Property and Casualty Insurance Practice Exam

What does the Permitted Incidental Occupancies Endorsement support?

1. Excludes all business activities from homeowner policies

2. Allows payment for all personal injuries sustained at home

3. Permits business activities conducted on residence premises

4. Provides coverage only for property damages

The correct answer is: Permits business activities conducted on residence premises

The Permitted Incidental Occupancies Endorsement is designed to allow specific business activities to be conducted from a residence without jeopardizing the coverage of a homeowner's insurance policy. This endorsement recognizes that homeowners may engage in minor business activities, such as a home office or a craft business, while still maintaining their primary residential status. By permitting these incidental business activities, the endorsement provides homeowners with a degree of flexibility. It allows them to operate small-scale businesses without having to purchase a separate business insurance policy, which can be more costly and may not be necessary for limited operations. This ensures that the residential coverage remains in effect while offering support for these specific incidental activities. The other options do not align with the intent of the endorsement. Excluding all business activities would not reflect the actual purpose of providing some leeway for homeowners. Coverage for personal injuries sustained at home or focusing solely on property damage does not capture the essence of what incidental occupancies aim to support. The key feature of the endorsement is its allowance for business activities that are incidental to the primary use of the property as a dwelling.