Quick answer: Only a little. In the widely used ISO HO-3 homeowners form (2011 edition), personal property used primarily for business is covered up to $2,500 on the residence premises and $1,500 away from it, and the liability section excludes claims arising from business activities. A home-based business usually needs a home business endorsement, an in-home business policy or a business owner’s policy (BOP), and possibly professional liability or commercial auto coverage, depending on the work.
Running a business from home is common, from freelance design and online shops to tutoring, crafting, consulting and bookkeeping. Many owners assume their homeowners policy covers the laptop, inventory and the occasional client visit. In most cases it covers far less than they expect.
This guide explains how standard homeowners policy language treats business activity and what options exist. For an overview of every part of a homeowners policy, see our homeowners insurance guide.
Sources: Insurance Services Office (ISO) Homeowners 3 Special Form (HO 00 03 05 11), including the definition of “business,” Coverage C special limits of liability and Section II exclusions; ISO Home Business Insurance Coverage endorsement; Insurance Information Institute (Triple-I) guidance on home-based business insurance; U.S. Small Business Administration (SBA) guidance on business insurance types. Insurers may use their own forms and limits, and rules vary by state. This is general information, not insurance advice.
How a Homeowners Policy Defines "Business"
The ISO HO-3 form defines business broadly as a trade, profession or occupation engaged in on a full-time, part-time or occasional basis, or any other activity engaged in for money or other compensation. The 2011 edition then lists activities that are not considered business, including:
- volunteer activities for which no money is received other than payment for expenses;
- providing home day care services for which no compensation is received, other than the mutual exchange of such services;
- providing home day care services to a relative of an insured; and
- any other activity for which no insured receives more than $2,000 in total compensation for the 12 months before the beginning of the policy period.
That last point is important. If you earned more than $2,000 from an activity in the 12 months before your policy period began, it likely counts as a business under the form, which triggers the property limits and liability exclusions below. Older editions and company-specific forms may word this differently, so check yours.
Business Property: The $2,500 and $1,500 Limits
Coverage C in the HO-3 covers personal property, but it applies special limits to certain categories. For property used primarily for business purposes, the 2011 edition limits coverage to:
| Location of property | Special limit (ISO HO-3, 2011 edition) |
|---|---|
| On the residence premises | $2,500 |
| Away from the residence premises | $1,500 |
The form also limits coverage for electronic apparatus used primarily for business while it is in or upon a motor vehicle. Inventory, specialized tools, computers and equipment can quickly exceed these limits. Those amounts are also the most the policy will pay in total for that category, not per item.
Our explainer on homeowners Coverages A through F shows how these special limits fit into Coverage C.
Business Liability: Usually Excluded
Section II of the HO-3 provides personal liability (Coverage E) and medical payments to others (Coverage F). Both exclude bodily injury or property damage arising out of or in connection with a business conducted from the residence premises or engaged in by an insured, whether or not the business is owned or operated by an insured or employs an insured.
Examples where the exclusion could apply:
- a client slips on your front steps while arriving for a consultation;
- a customer picks up an order and is bitten by your dog;
- a product you made and sold causes an injury; or
- advice or services you provided cause a financial loss for a client.
The 2011 form includes exceptions, such as the rental of the residence in some circumstances and business activities of an insured under age 21 involving services rendered by the insured, but these are narrow. Product claims and professional mistakes are normally outside homeowners coverage.
Other Structures Used for Business
Coverage B (other structures) in the HO-3 does not cover structures from which any business is conducted, or that are used to store business property, with exceptions for certain property owned solely by an insured or a tenant. A detached studio or workshop used for business may not be covered unless you arrange separate protection.
Your Coverage Options
Home business endorsement
Some insurers will add an endorsement to a homeowners policy for small, low-risk businesses. ISO’s Home Business Insurance Coverage endorsement is one model. Depending on the insurer, such endorsements can raise business property limits and add some business liability. They are typically limited to certain business types, revenue levels and numbers of employees.
In-home business policy
Some insurers offer a stand-alone in-home business policy with broader limits than an endorsement. Triple-I notes these may include coverage for business property, liability, loss of business income and valuable papers.
Business owner’s policy (BOP)
A BOP bundles property and general liability coverage, often with business income coverage. The U.S. Small Business Administration describes it as a common option for small businesses. It suits businesses with more inventory, equipment or customer contact. Our guide to business insurance basics explains BOPs, general liability and professional liability in more detail.
Professional liability
If you give advice or perform professional services, professional liability (also called errors and omissions) covers claims that your work caused a client a financial loss. Homeowners and most BOPs do not cover these claims.
Commercial auto
Personal auto policies may exclude or restrict business use of a vehicle. If you deliver products, visit clients or carry equipment, ask your auto insurer whether you need a business use endorsement or a commercial auto policy.
Cyber coverage
Businesses that store customer data or take payments online may want cyber liability coverage, which a homeowners policy generally does not provide.
