Business Insurance 101
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.
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Additional Business Coverage to Consider
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 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.
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 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.
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.
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:
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 $375 (+$ 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.
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.
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 insurance 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.