Mather and Pitts Insurance, Inc.
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Home Business

Do you operate a home business?

Many people do. Almost 3 out of 10 people engage in some sort of home business,with activities ranging from sales and services to manufacturing and farming. Some homeowners sell Christmas crafts, firewood, farm products, pets, antiques, beauty products, cleaning products and subscriptions, while still others teach piano, provide day care, counsel patients, repair bicycles, service computers, groom dogs, and sharpen knives.

Homeowners have even been known to have kilns and machine shops in their garages!

What is a business?

Many homeowners policies define business as a trade, profession or occupation.

Unless an exception is stated, or the policy is otherwise endorsed, you should take a very conservative view of the business exclusions and limitations which are contained in your policy. Any activity that even resembles a business should receive special attention.

Missing Coverage

We'll be blunt. Your homeowner's policy provides very limited coverage to your business property and no coverage for business liability.

To adequately protect yourself against home business exposures involving premises and operations, advertising, personal injury, products and completed operations, workers' compensation and employer's liability, property damage and business income, you may need to purchase a commercial policy. But, you also may be able to adapt your homeowners policy to solve some of these coverage issues.

Your Homeowners Policy

Your homeowners policy is divided into two sections with Section I covering your property and section II covering liability.

Under Section I, you'll find the following coverages:

  • Coverage A-Dwelling
    Although there are no special exclusions here for business activities under most homeowners policies, the manual rules tell us that non-incidental business and farm activities are not eligible for a homeowners policy.
  • Coverage B-Other Structures
    An 'other structure' which is separated from the dwelling by clear space and is 'used in whole or in part for business' does not contain any coverage under your homeowner's policy. So, a claim for windstorm damage to your garage will probably be denied if you use the garage to repair bicycles on the weekends for a fee. You should also know that if you use your other structure as a 'rental to any person not a tenant of the dwelling, unless used solely as a private garage' will void your coverage as well.
  • Coverage C-Personal Property
    There are four special limits and one exclusion for personal property used in business. The first special limit applies to business personal property on your premise. There's a $2,500 limit on this property. Be careful to note that this limit applies to property 'used at any time or in any manner for any business purpose'. Thus, a home computer used at any time for work will subject it to a $2,500 limit. Contractors often keep tools, equipment and supplies at their residence. Those items, too, are subject to the $2,500 limit. Office furniture, musical instruments, artwork and crafts are just some of the items which are also subject to this limit.

    The next three special limits apply to business property away from the residence. Electronic gear has a $1,000 limit while in a motor vehicle and a separate $1,000 limit while somewhere other than in a motor vehicle. Covered property which is not considered electronic apparatus is subject to a $250 limit while anywhere away from the residence. The policy makes it clear that business data (other than retail computer software) is not covered. Neither is property which is rented to others. This means that the typewriter which you lend to a neighbor is covered as personal property, but it's not covered if a charge is made for its use.

Loss of Use

Except for loss of rents, your homeowners policy will not provide 'time element' coverages for business income or extra expense. 'Loss of use' coverage pays only for damaged premises 'not fit to live in' and it pays either living expenses or fair rental value.


Your homeowner's policy provides no protection for business activities. Your policy states that coverage is excluded when 'arising out of or in connection with a business engaged in by an insured'. This can be a very significant problem for you if you have an in-home business.

If you teach piano to students in your home, you may not realize that every student coming to your door may threaten your financial security if there should be an accident at your residence.

Solutions to the Problem

Many companies offer an 'In-Home Business Endorsement'. This endorsement will go a long way toward filling the gaps in your coverage. If your company doesn't offer this endorsement, other endorsements may be able to be added to your homeowners policy. But keep in mind that not all companies offer all of these endorsements.

For Other Structures

(HO 0440) We use this endorsement to restore coverage to a structure which you rent to others. The structure must be identified and located on the residence premise. This endorsement is commonly used to provide coverage for a detached garage which has an apartment rented to others over it.

Permitted Incidental Occupancies-Residence Premises

(HO 0442) This endorsement will provide coverage on an 'other structure' which is used for business purposes. The structure must be described and located on the residence premise.

Home Day-Care Coverage

(HO 0497) This endorsement identifies a home day-care business as a permitted incidental occupancy. Another home day-care endorsement (HO 04 96) clarifies which home day-care activities are considered a 'business'.

Increased Limits on Business Personal Property

(HO 0412) This endorsement raises the on-premise business property limit from $2,500 to a higher amount. The off-premise limit automatically increases by 10% of the on-premise amount. The additional coverage does not apply to merchandise, 'business property in storage' or to 'business property pertaining to a business actually conducted on the residence premises'. This means that the endorsement won't be much help to an Amway dealer or cabinetmaker or many other business operations.

This endorsement is useful for a contractor's non-vehicle equipment or for an artisan's tools. It can also cover an employer's property (other than merchandise) which is temporarily in your possession. This would be useful for you if you bring home expensive equipment, such as computers, from your workplace.

Permitted Incidental Occupancies-Residence Premises

(HO 0442) By using this endorsement, you can cover a $10,000 piano which is used for giving lessons in your home. All of the electronics or machinery which you use in your home-business can be covered with this endorsement as well.

The endorsement is for a described premise only. It eliminates the $2,500 limit for on-premises business 'furnishings, supplies and equipment'. The $2,500 limit still remains for property which is categorized as other than 'furnishings, supplies and equipment' and for property used in a business which is not described in the endorsement.

Scheduled Personal Property

(HO 0461) This would be the right endorsement to insure the musical instruments, cameras, bicycles or golf equipment of professionals. You can even use this endorsement to insure the fine arts located in your office.

Rented Personal Property

We should make a special note of personal property (which does not belong to the roomer or boarder) located in a room rented to others. It's not subject to the $2,500 business property sublimit. But, certain kinds of personal property located in an apartment rented to others is subject to the $2,500 sublimit. This is known as Landlord's Furnishings and does not include theft.

Liability Coverage

Remember that we said there is no liability coverage under a homeowner's policy for your in-home business. But there are some endorsements which may be available to add back in some liability coverage. Here are some useful ones.

Permitted Incidental Occupancies

(HO 0442) This endorsement provides bodily injury and property damage coverage for the 'necessary or incidental use of the premises to conduct the business described'. It's premises coverage only and provides no products or completed operations coverage, or professional liability coverage. And, there is a restriction on employer's liability. It also excludes bodily injury due to corporal punishment.

This endorsement is useful if, for example, you sell cosmetics from your home. One of your customers brings her child along while she's getting a facial. If the toddler gets injured, this endorsement could save you from an economic disaster. Or, let's say that you repair bicycles in your garage. One day, you're using a torch and you accidentally ignite some combustibles. Before the fire can be controlled, it spreads to a neighbor's property. Once again, with this endorsement, you may save yourself from financial ruin!

Business Pursuits

(HO 2471) If you're a teacher, salesperson or a clerical staff member, this endorsement could be useful. It adds an extra layer of protection when primary coverage would be inadequate or unavailable from your employer.

Rented Property

Additional residence rented to others
(HO 2470) With this endorsement, you can insure your one to four family residence as an insured location.

Structures rented to others-residence premises
(HO 0440) A rented structure on the residence premises can be specifically described as an insured location.

Unit-Owners rental to others
(HO 1733) This endorsement restores coverage to a rented condominium units.

Final Note

Although it all may sound quite complicated, what you should remember is that your homeowners policy doesn't provide very complete (if any) coverage for business pursuits. If you have an in-home business, you should discuss it with us. We'll help you find the coverage which will provide the protection you need.

Just give us a call.