Following is a discussion of the property coverages. Endorsements that modify property coverages are included at the end of this discussion.

Topics covered:

Introduction

Eligibility

Definitions

Property coverages

Additional coverages

Section I exclusions

Section I conditions

Endorsements

Introduction

 The exponential use of instant messaging, email, and the Internet has made it possible for many persons to telecommute at least one day per week. Technology has also allowed many entrepreneurs to realize their own version of the American dream by starting their own businesses, particularly home-based businesses.

 Many persons do not realize that the coverage under the typical homeowners policy is inadequate for covering both personal and business property. Further, there is very little coverage for any liability exposure arising out of business activities. For many of these persons, the coverage afforded by the home-based business coverage forms will adequately address their needs by giving additional coverage for property used in business, liability coverage for certain activities, and, importantly, business income coverage.

 The ISO Home Business Insurance Coverage form does not address all of the exposures the modern entrepreneur may need. Depending on the business, there are potential gaps in coverage, which may include bailee's coverage, liability arising out of violation of any intellectual property laws, infringement of a copyright or trademark for anything on a Web site, an errors and omissions exposure, and employers liability and workers compensation.

 Coverage for these exposures must be obtained from the appropriate source—for example, an insurer who writes professional liability coverage for information technology professionals, E&O for accountants, or workers compensation and employers liability coverage. But for many home-based business insureds, the coverages of the ISO form will be adequate, or at least the foundation of a complete insurance package.

Eligibility

 Certain rules govern eligibility for coverage under the home business endorsement. The home business must be owned by the named insured, or by a partnership, joint venture, or other organization comprised solely of the named insured and resident relatives. The insured business cannot be a home day care operation. The business must be operated from the residence premises—which may include the home or an other structure that is on the residence premises—as described on the homeowners declarations. The dwelling must be used primarily for residential purposes. The business may have up to three employees, with gross annual receipts of not more than $250,000.

 The endorsement is designed for four principal classes of business. The first of these is an office in which functions such as accounting, resume writing, telephone answering, or other administrative or professional services are performed. (However, it is important to note that there is no professional liability or errors and omissions coverage, such as an accountant might require, provided by this endorsement.) The second class is a service business, such as videotaping, bicycle repair, or house cleaning. The third class is sale of tangible products, such as books, costume jewelry, or cookware. This does not include homemade crafts, which are covered by the fourth class: sale of crafts, such as ceramics or needlework made in the home.

 Certain types of businesses may be ineligible based upon company underwriting guidelines.

The endorsement may be used with standard ISO homeowners forms HO 00 02 05 11, HO 00 03 05 11, HO 00 04 05 11, HO 00 05 05 11, HO 00 06 05 11, or HO 00 08 05 11. While the endorsement provides many coverages in keeping with a small business's needs, the covered causes of loss are those perils in the homeowners to which the endorsement is attached. So, for example, if the HO 07 01 is attached to an HO 00 02, coverage for  business property will be on a named perils basis.

 Finally, before examining the definitions in the home-based business coverage form, remember that all of the underlying homeowners provisions and exclusions apply unless otherwise modified by the HO 07 01. For example, as indicated in the next section, definition 3. (business) in the homeowners form is replaced with another definition for purposes of the home-based business coverage.

 Definitions

 Remember that all of the definitions that are contained in the underlying homeowners form to which this coverage form is attached apply. Therefore, when encountering the defined terms "residence premises" and "motor vehicle" later in this discussion, these definitions taken from the homeowners forms apply:

 7.  "Motor vehicle" means: