Insurance - Frequently Asked Questions
The following are the most frequently asked questions about the member benefit insurance offered by the HSCG. Click any question to display the answer, or view all answers.
General Insurance Information
Why is it called "member benefit insurance"?
It's "member benefit insurance" because it is an integral part of the membership benefits for Handcrafter Members, not an optional add-on.
Why did the HSCG decide to include insurance as a member benefit?
The HSCG implemented the member benefit insurance program in September 2006 as a way for handcrafters to have access to reasonably priced insurance. It was at a time when insurance options for small businesses were limited. The lack of affordable insurance was threatening many members' ability to stay in business and making it extremely difficult for new handcrafters to start businesses. The industry as a whole was being potentially crippled.
Why can the HSCG offer such good rates?
These rates are based on having a large group of participants. We have enough participating members to make it worthwhile for the insurance company. With many members it reduces what the insurance companies call "adverse selection". Adverse selection is the idea that the people who need insurance most will buy it (like a sick person wanting to get health insurance).
When everyone participates, the insurance company knows they aren't just getting the people who feel they are likely to have a claim; so their underwriters think there is less risk, and the price goes down. The whole idea may or may not be true, but that's one of the things they take into account when calculating the insurance premiums.
Who qualifies for the HSCG member benefit insurance?
An HSCG Handcrafter Member who resides in the 50 US states, Washington, DC or Puerto Rico (other US territories are excluded). Also, in order to qualify more than 80% of your products must be handmade. Canadian members have the option of participating in the Canadian Insurance program (see the Canadian Insurance FAQ for details).
Do I have to have a business in order to qualify for the insurance?
No. If you do not have a business, list your full legal name as a sole proprietorship including DBA (Doing Business As) under the business name. If you have a company name you will be listed as Suzie Smith DBA Suzie’s Soaps.
What is meant by "handcrafted"?
The majority of your products have to be made by hand with minimal use of mechanized equipment, and a large portion of the processes must be under your control. Products that are made from scratch by hand, or products you purchased in bulk that are unscented and/or uncolored in which you add your own scent and/or color qualify as handcrafted.
Products that are made for you by an outside company that you purchase packaged and ready to sell do not qualify as handcrafted.
Can I join the HSCG as a Handcrafter and not get the member benefit insurance?
Yes, under certain circumstances:
Outside the US: If your business is located outside the US and you don't have a physical address within the US where you perform work related to your business. Canadian members have the option of participating in the Canadian Insurance program (see the Canadian Insurance FAQ for details).
Not handcrafted: If more than 20% of your annual revenue comes from the sale of ingredients, supplies, or products that are produced for you complete and ready to sell, and/or non-consumer products such as consulting or other services.
Already Insured: If you already have product liability insurance, you can request that the member benefit insurance portion of your Handcrafter Membership be waived.
I have liability insurance through my homeowner’s insurance policy, does this cover me for my handcrafted soap and cosmetic business?
No. Homeowner's Insurance Policies will cover your business for General Liability, they will not cover you for Product Liability. Product Liability specifically covers you against financial loss arising out of the legal liability incurred by an insured because of injury or damage resulting from the use of a covered product. The HSCG Member Benefit Insurance that comes with the Professional Membership includes both a General AND Product Lability Policy, your Homeowner's Insurance does not include this type of coverage.
Furthermore, many homeowner insurance carriers will drop your coverage completely if they find out you are operating a business out of your home.
Is there a lower cost General & Product Liability Policy out there, other than the HSCG's Member Benefit Insurance?
Yes. There is one other known carrier of General & Product Liability Insurance (in a competative or lower price range) and that is RLI. Their policy is excellent for businesses that are just starting out, policies run from about $200-$300 per year. RLI does, however, have a cap on annual gross sales of $5,000 in annual sales; once sales reach that level their coverage is dropped. In addition, their policy does not cover candles, nor does it include any business property insurance.
If you are small enough, don't make candles, and don't need any property insurance, this may be the best insurance choice for you and you can still be an HSCG Member with insurance waived. If you make more than $5,000 in annual gross sales, make candles or need property insurance, the HSCG Member Benefit Insurance is the best way to go.
About the Insurance Coverage
How much does the insurance cost?
The insurance is included in the membership benefits for Professional Members. A Basic Professional Membership in the HSCG is $520.00 per year.
What is the coverage?
