What Is a Permitted Incidental Occupancies Endorsement?

At times, insurance plans seem to contain enough complicated, obscure language that a policy can easily turn into alphabet soup if you try to read it for too long. 

If you have a home-based business, one of these terms you may want to unscramble is “permitted incidental occupancy.” Read on to understand what a permitted incidental occupancies endorsement is in homeowners insurance and how it can help you.

A permitted incidental occupancies endorsement can be added to your homeowners insurance policy to increase the coverage for your home-based business, in some cases. Permitted incidental occupancy endorsements increase the limit for business property in your home insurance plan.

It may cover business items located in other structures on your property, too, like in garages or sheds, when normally these items are excluded completely from standard home insurance policies.

Business property considered under permitted incidental occupancy endorsements typically consists of furniture, supplies, and equipment you use for your business in your house. 

It’s important to note that any retail inventory for your business isn’t covered with a permitted incidental occupancies endorsement. For example, if you make clothes and they sit in your house as they’re waiting to be shipped, they won’t be covered if they’re destroyed by a peril.

Permitted incidental occupancy endorsements also don’t always increase the liability coverage related to your home business, so be sure to watch for that. Employees or customers who visit your home might not be covered under a permitted incidental occupancies endorsement if they get hurt on your property.

Permitted incidental occupancy endorsements also don’t cover loss of income for your home business or any loss of business-related data. While your computer and software should be covered, the information on them probably isn’t.

Standard homeowners policies include very limited coverage for home businesses. There is normally a $2,500 limit for business property (equipment and belongings) and no liability coverage for your business. And, any business items in other structures on your property may not be covered at all depending on your provider. For instance, many homeowners policies state that “other structures from which any “business” is conducted” or “other structures used to store “business” property” are excluded.

With a permitted incidental occupancies endorsement, however, you can boost the amount of business property your home insurance provider covers. Limits vary by carrier, but you should be able to double or triple your coverage.

Permitted incidental occupancy endorsements usually require you to describe your business and where it will be conducted on your property. You also may be asked to define how much coverage you want under the endorsement if your insurer doesn’t have a set amount they provide.

The business must be owned by the policyholder – you can’t insure your friend’s business property if he keeps his or her stuff at your place.

Prime candidates for home businesses that could benefit from permitted incidental occupancy endorsements include home offices or studios where your work is largely limited to computers and phone calls, or where you offer some instruction to others from time to time.

Examples of such businesses include a photo studio, an office where you do graphic design work, or a room where you teach music or dance lessons on a small scale.

A business that you may have some equipment for, that doesn’t have many if any other employees, and that doesn’t produce a relatively large amount of money are some good qualifications for a permitted incidental occupancies endorsement. In regards to revenue, permitted incidental occupancy endorsements have different limits on how much the business can generate depending on the provider. If it’s a large enough business, you’d need an endorsement or a dedicated commercial insurance policy for it. 

Even if they’re small or part-time, businesses that wouldn’t normally qualify under a permitted incidental occupancies endorsement include contractor work, daycare services, and lawn care services. 

Contracting work and other jobs where you install things for other people aren’t always covered because your insurer doesn’t want to be responsible for your installation or repair job on another property in case your work is faulty or something goes wrong down the line. Additionally, the increased liability involved with home care services where other people would be in and around your home a lot isn’t a risk your insurer wants to pick up whether you have a permitted incidental occupancies endorsement or not. 

And, homeowners insurance typically won’t cover any plants grown for commercial purposes, so a nursery or a lawn care service likely won’t be covered. And, any commercial or business use of your car or boat still isn’t covered under a permitted incidental occupancies endorsement.

A permitted incidental occupancies endorsement can increase your monthly premium by roughly tens of dollars every month. It can total to a few hundred dollars each year depending on how much coverage you want, the value of your property and business property, and the options from your insurance provider.

It’s hard to nail down an exact cost of home-based business insurance because there are a few different types and they are all affected by many factors. One of the most direct influences is how much coverage you want. Generally, the more protection you want or need for your home business, the more it’ll cost. Insurers tend to have a limit for permitted incidental occupancy endorsements of $10,000, but it can vary.

But, your overall home value, your claims history, and more can come into play. Your best bet is to talk to your insurer for an exact amount, and if you’re not satisfied you can shop around.