Only a little, and only for property. The standard ISO homeowners form (HO-3) caps business property kept at home at a few thousand dollars, caps it lower when it leaves the house, and excludes liability arising out of a business. A client who trips in your hallway, a detached garage you work out of, inventory in the basement, a car making deliveries on a personal auto policy: each runs into a limit or an exclusion. The fixes come in three sizes. ISO's permitted incidental occupancies endorsement covers a business that just uses part of the home. ISO's home business endorsement adds property, business income and liability for small office, service, sales and craft businesses. A business owners policy is the step after that. Employees and vehicles need their own policies, and daycare and short-term rentals get special treatment.
What the standard form gives business property
ISO's HO-3 treats a business two ways: property gets a sublimit, liability gets an exclusion. In the HO 00 03 10 00 edition, Coverage C pays no more than $2,500 for property on the residence premises used primarily for business and $500 for business property away from the premises. In the 2022 edition (HO 00 03 03 22), the Risk & Insurance Education Alliance's recap of the form lists $3,000 and $1,500. Neither covers a room of inventory or equipment.
Two other provisions matter. Coverage B, other structures, does not cover a structure from which any business is conducted, so a detached workshop or a garage you see customers in can fall outside the policy. And "business" is defined broadly: a trade, profession or occupation on a full-time, part-time or occasional basis, plus any other activity done for money. The main carve-out is for those other paid activities when no insured received more than $2,000 for them in the 12 months before the policy period. A hobby can escape the definition; a real business does not.
Customers, clients and the business exclusion
Section II, the HO-3's liability coverage, has Exclusion E.2, which removes bodily injury or property damage arising out of a business conducted from an insured location or engaged in by an insured, including any service or duty owed because of the nature of the business. A client who falls on your steps or a product you sold that hurt someone: the policy steps aside. A separate exclusion removes professional services.
The exceptions are narrow: occasional rental of the home as a residence, renting part of it as a residence to no more than two roomers or boarders, renting part of it as an office, school, studio or private garage, and an insured under 21 in a part-time or occasional, self-employed business with no employees. If you are 21 or older and someone pays you, assume the exclusion applies and look at what a general liability policy is designed to do.
Which endorsement, or a BOP
- Permitted Incidental Occupancies (HO 04 42). For a business that just uses part of the home. Per the Alliance's 2022 recap, it removes the $3,000 limit for the furnishings, supplies and equipment of the business named in the schedule and lifts the business liability exclusion for the necessary or incidental use of the home for that business.
- Home Business Insurance Coverage (HO 07 01). ISO's endorsement for four classes of home business: office, service, sales and crafts. It adds business property, business income, extra expense, liability and medical payments. Eligibility per IRMI: owned by the named insured or resident family, run from a premises used primarily as a residence, up to three employees, gross annual receipts not over $250,000. No professional liability.
- Business owners policy. ISO's BOP (BP 00 03) is a self-contained package of property and liability coverage for small and midsize businesses, with business income, extra expense and an off-premises property extension. How a BOP is put together, and what I ask a home-based business before placing one.
- Not the fix: Increased Limits on Business Property (HO 04 12). The 2022 edition raises the on-premises limit up to $10,000, but it does not apply to property of a business actually conducted on the premises or to stock and samples, and it does not touch the liability exclusion.
Employees and workers' comp
The HO-3 liability section excludes bodily injury to anyone eligible for benefits under a workers' compensation law, and its "residence employee" definition covers household help, not your business staff. Whether you must carry workers' compensation is state law, and the trigger varies by state: California requires it even with one employee, while Texas lets most private employers choose, and an employer without coverage must report that to the state.
Vehicles and deliveries
A personal auto policy is written for personal use. The Texas Department of Insurance puts it plainly: some personal policies may cover an accident during a paid delivery, others will not cover driving for business, and if you do not tell the company you drive for business it can deny the claim. It suggests asking about optional delivery coverage. If that is not available, or the vehicle is really a work vehicle, that is a commercial auto conversation.
Daycare and short-term rentals
Home day care. The HO-3 leaves home day care out of "business" only when no compensation changes hands beyond a swap of services, or the child is a relative of an insured. Paid care is a business, so an injured child's claim hits the exclusion. ISO's Home Day Care Coverage Endorsement (HO 04 97; the 1991 edition is quoted here) extends liability and medical payments to paid day care on the residence premises under an annual aggregate, adjusts property coverage for day care property, and excludes injuries to employees other than residence employees.
Short-term rentals. NAIC's 2016 home-sharing paper explains the gap: homeowners and dwelling policies are generally not designed to cover accidents from short-term rental except "occasional" exposures, and "occasional" is generally not defined. ISO has endorsements that reinforce the home-sharing exclusion and optional ones that restore coverage and add lost rental income. If an insurer decides the rental is more than occasional, it may drop coverage. Tell your agent before the first booking. The rest of what a homeowners policy does.
Common questions
What counts as a business under a homeowners policy?
In the ISO HO-3, a trade, profession or occupation on a full-time, part-time or occasional basis, or any other activity done for money. The carve-outs are other paid activities that brought no insured more than $2,000 in the 12 months before the policy period, volunteer work, unpaid home day care and day care for a relative.
Do I have to tell my insurer about a home business?
Yes. The NAIC warns that failing to disclose a substantial business run from the home can mean a denied business-related claim or a nonrenewed policy. Disclosure is also how the right endorsement gets added.
Will the increased-limits endorsement cover my home business?
Usually not. HO 04 12 does not apply to property of a business actually conducted on the premises, and IRMI notes it does not affect the business liability exclusion. A home business looks at HO 04 42, HO 07 01 or a BOP instead.
Is the home business endorsement the same as a BOP?
No. HO 07 01 is an endorsement to the homeowners policy for four classes of small home business, with up to three employees and no more than $250,000 in gross annual receipts, and no professional liability. A BOP is a standalone package policy with its own property, business income, extra expense and liability coverage.
I rent a room on Airbnb a few weekends a year. Is that a business?
It depends on the policy. The HO-3 exempts occasional rental of the home as a residence, but "occasional" is generally not defined, and the NAIC notes the income threshold in business definitions ranges from $2,000 to $15,000 by policy. Ask your insurer in writing before you list.
Sources
- ISO HO 00 03 10 00, Homeowners 3 – Special Form (copy hosted by the Maine Bureau of Insurance)
- Risk & Insurance Education Alliance: "Business" property limitations, exclusions and endorsements recap, ISO HO 00 03 03 22
- IRMI: Insuring the Home-Based Business (Part 3), Robin Olson, Sept. 30, 2024, on HO 07 01 03 22 and HO 04 12 03 22
- ISO HO 04 12 04 91, Increased Limits on Business Property (AAA Auto Club insurer form library)
- NAIC Consumer Insight: working from home and your insurance coverage
- NAIC white paper (adopted Dec. 13, 2016): Insurance Implications of Home-Sharing
- Texas Department of Insurance: delivering packages and your auto insurance
- Verisk/ISO: Businessowners Policy (BOP) program overview, February 11, 2025
- ISO HO 04 97 04 91, Home Day Care Coverage Endorsement (AAA Auto Club insurer form library)
- Texas Department of Insurance: workers' compensation for employers
- California Department of Industrial Relations: workers' compensation for employers
General information about homeowners insurance and home-based businesses as of October 2026, not legal or tax advice; ISO form editions vary by insurer and state, and the policy and endorsements actually issued control. Coverage depends on underwriting and the terms, conditions and exclusions of the policy actually issued.