If you plan to manufacture and sell handcrafted soap & cosmetics to the public,
you need to have both general & product liability policy in place to protect you,
your business and your personal assets. Without suitable coverage, a claim
made against you, your business or your products could potentially go after any
and all of your business and personal assets.
What does a "General Liability Policy" cover?
General Liability insurance protects a company's assets and pays for obligations (medical costs) if a person gets hurt
on your property or when there are property damages or injuries caused by you or your employees. For example, if someone
trips on a cord at your craft fair booth, or is splashed by wet soap when you are doing a demonstration of soapmaking.
This coverage can also cover you against any liability as a tenant if you cause damage to a property
that you rent, and can also cover claims of false or misleading advertising, including libel, slander and
copyright infringement (check your specific policy). It does not cover you if someone is
injured by using a product that you make or sell (see below).
What does a "Product Liability Policy" cover?
Product Liability Insurance covers the policy holder in the event that a suit arises from the use of the
insured's products which might be brought due to loss to personal property, business property, injury
or death. The coverage is designed to protect the business against losses even if they are negligent or liable
for damage, injury or loss to another's property. Damages, legal fees and settlement charges are paid by the
insuring company when a claim is filed against the business as a result of a Product Liability suit. The coverage
will cover the insured for suits that arise out of damage or injury of use of a product that the holder of the
insurance policy manufactures or sells.
Harm from using your products
Product Liability insurance is the only type of insurance that will cover you if someone
is injured by using your products - even if it is your fault.
Additional Business Coverage to Consider
Property
You may also want to consider Property Coverage for your business. Property Coverage
is also called "Inland Marine Insurance" in the United States. It indemnifies (protects against)
loss to movable or specialized types of property, such as computers and systems, tools and equipment
for artisans, photography and camera equipment and more. It does not apply to structures
and buildings (a separate policy would be needed for this).
The HSCG General & Product Liability Policy does have Property (Inland Marine) Coverage
included (to $5,000) and additional coverage can be purchased.
Professional Liability
Professional Liability is another add-on that a business may want to consider if they
are engaged in teaching others how to make handcrafted soap and/or cosmetics. Professional
Liability covers the teacher in the case that a student makes a claim or acts on advice
or instruction that they received and tries to hold the teacher liable.
The HSCG Policy has a purchasable add-on for professional liability coverage.
Additional Personal Coverage to Consider
Having your own business can mean that it all falls back to you. So in addition to your business insurance
and your medical insurance, there are other personal insurance products
that you might want to consider based on your individual circumstances.
Life Insurance
A life insurance policy helps you plan for your family's future and protect their financial well-being in
the event of your death. There are several different kinds of life insurance.
Disability Insurance
Disability insurance kicks in if an illness or injury keeps you from working - whether permanently or just temporarily.
While you're recovering, disability insurance can help cover your financial obligations, including housing costs, students
loans, and other types of day to day living and debt expenses.
Accident Insurance
When an accident happens and you're unable to work, medical insurance may not cover all of the costs, especially
in regards to day-to-day living. Accident insurance can help by providing cash benefits with immediate coverage and
no waiting period, allowing you to pay for things like medical deductibles and copayments; mortgage or rent,
utilities, childcare, groceries, home maintenance, transportation, and more.
Critical Illness Insurance
If you experience a critical illness like cancer, a benign tumor, a stroke or heart attack, renal failure,
etc., the cost of your care and treatment may not be fully covered by your medical insurance. Critical illness
insurance fills in the gaps with cash benefits that you can use for copayments and medical insurance
deductibles, out-of-pocket expenses, physical and speech therapy, vehicle and home modifications,
private nursing care, and more.
24/7 Sick Pay Coverage
If an illness keeps you from work for a week or even months, sick pay insurance can help with up to $1,500
per month for up to 6 months. This money can be used to pay your deductibles, copayments, and other out-of-pocket
medical costs; car payments, rent, and utility bills; and everyday costs like groceries, childcare, and transportation.
Cancer Insurance
Supplemental cancer insurance helps you and your family with up to $100,000 of cash benefits that you can use for
out-of-pocket medical expenses like deductible and copayments, transportation expenses, lodging and meals for you
and your family during treatment, and domestic help like childcare, meals, and laundry services.
Dental & Vision Insurance
Many medical insurance plans no longer include dental and vision coverage. Dental and/or vision insurance serves
as additional insurance to your medical insurance.
Sources of Insurance Coverage
As a start-up business you can obtain General & Product Liability from various sources:
RLI Insurance
If you are just starting out and do not yet make in excess of $5,000 in gross sales and you do not
manufacture candles, RLI Insurance may be the proper fit for your business. RLI will cover your business
with a General & Product Liability Policy for around $230-$300 per year. Once you reach $5,000 in gross sales,
your coverage with RLI will be terminated and you will have to seek an alternate source for your insurance.
See RLI Insurance for details.
HSCG Member Benefit Insurance
The HSCG offers members (in the US and Canada) low cost General & Product Liability Insurance with $1M coverage. It
is a member benefit, the cost of which is $375 (+$5 admin fee) for US Members and $395 (+ tax) for Canadian Members
per year. Coverage may be increased to $2M, and additional property or professional coverage may be added.
Read more about the policy or the insurance FAQ to decide which policy
best fits your start up business.
HSCG members can get additional personal insurance products at special rates through
our partnership with Veracity Insurance Solutions.
Common Mistakes
Homeowner's Policy
Your homeowner's insurance will NOT cover you for product liability; it MAY cover you for general liability,
including liability arising from a home-based business.
Check your home-owners policy!
Some homeowner policies do not allow home-based business or limit the types of allowed businesses In that
case, having a business (or disallowed business) in your home might void your coverage.
CHECK WITH YOUR HOMEOWNER INSURANCE CARRIER TO MAKE SURE YOU ARE STILL COVERED
IF YOU RUN YOUR BUSINESS OUT OF YOUR HOME.
Farmer's Market policies
Some Farmer's Markets offer coverage to their members/vendors. Check the policy carefully; this type of
policy usually covers general liability only and only while at the Farmer's market. It is unlikely to cover your
other business activities or to offer product liability coverage.
Income Cap
Many small business policies come with income caps. In other words, if you make more than a certain amount
of income from the business, the policy is no longer valid. When starting out this may be workable, but
if you plan to grow and expand your business, you may need to go through the process of changing insuance
companies and possibly find yourself without coverage.
Limited (or no) Property Coverage
One way the insurance companies keep prices down is by limiting or eliminating property coverage. This can
be an unfortunate wake-up at the wrong moment. While the potentially large losses prevented by general and
product liability insurance are normally the reasons for getting business insurance in the first place, the
reality is that most of the claims are going to be property claims.
