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Business Insurance for the Handcrafted Industry

Filed Under: Business Musings

You have home owners insurance. You have car insurance. Should you get business liability insurance? Having business liability insurance is not mandated by law. If you wish to run a craft business without insurance, there is no governing agency that will force you to buy insurance. Your bank, should you ever get a loan, will ask you for insurance (they’d like to ensure they get repaid on their loans no matter what happens with your business). Buying insurance is a prudent choice to protect your family’s assets should anything go wrong in your handcrafted soap and toiletry business.

We live in a litigious society. People can sue or claim damages for anything and everything. If someone slips in the shower using your salt scrub, they could claim it was the fault of your scrub. If someone uses your soap and decides that the rash they developed the next day was from your soap, they can claim damages. They might not win a possible lawsuit but dealing with the issue would take valuable time away from you and your business. Additionally, any legal fees could be costly and put you and your family assets at risk. Finally, if your house were to (knock on wood, throw salt over your shoulder, turn around 3 times) burn or have fire damage, your business property might not be covered under your home owners insurance.

There are a variety of options to explore if you’re looking into business insurance for your handcrafted products business:

(1) Your homeowners insurance – Some homeowner’s policies will cover small businesses that you operate out of your house up to $5000 in sales.  You will want to clarify with your home insurance agent on the type of coverage they provide and ensure that they are clear on what you are manufacturing and selling.

(2) RLI -RLI has a homecrafters business insurance. The pricing varies based on what you are making and selling and how much liability coverage you want but generally, they cover up to $7500 in retail and wholesale sales. You can find more information about their policies and coverage here. You can apply for a policy or request more information online here.  They do not cover candle makers of any type. You can look at rate quotes online. Soapmakers report RLI is reasonable and they like the ability to purchase different levels of coverage.

(3) Indie Business Network – IBN provides a group policy for the handcrafted soap and toiletry industry. It has been hand picked and designed just for soap and toiletry makers. It is $395 per year for $1,000,000 in aggregate insurance for product liability. You can buy an additional $1,000,000 in coverage for $55 more. The policy also includes a $100,000 coverage for damages for rental premises.  There is also some “floating” product coverage included if you travel to craft shows. You must be a member of IBN (dues are $150 per year) in order to buy the group insurance policy. Click here to learn more about their insurance policy.

(4) Handcrafted Soapmaker’s Guild – HMSG offers a group policy for handcrafted soap and toiletry makers. It is only available with a membership, learn more here. There are two different insurance options, a “Lower-Cost Coverage” with a fee of $265, and a “Full Coverage,” option with a fee of $375. Both options have general and product liability coverage up to $2,000,00. Click here to learn more about their insurance policy options.

(5) HandMade Artisans Insurance The Handmade Artisans Insurance provides business general liability coverage including product liability coverage to artisans who produce their own products by hand. This includes soap, lotions and more. The annual coverage starts at $275 per year. Click here to learn more about their insurance policy.

At what point in your business you choose to get insurance is a personal preference and is directly related to your comfort levels with risk. If you choose not to buy insurance, talk to your spouse or partner about that decision so he or she knows the potential ramifications for you and your family. As you grow, you will eventually want to buy insurance so even if you don’t buy it now, price your products with enough buffer so that you can buy insurance in the future. Plan now for a successful and safe future for your business.

Do you have any other insurance resources to share?

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43 Comments

  1. I was thinking about selling home made lip balms and scrubs on etsy but I have no idea if my items will even sell. I am worried that even tho the ingredients are listed on the packaging and if i list them on the description as well someone can still sue me if they are allergic to say coconut oil even if it is clearly printed. suggestions please?

  2. Personally, I think it is too risky having your own business, no matter how small, without insurance. I am just starting out myself and will not officially launch until I’ve purchased proper insurance. The big question for me is should I form an L.L.C. for my business to further protect personal assets. Anyone have any insight on this issue?

    • Hi Brooke!

