006 on Public Company Information, Company Registration and Winding-up Proceedings (Ctv., the Companies Act), a company's registered office is the office entered in the company register, and only a property that the company owns or is entitled to use may be registered as its registered office or business site; according to the practice of the courts of registration, the legal basis of use must be proven with the application for registration – for a property owned by someone else, typically with a lease or with the owner's declaration of consent. This document also brings order to the insurance side. If the owner leases the garage to the company, the owner, as landlord, insures the building and the landlord's liability, and the company, as tenant, insures its own assets and its liability for the leased premises; with rent-free use, the division of roles is the same, just without rent. It is worth recording in the agreement which room belongs to the company, who is obliged to insure the building, and who bears damage arising from the company's activity. There is also a little-known consequence: if the company's activity causes a fire in the owner's house, under Section 6:468 of the Ptk. the home insurer is entitled, up to the amount of the loss it has paid, to a recovery claim against the party that caused the damage – that is, the company (the exception for relatives living in the same household does not apply to the company) – and the company can handle this only with its own liability insurance, bearing in mind that under many policy conditions general business-activity liability insurance excludes damage caused to rented or used property, so a separate tenant's liability extension is typically needed for this, which varies by insurer. Rent is subject to personal income tax for the owner, and rent-free use may raise tax issues on both sides – this has to be clarified with an accountant or tax adviser; from the insurance perspective, what counts is the actual substance of the use.
In whose name? The clean set-up
In practice there are four clear-cut elements, and trouble is typically caused by mixing them up. The building and the household contents are covered by the home insurance of the owner as a private individual, with the owner as both policyholder and insured; with a mortgage loan, the bank typically expects this anyway. The company should not be the policyholder of the home insurance: under some policy conditions, the rules on consumer insurance contracts do not apply to a contract concluded with a non-consumer policyholder, and booking the premium as a company expense does not change the fact that the insured is the private individual. The company's machinery, tools, stock and IT equipment belong on the company's property insurance, with the company as both policyholder and insured, and with the address of the house, specifying the rooms actually used, as the insured location; if the company converted the garage with its own money, the tenant's improvements also go here. With a low-value set of equipment, it may be enough if the home insurance covers property used for earning an income as a separate property group; the limit has to be measured against the actual value. Liability is the fourth element: business-activity liability insurance for the company's activity, and the liability section of the home insurance for the private individual's liability as a property owner. The article on owned or rented property presents the same division of roles from the perspective of a rented business site.
What should the owner and managing director do?
First, write down what belongs to the company and what belongs to the private individual: the company inventory – machinery, tools, stock, IT – and the household are two separate lists, and this boundary decides what belongs under which contract. Second, find the clause in your home insurance conditions on property used for earning an income: an exclusion, a limit or a separate property group – and if the value of the company's equipment exceeds this, the solution is property insurance in the company's name at the address of the house. Third, the legal basis of use should be in writing, and you should also notify your home insurer of the activity carried out in the home, because disclosure and notification of changes are the policyholder's non-transferable obligations. Fourth, if customers, couriers or subcontractors come to the house, then without the company's business-activity liability insurance the company has to pay compensation for their injuries – where the company is liable for them – out of its own assets. If you let me know, I will compare the scope of cover of your existing home insurance and the company policy on the basis of the policy conditions, and help where I can; however, I cannot promise anything: the insurer pays only for what is an insured event under your contract.
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Sources
- Hungarian Civil Code (Ptk.) – Act V of 2013, Section 6:440 (insurable interest), Section 6:468 (the insurer's recovery claim – statutory subrogation)
- Ctv. (Companies Act) – Act V of 2006 on Public Company Information, Company Registration and Winding-up Proceedings, Section 7 (registered office, business site: a property owned by the company or which it is entitled to use)
- Alfa Vienna Insurance Group – Alfa OKÉ home insurance conditions (property used for earning an income as a separate property group; non-consumer policyholder; notification of changes)
- Magyar Posta Biztosító – BiztosOtthon home insurance conditions (2 February 2026), point 13.1 m) (exclusion of fire- and explosion-hazardous activities carried out in the insured building)
- Szja tv. (Personal Income Tax Act) – Act CXVII of 1995 (income from letting real estate as an independent activity)
- MNB position statement 24134-3/2023 (25 January 2023), footnote 3 – wording of Ptk. Section 6:440 (insurable interest; contract for the interested person's benefit)
