1. Forms
2. FP
3. FP-04-09

What the form is

The FP 04 09 Increased Special Limits on Business Property endorsement is designed to modify standard ISO Farm Property coverage forms. Farm policies, such as the Farm Property–Farm Dwelling, Appurtenant Structures and Household Personal Property Coverage Form (FP 00 12), typically include special, lower limits for business personal property (e.g., $2,500 on the insured location and $1,500 off). This endorsement allows the insured to purchase higher limits for business property kept on the insured location. The limit for business property off the insured location is then typically a percentage of this increased on-location limit (e.g., the 04 16 edition specifies 20% of the on-location limit, or $1,000). This increased limit is part of, and not in addition to, the overall applicable limit of liability.

Classes of business it applies to

This endorsement is suitable for farming or ranching operations that have an incidental exposure to business personal property that exceeds the base limits provided in their farm policy. Examples include:

• A farmer who maintains a small office on the farm premises for business record-keeping, containing computers and office furniture valued at more than the standard limit.
• An insured who conducts a small-scale ancillary business from their farm, such as crafting or minor repair work, and has tools or inventory related to this side business.
• Farms that occasionally take business-related property off-premises, such as to a local market or for a presentation.

It is important to note that this endorsement is generally intended for incidental business property. The 04 16 edition specifies that the increased limits do not apply to business property in storage, or held as a sample, for sale or delivery after sale. It also clarifies that the increased limit does not apply to adaptable electronic equipment as described in the special limits of insurance in the farm property—farm dwellings, appurtenant structures and household personal property coverage form.

Special considerations

• Specific Limits: The insured must select a specific increased limit for business property on the insured location. The off-premises limit is then calculated based on this (e.g., 20% for the 04 16 edition).
• Not a Substitute for Commercial Coverage: This endorsement is not designed to cover substantial commercial operations. If the business activities on the farm are significant, a separate commercial policy may be more appropriate. The endorsement is for increasing special limits within the farm policy framework.
• Policy Integration: The increased limit provided by this endorsement becomes part of the total limit of insurance for the coverage it modifies; it does not add to it.
• Eligible Property: It's crucial to understand which types of business property are eligible for these increased limits and which are excluded (e.g., adaptable electronic equipment under the 04 16 edition).

Key information for agents and underwriters

• Needs Assessment: Agents should discuss with farm clients the nature and value of any business personal property they own to determine if the standard policy limits are adequate or if this endorsement is needed.
• Proper Valuation: Accurately valuing the business property is essential to selecting an appropriate increased limit. Underinsurance can lead to coverage gaps.
• Risk Assessment: Underwriters should evaluate the type and extent of the incidental business activities. While the endorsement provides higher limits, the underlying exposure should still be within the scope of what is considered an incidental business exposure for a farm policy.
• Distinguish from Full Business Coverage: Ensure the client understands this endorsement modifies existing farm policy sub-limits and is not equivalent to a comprehensive commercial property policy for a standalone business.
• Edition Date Specifics: Be aware of the specific provisions of the edition date being used, such as the percentage for off-premises coverage and any particular exclusions (e.g., the 04 16 edition's treatment of adaptable electronic equipment).