It is true that all assets of a sole proprietor are owned by sole proprietor: that's because there is no separate legal entity to own them. However, that definition is irrelevant to insurance coverage if the policy has specific terms addressing this property or this situation. An insurance policy is a contract; it provides that coverage--no more and no less--defined in the policy. If the policy says that there is maximum coverage of $2,500 for property pertaining to a business conducted on the residential premises, whether part time or occasionally, then that is the limit of coverage; general legal principals or definitions do not override the specific terms of an insurance policy.