Arizona Adjuster Practice Exam

Mary offers piano and guitar lessons and seeks additional liability coverage beyond her homeowners policy. What is the most practical solution?

1. Purchase a business liability policy

2. Add the permitted incidental occupancies endorsement

3. Obtain a commercial general liability policy

4. Increase her homeowners coverage limit

The correct answer is: Add the permitted incidental occupancies endorsement

The most practical solution in this scenario would be to add the permitted incidental occupancies endorsement to her homeowners policy. This endorsement is designed to provide coverage for business activities that occur in the home without converting the residential policy into a full commercial policy. Since Mary offers piano and guitar lessons on a small scale, this endorsement allows her to maintain her existing homeowners policy while gaining the necessary liability coverage for her teaching activities. This option is particularly beneficial for individuals like Mary who are running small, home-based businesses and want to mitigate the risk associated with potential liability claims without incurring the higher costs and stringent requirements of a comprehensive business policy or commercial general liability policy. It is a simpler and more cost-effective method to ensure coverage for incidental business activities compared to other options that may involve extraneous expenses or operational changes. The other options may not suit her needs as effectively. For instance, purchasing a business liability policy could provide thorough coverage but may also be more expensive and involve more complex requirements than necessary for her situation. Similarly, obtaining a commercial general liability policy would be overkill for the scale of her operations and likely incur higher costs. Increasing homeowners coverage may not adequately address the specific liabilities associated with running a lessons business, leaving her potentially underinsured in that regard