This is a Commercial General and Product Liability policy. The base limits are:
- $1,000,000 General Aggregate Limit
- $1,000,000 Products-Completed Operations Aggregate Limit
- $1,000,000 Personal and Advertising Injury Limit
- $1,000,000 Each Occurrence Limit
- $300,000 Damage to Rented Premises Limit
- $5,000 Medical Expense Limit
Business Personal Property coverage includes "miscellaneous property of a floating nature". It basically covers "tangible property you own or is in your care, custody or control", like when you go to a show or have items on consignment in a store. The limits are:
- $1,000 Maximum payout per any one Item
- $5,000 Total
- $100 Deductible
Identity Theft coverage limits are:
- $15,000 Aggregate Limit
- $250 Deductible
Can the limits be increased?
Yes. Please see coverages and costs below:
Increased Liability - The insurance company offers an additional $1 million in coverage (making it $2 million total). The additional coverage is optional and is being offered because some fairs/shows and wholesale buyers require $2 million in liability coverage. When you sign up, you will be given an option to purchase the increased insurance. The cost is $55.00 per year.
Professional Liability - If you teach soapmaking in a professional capacity, you can get additional professional liability coverage that will cover you if a person claims that what you taught them caused damage or liability of some kind. The cost of the professional liability insurance endorsement is $135 per year.
Additional Business Personal Property Insurance - If you need additional property insurance (over the $5,000 already included) you can increase the limits. Up to $10,000 in coverage is an additional $75; up to $20,000 is $125; and up to $30,000 is $175. Higher amounts are also available, but that would require an application process. Contact Veracity Insurance if you want to increase your property insurance limits above $30,000.
Who is the insurance carrier?
The carrier is Great American Insurance Group.
Who is the insurance broker?
The insurance broker is Veracity Insurance Solutions, LLC. They can be contacted at (888) 568-0548 or by email at email@example.com.
Can I read the actual policy?
Yes. See Great American Insurance Policy for the current policy. It is viewable in full as a .pdf file. Note: The file size is pretty large; you might want to right-click and "save file" to your computer.
What products are covered?
Soaps, lotion, bath salts, perfume, essential oils, fragrances, candles, jewelry, clothing, fragrance oils, base oils, waxes, powders, masks, scrubs and just about anything else that is used to beautify the body, the home or the environment and is handcrafted. This list is not a full list, but a representative sampling of the kinds of products covered.
Pet products are covered if they are handcrafted by you. If they are made elsewhere and repackaged by you, or you buy them in bulk and repackage them, they are not covered by this program.
Coffee, tea and other consumables are covered only if they are prepackaged and sold in a set (such as a gift basket) in conjunction with handcrafted items that are covered as above. If they are sold separately, they are not covered.
Are there products that are NOT covered?
Except as noted above, the policy does not cover ingestible products (anything to be eaten) and some products that could be handcrafted, including:
- Acetone based products
- Aerosol products
- Any product requiring a prescription
- Digestible food/Drink Products of any kind
- Drugs or medicines
- Formaldehyde or products containing formaldehyde
- Invasive body inks
- Invasive products - intended to remain within the body
- Permanent cosmetics
- Plug-in electrical products
- Tanning beds or equipment
- Toys (except when sold in conjunction with an eligible beauty product)
- Vitamins or Supplements
What if I only make candles but not cosmetics or soap?
To qualify for a Professional Membership (and thus the insurance) you must make and sell handcrafted soap and/or cosmetics. It doesn't have to be any particular percentage of your total revenue, just so long as it is somewhere in your product line. Remember, however, that the other benefits of HSCG membership are geared towards soapmaking.
If you don't make soap or cosmetics and don't want to add it to your product line, then you don't qualify for membership in the HSCG and will need to look elsewhere for product liability insurance.
The policy has a "fungi exclusion". What does that mean?
The policy excludes fungi and mold that affect a structure and which could be harmful. It doesn't exclude fungi or mold if it got into your product and caused you some liability exposure.
The policy has a "hazardous materials exclusion". Does that include lye?
The policy excludes covering hazardous materials and any kind of cleanup of hazardous materials. If you or your employee were damaged by lye (or slipping and falling in the workplace) it wouldn't be covered under this policy anyway.
However, if a customer is harmed by your soap because it's incorrectly made and lye heavy you would be covered for any potential liability exposure. Or if you were doing a demonstration and a public viewer was splashed by lye or unsaponified soap and they sued you over it, you would be covered.
What about Additional Insureds?
You can get an unlimited number of additional insureds.
Does the insurance cover home based businesses?
