Without realizing it, you can void all coverage on a detached “Other Structure” like a garage or shop building if it is used for business, as defined in the typical Homeowners insurance policy. See item B.2. below for the exclusions on other structures.

SECTION I – PROPERTY COVERAGES

B. COVERAGE B – Other Structures

1. We cover other structures on the “residence premises” set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line, or similar connection. This coverage does not apply to land, including land on which the other structures are located.

2. We do not cover other structures:

a. Used in whole or in part for “business”; or
b. Rented or held for rental to any person not a tenant of the dwelling, unless used solely as a private garage.

EXPLANATION:

In B.2.a. Other structures that are used in whole or in part for “business” are NOT covered.

This means that if you start using a detached garage or shop located on your residence premises for business purposes no coverage is provided. The entire value of the building is at risk from any and all perils including total loss by fire.

This business exclusion became necessary to restrict the scope of coverage to normal personal activities. It is not uncommon for home owners to convert their garages or shop buildings to business use to make extra money like doing auto repair, cabinet making, wood working, manufacturing and the like. The solvents, fuels, paints, sawdust, etc. caused increased loss experience far beyond normal personal use.

If you are using your other structure for business purposes you will need to arrange separate insurance coverage to protect the value of your building.

NOTE: The business use exclusion applies only to the “other structure” not the “residence premises”. So, having a business inside your home doesn’t void the property coverage on your home or attached garage.

Homeowners policy references are from the unendorsed ISO HO-3 Special Form policy, 01-00 edition. Policy language may vary somewhat from company to company and state to state. Read your policy.

For a list of related questions click:
Does my Homeowners policy exclude business activities?