April 2, 2024

Homeowners: Do You Know Which Version of ‘Business Personal Property’ You Have?

Do you run a business out of your house? Then you should get familiar with the Business Personal Property (BPP) section of your homeowner’s policy. Some insurance carriers have changed what you can claim in the event of damage, as well as the limit for what you can recover. Let us walk you through these changes.

For years, insurance carriers provided basic homeowner’s coverage that defined certain words and phrases in a very particular way. These definitions are, of course, defined to help both the carrier and the insured understand what gets covered by the insurance policy. Among these words and phrases, homeowners’ policies have typically defined “business” as a “trade, profession or occupation.” This is important, because homeowners’ policies also have “Special Limits of Liability” which set a total limit for all property in several categories.

Here is a relevant example of such a limit: “$2,500 on property, on the ‘resident premises,’ used at any time or in any manner for any ‘business purpose’.” What this means is that any contents in your house that have been used – at any time – for “business” are subject to that $2,500 limit.

Suppose you have a baby grand piano in your home. Ten years ago, a family member used that piano – which is still worth, say, $10k – to charge students for music lessons. Then you have a fire that damages everything within your house. Even though that family member has not provided any lessons for 10 years, the insurance company will insist on the $2,500 limit. This same $2,500 limit applies to anything in your house that you’ve ever used to derive income – laptops, printers, tools, etc.

Recently, some insurance carriers have redefined “business” within homeowner policies. Under this new definition, “business” can now mean:

  1. A trade, profession or occupation engaged in on a full-time, part-time or occasional basis; or
  2. Any other activity engaged in for money or other compensation, except the following:
  • One or more activities, not described in (2) through (4) below, for which no “insured” receives more than $2,000 in total compensation for the 12 months before the beginning of the policy period;
  • Volunteer activities for which no money is received other than payment for expenses incurred to perform the activity;
  • Providing home day care services for which no compensation is received, other than the mutual exchange of such services; or
  • The rendering of home day care services to a relative of an “insured.”

This redefinition changes what you can recover in an insurance claim for damage done to your home. After these changes, you now have to ask yourself if you have derived more than $2,000 in income from that family piano in the 12 months prior to the policy period. If the answer is no, then – under the new definition of “business” – that piano may not be considered Business Personal Property.  Therefore, you cannot submit a claim for it. For example, if your policy period is February 15, 2024 through February 15, 2025, anything used as BPP prior to February 15, 2023 would NOT be covered. This is a big change from the previous definition of “business,” under which such a piano did qualify as Business Personal Property.

The policy language for BPP varies between carrier and policy editions, so be sure to check your insurance policy for specific language. It could make a big difference should you ever have to file a claim.

Diane Swerling

Diane Swerling is a Principal at Swerling Milton Winnick, and current Vice President of the Massachusetts Association of Public Insurance Adjusters. She has particular expertise in claims involving condominium associations and commercial policies.
If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.