Yes. This insurance will cover your business operation at home, at trade shows or fairs, and even a rented shop.
Please note that we do not cover damages to your home that occur out of your business operations, and this insurance does not replace your homeowner’s coverage.
Is there a cap on gross revenues with this insurance?
No, there is no cap on gross revenue.
Can I make installment payments?
No. The membership dues (which include your insurance) must be paid in full before your membership and insurance become active.
HOWEVER, you do have the option to pay through PayPal and take advantage of PayPal's Bill Me Later® program (provided you qualify).
Is the premium refundable?
No. The policy becomes effective as soon as payment is processed when you join HSCG. The policy will cover you for a year in exchange for payment in advance of the policy premium. You may choose to renew it or not when it expires, but it is in place for a year and the premium is not refundable.
How does the HSCG Insurance Program work?
How do I sign up and get the insurance?
Just join the HSCG as a Professional Handcrafter Member (and be located in the US or Puerto Rico). Your insurance will be in force as soon as your payment is processed and you will receive a link to your Certificate of Insurance by email shortly thereafter. You can download the insurance policy as a .pdf file at any time (you will not receive a copy of it by mail).
The sign-up process for Canadian Handcrafters is slightly different; see the Canadian Insurance FAQ for details.
What if I need MORE insurance than is provided with the HSCG member benefit insurance?
There is an option to increase your liability coverage to $2M. If that still isn't enough, contact Contact Veracity Insurance Solutions at or (toll free) (888)-568-0548 to see what can be done to fill your needs.
Do I have to purchase the HSCG insurance if I already have insurance coverage?
You can get a Professional Membership with the insurance waived so you aren't paying for double insurance just to be a member of the HSCG. You can sign up for a Professional Handcrafter Membership with insurance waived. You'll have 15 days after that to complete get your waiver, which has to come from Veracity Insurance.
What if I sell my product online, through a distributor or even outside the US and Canada?
You may sell your product in any way you want. As long as the law suit or claim is brought back to Canada or the US, the insurance policy will respond to your claim.
Do I need to purchase additional insurance if I open my own store?
If you open your own store where you sell beauty products, there is no need to purchase separate liability insurance. However, your landlord by contract may require you to carry additional coverages. For example, higher liability limits, property coverage not only for your property but also for flooring, glass windows and doors and other permanently fixed items in the rented space.
If I sell my business, is the policy transferable to the new owner?
No. The new owner would have to procure their own coverage.
What is an "Additional Insured"?
An additional insured is a person or organization that is added to your insurance policy by endorsement – this is a common request. Often craft shows or farmers markets asked to be named as an Additional Insured on the policy of the people who vend or display; sometimes distributors or wholesalers may request to be added to your policy.
When you add someone to your policy as an Additional Insured, you are extending your policy coverages to protect the additional insured from a lawsuit that was caused by your negligence.
In other words, if someone slipped in your booth and broke their arm, the injured person would sue you and the venue. Since the venue is added as an Additional Insured your insurance policy would protect both you and the venue in the lawsuit.
Why should I add an Additional Insured?
The majority of venues, promoters, vendors, or stores will require you to add them as an Additional Insured before they will allow you to occupy their premises and/or sell your product.
Those that will require an Additional Insured status on your policy, will usually have it written into a contract or agreement. It is a simple procedure to add them onto your policy.
Is there a deductible?
There is NO liability deductible. The only deductible you have is $100 per claim under Inland Marine Coverage (business personal property). And there is $250 deductible for Identity Recovery.
A deductible is the amount of the loss that is your responsibility. For example, if you have a theft claim of $500 dollars, you will be responsible for $100 dollars of that claim. The insurance company will pay you $400 dollars.
What if I have a question that isn't answered here?
The Handcrafted Soap & Cosmetic Guild, Inc. is not authorized nor licensed in any state or country to provide any kind of insurance. The HSCG merely collects the premium for Veracity Insurance, in accordance with the requirements set forth by Veracity Insurance and Great American Insurance Group. A new HSCG member's product liability insurance becomes effective immediately upon processing of the membership application in the HSCG. The HSCG cannot and will not answer any questions about product liability insurance provided other than the questions contained in the posted "Frequently Asked Questions" (FAQ) (above). If you have questions about the insurance products offered to HSCG members, your existing policy and how it may or may not be impacted by joining the HSCG, or other insurance options available to you, contact Veracity Insurance at firstname.lastname@example.org or (toll free) 888-568-0548.