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Insurance · Homeowners Policies

Under a homeowners policy, is a home-based business covered for business losses?

Reviewed by Jordan Morley, Editorial Lead at 247SimpleTests. Written by the 247SimpleTests Editorial Team from the official source material cited on every question.

Correct answer

No — homeowners policies typically EXCLUDE business activities and business property above small sublimits; a separate business policy, home business endorsement, or BOP is needed

  1. A Yes for losses under $5,000
  2. B Yes — homeowners policies cover all activities at the home
  3. C Only if the business is registered with the state
  4. D No — homeowners policies typically EXCLUDE business activities and business property above small sublimits; a separate business policy, home business endorsement, or BOP is needed

Why this is the answer

The BUSINESS PURSUITS exclusion in standard homeowners policies excludes: bodily injury or property damage arising from business activities (Coverage E liability); business property beyond sublimits (typically $2,500 at home for business property under Coverage C). This means: if a client slips and falls during a business meeting at your home-office, Coverage E may not pay (business pursuits exclusion). If your $20,000 worth of business computer equipment burns with your house, Coverage C will only pay $2,500. Options for home-based businesses: Home Business Endorsement (adds limited business coverage); In-Home Business Policy; Business Owners Policy (BOP) — depends on the size and type of business.
Source: Property Insurance Exam, Business Pursuits Exclusion

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About this topic: Homeowners Policies

Homeowners questions cover the HO forms (HO-2 through HO-8), the coverage sections (dwelling, other structures, personal property, loss of use, liability, medical payments), the perils, exclusions and endorsements. This is one of 21 Property Insurance questions on homeowners policies, each with a full explanation on a single study page.

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