Dick asks whether his woodworking hobby has liability coverage under his homeowners policy. What should the insurer tell him?

• A. No coverage when annual compensation exceeds $2,000
• B. Coverage applies regardless of income
• C. The hobby requires a rider
• D. The insurer excludes all hobbies

Answer: (A)

Homeowners liability coverage is designed for personal, non-business activities. When a hobby starts bringing in money, it’s treated more like a business activity rather than a pure personal pastime. Many homeowners forms cap incidental hobby income under a small limit and exclude liability for the hobby beyond that amount. In this case, if the woodworking hobby earns more than $2,000 in a year, the liability protection under the homeowners policy wouldn’t apply. To have coverage for a hobby that generates income above that threshold, the insured would typically need a rider or a separate policy designed for a business activity.

That’s why this option is the best: it reflects the idea that liability coverage isn’t extended to a hobby once annual compensation exceeds a modest limit. The other statements aren’t accurate because coverage isn’t guaranteed regardless of income, a rider isn’t always required for minimal hobby activity (and isn’t the defining rule here), and insurers don’t automatically exclude all hobbies—coverage can exist up to a limit or with a rider.