1. Forms
2. HO
3. HO-07-01

What the form is

The HO 07 01, titled "Home Business Insurance Coverage," is an endorsement to a standard homeowners insurance policy. Its purpose is to provide specific insurance coverages for certain types of small businesses that the named insured operates from their residence premises. Standard homeowners policies typically exclude or significantly limit coverage for business-related activities and property. This endorsement bridges that gap by adding tailored property and liability protections for the home-based business.

Classes of business it applies to

The HO 07 01 is designed for small-scale, home-based businesses that meet specific eligibility criteria. ISO (Insurance Services Office) has outlined principal classifications for this program, which generally include:

• Office: Businesses involving professional or administrative activities, such as accounting, resume writing, telephone answering services, or technical writing.
• Service: Businesses providing repair or other services for customers. An example could be a small electronics repair service operated from the home.
• Sales: Businesses involving the sale of goods, often those not manufactured by the insured at home (e.g., selling nationally recognized personal care products like Avon).
• Crafts: Businesses involving the sale of crafts made in the home, such as ceramics, dolls, or quilts.

Real-world examples: A freelance graphic designer working from a home office, a consultant conducting business primarily online from their residence, or an individual selling handmade jewelry through an e-commerce platform from their home.

Special considerations

There are important limitations and requirements for a business to be eligible for the HO 07 01 endorsement:

• Ownership: The business must be owned by the named insured or by a partnership, joint venture, or other organization composed only of the named insured and resident family members.
• Location: The business must be operated from the residence premises, and the residence must be primarily used as a private residence. Operating the business from a detached structure on the premises, like a separate garage, may be permissible, but this should be clarified with the insurer.
• Size and Revenue: Typically, the business can have a limited number of employees (e.g., up to three) and cannot exceed a certain gross annual revenue (e.g., $250,000).
• Prohibited Businesses: Certain types of businesses are generally ineligible. For example, businesses involved in the manufacture, sale, or distribution of food (with some exceptions for selling pre-packaged items from reputable companies) or the manufacture of personal care products are often excluded.
• Underlying Policy: The HO 07 01 must be attached to an eligible underlying homeowners form (e.g., HO 00 02, HO 00 03, HO 00 04, HO 00 05, HO 00 06, or HO 00 08). The coverage provided by the HO 07 01 will be influenced by the perils covered in the base homeowners policy (e.g., named perils if attached to an HO 00 02).
• No Professional Liability: This endorsement does not provide professional liability (Errors & Omissions) coverage. Businesses with this exposure (e.g., accountants, consultants) will need a separate professional liability policy.

Key information for agents and underwriters

Agents and underwriters should pay close attention to the following when considering the HO 07 01:

• Eligibility Verification: Thoroughly verify that the home-based business meets all eligibility criteria regarding ownership, location, number of employees, gross annual receipts, and type of business. The insured should clearly describe the business in the schedule.
• Coverage Scope: Understand that the endorsement provides specific coverages, including business property (often with higher limits than the base policy allows for business property), business income, extra expense, and business liability. It can also extend personal and advertising injury liability.
• Property Coverage: Business property coverage under this endorsement is typically for property located on the residence premises. Coverage for business property in transit or off-premises is limited to the United States, its territories and possessions, Puerto Rico, and Canada.
• Liability Coverage: The endorsement provides liability coverage for the described business operations. This is a significant enhancement as standard homeowners policies heavily restrict business liability.
• Exclusions: Be aware of the exclusions within the HO 07 01 itself, as well as the exclusions in the underlying homeowners policy, which still apply unless modified by the endorsement. For instance, employee dishonesty is generally excluded.
• Pricing: Pricing will depend on the nature and scale of the home business, the limits of liability selected, and the underlying homeowners policy.
• Risk Assessment: Assess the specific risks associated with the type of home business. For example, a business with frequent client visits to the home has a different liability exposure than one conducted purely online.
• Coverage Gaps: Identify potential coverage gaps. As mentioned, professional liability is a key exclusion. Also, businesses that outgrow the eligibility criteria of the HO 07 01 will need to transition to a commercial policy, such as a Businessowners Policy (BOP).
• Related Endorsements: Consider if other endorsements might be necessary in conjunction with the HO 07 01, such as HO 07 51 (Additional Insured – Vendors) or HO 07 57 (Special Coverage For Valuable Papers And Records).