Property and Casualty Insurance Practice Exam

What is typically excluded under homeowners forms regarding business activities?

1. All personal property coverage

2. Liability related to home-based businesses

3. Coverage for personal injuries

4. Medical expenses incurred at home

The correct answer is: Liability related to home-based businesses

Homeowners insurance policies generally exclude liability related to business activities that occur within the home. This exclusion is in place because standard homeowners policies are designed to cover personal assets and activities, rather than commercial ventures. When a business is operated from home, any resulting liabilities—such as slips and falls involving clients or damage caused during business operations—are considered business-related liabilities and typically fall outside the scope of coverage offered by standard homeowners policies. However, homeowners insurance can provide limited coverage for certain business activities, especially if they constitute a small part of the homeowner's overall activities and do not generate significant risk. For more comprehensive coverage for home-based businesses, endorsements or separate business insurance policies may be required. The other options listed are not typically excluded under homeowners forms in the same manner. Personal property coverage is meant for individual belongings, while coverage for personal injuries and medical expenses may still apply under certain circumstances, regardless of business activity.