Arizona Adjuster Practice Exam

What advice should an agent give to a homeowner running a business from home to protect against potential claims?

1. Get a separate business policy

2. Add an endorsement to cover the home-based business

3. Purchase liability insurance only

4. Ensure business equipment is covered

The correct answer is: Add an endorsement to cover the home-based business

Advising a homeowner who runs a business from home to add an endorsement to cover the home-based business is sound guidance because it allows the homeowner to enhance their existing homeowner's insurance policy to include coverage specifically tailored to their business activities. Homeowner’s insurance typically focuses on personal property and liability associated with residential use, and it may not adequately cover risks associated with business operations. By adding an endorsement, the homeowner can receive coverage for potential risks such as business equipment damage, liability claims arising from business activities, or loss of income due to business interruptions. This approach provides a cost-effective and comprehensive way to protect business interests without necessitating a completely separate policy, which could unnecessarily increase insurance costs. While purchasing a separate business policy may be suitable in some cases, depending on the scale and nature of the business, the endorsement route often strikes a better balance for those running smaller or less complex business operations from home. The other options, while they may address certain aspects of risk management, do not provide the same level of comprehensive protection as adding an endorsement would. For instance, purchasing liability insurance only would not cover damage to business property or provide financial assistance if the business is unable to operate.