1. Forms
2. HO
3. HO-04-12

What the form is

The HO 04 12, Increased Limits On Business Property endorsement is designed to modify a standard homeowners insurance policy. Its primary function is to increase the typically low special limit of liability that applies to business personal property located on the insured's "residence premises". Standard homeowners policies often cap this coverage at a nominal amount (e.g., $2,500 or $3,000 for business property on the premises and a lower amount, like $500 or $1,500, for business property off-premises). This endorsement allows the policyholder to select a higher total limit for their business property, both on and, in some versions or by carrier interpretation, off the "residence premises". The specific increase in the limit and the new total limit are shown in the Schedule of the endorsement or elsewhere in the policy.

Classes of business it applies to

This endorsement is suitable for individuals who operate small, home-based businesses or have valuable business-related property at their residence that exceeds the standard homeowners policy sub-limits. Real-world examples include:

• A freelance graphic designer with expensive computer equipment and software in their home office.
• A consultant who keeps business-related documents, reference materials, or specialized tools at home.
• A sales representative who stores business samples or promotional materials at their residence.
• Individuals with business property that is sometimes taken off the "residence premises".

Special considerations

It is crucial to understand the limitations of the HO 04 12 endorsement:

• No Liability Coverage: This endorsement only increases the limit for business property. It does not provide any business liability coverage, nor does it modify the business liability exclusions typically found in a homeowners policy. For liability protection related to a home-based business, other endorsements like HO 24 71 (Business Pursuits) for certain occupations or HO 07 01 (Home Business Insurance Coverage), or a separate commercial policy, would be necessary.
• Scope of Property Covered: While it increases limits, the types of business property covered are still subject to the definitions and exclusions within the main homeowners policy and the endorsement itself. Some older editions or interpretations had restrictions on property held as samples, for sale, or pertaining to a business actually conducted on the premises, suggesting other endorsements might be better suited for those exposures. However, more recent commentary suggests this endorsement can address property held as samples or for sale. The 03 22 edition specifically addresses increasing the limit for business property away from the residence premises.
• Carrier Limits: Insurance companies may have their own internal maximum limits for how much this coverage can be increased.

Key information for agents and underwriters

• Needs Assessment: Agents should thoroughly discuss the nature and value of an insured's business property, both on and off the "residence premises", to determine if the standard homeowners limit is adequate or if the HO 04 12 is needed, and at what increased amount. A description of the business is typically required.
• Explain Limitations: Agents must clearly communicate to the insured that this endorsement does not cover business liability. The potential coverage gap for liability should be addressed, and more comprehensive solutions (like HO 07 01 or a commercial policy) should be discussed if the insured has significant business liability exposures.
• Risk Assessment: Underwriters should review the description of the business to assess the type and value of property involved. If the home-based business activities are extensive or involve higher-risk property or operations, this endorsement alone may be insufficient, and a commercial policy might be the appropriate recommendation.
• Pricing: The premium for this endorsement will vary based on the increased limit of liability selected by the insured.
• Alternative Endorsements: For more comprehensive coverage for a home-based business, including some liability and broader property coverages, the HO 07 01 (Home Business Insurance Coverage) endorsement is often a better option, though it has its own eligibility criteria.