Georgia Property & Casualty Practice Exam

In the liability section of a homeowners policy, what is the minimum compensation threshold for defining "business"?

1. $100 per year

2. $500 per year

3. $2,000 per year

4. $10,000 per year

The correct answer is: $2,000 per year

The correct answer is $2,000 per year as the minimum compensation threshold for defining "business" in the liability section of a homeowners policy. This threshold is significant because it helps differentiate personal activities from business-related activities, which can determine whether certain expenses and liabilities are covered under the homeowners policy. If an individual receives compensation that exceeds this amount, their activities may be classified as a business, potentially affecting coverage under the policy. The homeowners policy typically provides protection for personal liability, but business activities may require additional coverage options or commercial policies, as they often entail different risks and liabilities. This threshold is essential for ensuring that an individual’s insurance needs are adequately met and avoiding unintended gaps in coverage. Understanding this threshold helps policyholders recognize when their actions might shift from personal to business, prompting the need for appropriate insurance adjustments or additional policies to ensure complete protection.