Filed Under:Markets, Personal Lines

Covering Kid-Run Businesses

One of the recent videos to go viral is about a 9-year-old boy in Los Angeles who built an arcade out of cardboard. Caine built and designed the machines, has prizes, and offers a fun pass that allows the purchaser 500 plays at the arcade for one month—quite a deal.

The boy’s arcade is in the front of his father's auto-parts shop, although most of the auto-parts business is conducted online. A customer talked to the father about it, and when he found out he was Caine's only customer, he organized a flash mob to visit and play at the arcade. Naturally, Caine was thrilled.

Of course, nothing comes across my desk without automatically making me wonder what the insurance spin on it might be.

While the arcade is at the father's place of business, there are lots of children who set up lemonade stands, dog-sitting businesses and other endeavors from the home. So let's look at the homeowner's policy.

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The standard ISO form defines business as a “trade, profession or occupation engaged in on a part-time, full-time or occasional basis,” with an exception for activities for which the insured receives no more than $2,000 for the 12 months from the beginning of the policy. While at first glance it doesn't seem likely that Caine's arcade would earn that much, seeing as initially he had only one customer, donations have been received totaling more than $80,000 for a scholarship fund for Caine. Who knows what Caine has actually earned now that he's gotten the public's attention. The Internet is a marvelous thing.

But what's a dad to do when his son's endeavor becomes a business and is excluded from the homeowner’s policy? The form makes an exception for insured's under the age of 21 involved in a part-time, occasional or self-employed business as long as there are no employees. However, the $2,000 is still an issue. An endorsement saves the day. Business Pursuits endorsement HO 24 71 provides liability coverage for the scheduled business.

Since summer is on its way, the kids are safe to set up lemonade stands, pet sit and even set up an arcade.

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