Question

A broker submits an application for homeowners insurance to an

insurance company on behalf of a client. The broker is unaware

that although his client is the registered owner of the property to be

insured, the insured has neglected to report that the home is being

used to house a catering business. This means that the client has

failed to disclose information on the insurance application.

(a) If you are the underwriter on this risk and it comes to your

attention that the insured is operating a catering business from

the home, what issues should you consider when you discover

the actual facts about the use of the insured home

its a business law question

Answer 1

(a) If I’m the underwriter on this risk and it came into my attention that the insured is operating a catering business from the home and the same is not used for the residential purpose, then the basic nature of the insurance itself would change over here.

This would be the insuring of commercial property/business insurance and not a home insurance. So this would also amount to change in the percentage of the premium being computed by the insurance company or the risk underwriters.

In insuring the commercial property or a business property the insurance companies would consider the location and the performance of your company and also the equipment’s or the assets held by you before fixing the insurance amount and premium to be paid.

But in case of a home it would be different and the norms set by the company would also be much simple and different from the perils that they would provide for a business property.

In the present case as a risk underwriter I would either ask my client to change the insurance policy into business insurance or an in-home business policy which is in trend today and taken by many such small scale business owners.