The laws around insurance and insurance itself vary depending on where you operate your business and the type of business you operate, which is why this article is full of “likely”, “generally” and “may”. Generally, having insurance to cover your small business is not enforced, it’s more of a strong suggestion. Many small businesses believe that if they have home and car insurance, they can call it a day but unfortunately that’s not so. You may have some coverage under them but generally you need extra if you want your property and butt to be covered in the case of an accident or lawsuit. Check with your insurance agent or broker before you start a business to see what is covered under your existing plan and what you should have.
This article is an overview of the insurance your small, handmade, home-based business might be interested in.
There are several different types of insurance but generally the main ones a small handmade business would be interested in are:
Generally, unless you extend your current home or car insurance policies to cover your home-based business: your business equipment, tools, inventory, etc. may not be included under your existing policy or if they are, it’s very limited. Even if you do purchase a rider on top of your existing insurance, it likely won’t be as extensive as separate coverage.
You likely have some liability coverage under your home and car insurance to cover your fees if someone slips and falls on your property or you cause harm in a car accident. But when the insurance company starts asking you questions about the accident and you tell them the injured party was in your home for business or the accident happened on the way to a craft show, they’ll deem it business related and not covered under your basic
A word of caution: some insurance providers consider running a home-based business a violation of their policy terms. I’ve had a few friends tell me that once they talked to their insurers, inquiring about additional coverage for their home based business that was already in operation, their insurance company gave them 2 weeks to find another provider as they were cutting them off their current coverage. Be sure that you look into insurance before you start your business and if you’re already operating, take a look at your existing insurance to be sure you’re not breaking any of their rules. If you are, start looking for a new insurance provider immediately.
Liability insurance is to help protect you in the case of a mistake. A mistake made by you or caused by your product or service and that ultimately hurts or damages another person or their property. There are also different types of liability insurance and again, these vary by country and company. Your business will likely be interested in these 3 types:
If you sell through craft shows, the venue or organizer will have limited coverage of their own but coverage and claims can be expensive so they may require that vendors also have coverage so they’re not stuck with all the costs.
Some events specify in their terms that they are NOT liable for any loss, damage or injury that occurs to people or products at their event and some will actually require proof of insurance from their vendors.
If the event has their own coverage and doesn’t require that you have insurance as well, you may still want to look into what they are actually covering. If it’s an outdoor event and injury happens due to: one of your products, your display props or your tent blowing over, you may be held responsible.
Although you may be partially covered under the event’s insurance, it won’t cover you if someone takes one of your products home and gets injured by it or causes damage because if it. Keep that in mind if you’re selling higher risk products such as cosmetics, children’s items, candles, etc.
If you feel you’re selling low risk products and don’t really need coverage throughout the entire year, you can look into short-term coverage. Some companies will offer coverage by the day so if you’re attending a craft show that requires you have insurance to cover any injury that might happen at the event; this may be a good fit for you. Again, this won’t cover you or your products after the event is over so if you’re selling candles that might cause damage to someone’s home, you may want fuller coverage. It depends on the policy; your property may or may not be covered under this type of temporary coverage.
This may be a good option if you need property insurance on top of your temporary insurance mentioned above. The name no longer reflects its use as it originally covered products in transport over water. Now it refers to coverage for your goods while they are in transit in general (water, land, air) or temporarily being displayed, such as at a craft show. This type of insurance covers property and will not cover you against any injury claims.
Below are some examples of situations that different types of liability insurance can help protect you in. These are just examples and if you’re actually covered and how much coverage you have would depend on your policy.
Yikes…a little scary, I know. There are a lot of different angles people will use in our litigious society.
The cost will largely depend on what you need coverage for, the perceived risk, where you’re operating and whom you go through. Generally, the more popular the business concept, the lower the coverage because more businesses are paying for it. If you need coverage for a smaller, more specific industry, the higher your premiums may be. It can range from just over a hundred dollars, to hundreds of dollars to thousands of dollars a year; it’s best to call your insurance company to get some more specific numbers.
If you decide you want to get coverage, it’s strongly recommended you shop around to find a policy and price that works for you. You can start with the insurance company you have your home or car insurance under to see if they offer the extended property and liability insurance you need and if so, how much. Keep in mind our word of caution above; they may cut you off if you’re currently operating your business, they’re not aware of it and they don’t offer home-based business coverage.
There are insurance companies that specialize in insuring specific types of industries such as soap making; often these specialized companies can offer the best coverage and rates.
Business Owner’s Policies (BOP) is another option that may be available to you. Basically it bundles the basic types of insurance a business owner might need into one package that can cost less than purchasing the policies separately.
If you decide you want to forego additional insurance and someone files a claim against you, you will be responsible for covering all the fees associated with it; legal fees, settlement fees or judgement fees if you’re found guilty.
You’ll also want to:
There you have it! The fun facts of insurance 🙂
This article is for information purposes only, is in no way legal advice and is not necessarily kept up to date. Speak to an insurance professional for the most up to date information for your profession and jurisdiction.
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