Matching Coverage to Common Home Businesses
| Business type | Key exposures | Coverage often considered |
|---|---|---|
| Freelance writer or designer | Computer equipment, professional mistakes | Endorsement or in-home policy; professional liability |
| Online shop with inventory | Inventory, product liability | BOP or in-home policy with product liability |
| Tutoring or lessons at home | Visitors on the property | Endorsement or BOP with general liability |
| Home day care | Children on premises, injuries | Home day care endorsement or separate policy, depending on state rules |
| Consultant or bookkeeper | Advice-related claims, client data | Professional liability; cyber coverage |
| Contractor or handyman | Tools, job site injuries, vehicle use | General liability, inland marine for tools, commercial auto |
Home Day Care Is a Special Case
Paid child care in your home is one of the riskiest home businesses from an insurance standpoint. The HO-3’s business definition treats paid day care for non-relatives as business, so related liability is excluded. Some insurers offer a home day care endorsement, while others require a separate policy. States regulate licensed family child care homes, and many require providers to carry liability insurance. Check your state’s child care licensing agency and talk with your insurer before you start.
Does a Home Business Affect Your Homeowners Policy?
Telling your insurer about a home business is important. Policies require accurate information, and an undisclosed business can complicate a claim. Some insurers may decline to cover certain business uses under a homeowners policy, while others will gladly add an endorsement. Ask before you start, not after a loss.
Steps to Get the Right Coverage
- List your business property with values and receipts. Our guide to making a home inventory can help.
- Describe your activities honestly: what you do, who visits, where you work and how much you earn.
- Ask your homeowners insurer whether an endorsement is available and what it covers.
- Compare an in-home business policy and a BOP if your business has inventory, visitors or larger equipment.
- Add professional liability if clients rely on your advice or expertise.
- Review auto coverage for business driving.
- Revisit coverage yearly as revenue and activities grow.
A Hypothetical Illustration
The figures below are made up to show how the limits work. They are not typical losses.
Imagine a home-based baker who keeps $4,000 of commercial mixers, pans and packaging at home and brings $1,200 of display equipment to weekend markets. A kitchen fire destroys the equipment at home. Under the standard 2011 HO-3 special limit, the most available for business property on the premises would be $2,500, leaving $1,500 uncovered before the deductible is even considered. If a market customer later claimed a baked good made them sick, that claim would fall under the business exclusion in the liability section. An in-home business policy or BOP with product liability coverage is designed for exactly those exposures.
Renters and Condo Owners With a Home Business
The same issues apply to renters and condo owners. The ISO renters (HO-4) and condo unit owners (HO-6) forms use similar special limits for business property and similar business exclusions in the liability section. Renters should also check their lease, since some leases restrict business use or customer traffic, and condo owners should check association rules.
What Insurers May Ask
When you request a home business endorsement or a separate policy, expect questions such as:
- What type of business is it, and how long has it operated?
- What were your gross receipts in the past year?
- Do customers, clients or students come to your home?
- Do you have employees, and do any work at your home?
- What is the value of business equipment and inventory?
- Do you sell products you make, or resell products made by others?
- Do you store customer data or take payments online?
Accurate answers help the insurer offer coverage that fits, and they reduce the chance of a dispute after a claim.
Insurance and Taxes Are Separate Questions
Claiming a home office deduction on your taxes does not change your insurance coverage, and buying business insurance does not create a tax deduction for your home. The IRS explains the home office rules in Publication 587, including the requirement of regular and exclusive use and the simplified method of $5 per square foot for up to 300 square feet. Business insurance premiums may be deductible business expenses; ask a tax professional how they apply to you.
Common Gaps to Watch
- Inventory at a fair or market. Property away from home has the lower $1,500 limit under the standard form.
- Business income. Homeowners policies generally do not replace lost business income after a covered loss.
- Valuable papers and data. Records and data restoration may not be covered.
- Customer property. Items you hold for clients may be excluded.
- Employees. Workers’ compensation rules vary by state and may apply even with one employee.
Umbrella Policies and Business Activity
A personal umbrella policy extends liability limits above your home and auto coverage, but personal umbrellas generally exclude business pursuits. If you need higher business limits, ask about a commercial umbrella. Our guide to umbrella insurance explains how personal umbrellas work.
Frequently Asked Questions
Is my work laptop covered under homeowners insurance?
If it is used primarily for business, the standard ISO HO-3 limits business property to $2,500 at home and $1,500 away, shared with other business property.
Does homeowners insurance cover a client who gets hurt at my home?
Usually not if they are visiting for business. The HO-3 liability section excludes claims arising from business activities.
What counts as a business under a homeowners policy?
Under the 2011 ISO form, any trade, profession or activity for compensation, except listed activities such as volunteering and activities earning no insured more than $2,000 in the 12 months before the policy period.
What is the cheapest way to insure a small home business?
For small, low-risk businesses, a home business endorsement on your homeowners policy may be the least expensive option. Ask your insurer which businesses qualify.
Do I need a business owner's policy for a home business?
A BOP may make sense if you have inventory, equipment, customer visits or larger revenue. Compare it with an in-home business policy.
The Bottom Line
A homeowners policy is designed for personal risks. Under the standard form, business property has small limits and business liability is excluded. Tell your insurer about any home business, and use an endorsement, an in-home business policy or a business owner’s policy to fill the gaps.