      We are glad you have looked into the insurance option and know how important it is for small business owners. Everyone decides on a different kind of business model, and I would definitely chat with the crafters and business owners at the Teach Soap Forums to get a wide variety of opinions.

      http://www.teachsoap.com/forum

      -Becky with Bramble Berry

  3. Hi Anne-Marie,

    Thanks for this information. The whole business ownership process is so intimidating to me for some reason, especially insurance.

    Do you have any posts, advice, or resources on how to choose a business structure (LLC, sole proprietorship, etc.) for the bath & body industry? Is it even necessary to register any of these if you’re just going to be selling a few bars a year? It seems so silly to me to need to go through this paperwork process and paying legal fees to set up a true business when I am not expecting many sales at all in the first year.

    Thanks!

    Sarah

  4. So does this product liability insurance cover in case you get sued? does liability insurance protect your personal attests if you aren’t an LLC?

  5. Great Resources here~~!! Thanks for all of this information!
    Question:
    We don’t make the soap.
    We buy Home Made Soap wholesale and stamp our business as distributed by.

    We do not mention our supplier obviously.
    What do you all think about this…
    The supplier has Insurance, Do you think we as the distributor need it too?

  6. Thank you for this very helpful blog post. I have contacted and paid for insurance through RLI as a result of this post! My regular insurance company wanted to charge me $689; whereas, RLI charged me $220. They were most helpful, friendly, and prompt. Thank you so much for getting me on track!

  7. Thanks for posting this. I am considering starting a small (from my home) & I too am doing a lot of research on whether or not insurance is needed. I’m still in the air about insurance because I just wanted to see how things went business wise, if my products would actually sell. I haven’t even settled on a proper name yet! But I certainly do not like the possibility of personal assets taking a hit in case there was an issue w/ a product. I’m not sure how small or large these businesses are but is there anyone working out of their home & aren’t selling on the Internet quite yet?

    • It’s a tough call. If you haven’t started your business, it’s temping to say that you should test the market before getting insurance but it’s just as likely that the first bar you sell could have a potentially litigious issue as the 1000th bar. It’s a measure of calculated risks. I think that checking your home owners insurance to see if they already cover you might be a great (and affordable) middle ground. =)

  8. I’m not sure where you are getting your information, but good topic. I needs to spend some time learning more or understanding more. Thanks for magnificent info I was looking for this info for my mission.

    • We’ve done extensive research on the subject of insurance in the handcrafted industry because we are part of it and we want to me covered and help our customers be covered and safe! =)
      -Becky with Bramble Berry

  9. Excellent post. I can’t imagine having a soap business without insurance. I just wanted to add that Whole Foods and other larger grocery stores and chain stores will require you to have insurance (Whole Foods is asking for an incredible 5 MIL now!), so that’s something to keep in mind too.

  12. My state also has a Farmers’ Market Federation which has insurance coverage.well worth looking into!

  13. Hi Anne Marie, I have been thinking about getting insurance but should I get it if I only sale to friends and family? And on Etsy? I haven’t got my small homemade business up yet but want to be cover in all aspects. Thanks so much.

    • Hi Dawn!

      It really boils down to what you think you’ll need for your own business. But if you want to be covered in all aspects, we suggest going with a soapers insurance so that you don’t have to worry hanging over your head!
      -Becky with Bramble Berry

  14. If you are asking yourself do I need this, you probably do. I can attest to the struggle between getting business insurance or not. I had *just* started my “business”. I wasn’t even really sure if it was one yet or not. I rented a 15×13 in a commercial building in town and was only open on saturdays. I had no storage space and was only testing the waters. So I had my inventory, supplies, everything, in my home. Well, not long after that we had a fire. I lost everything. Homeowner’s only paid $500 (per my policy) and it was a nightmare geting that $500 from them. I used to work in insurance so I knew the risks of not having it. The “it won’t happen to me” mentality was high. I wanted it. But couldn’t justify the payment. Given my experience, and had I known what a nightmare it could turn out to be, going back, I would have made sure I had the funds to cover the montly premium.

    Also, I think it should be noted that everyone should also consider some sort of corporation. Both for tax purposes and in the event you are sued. I became an LLC and I did all the paper work on line for free, (except for the filing fees) on my state’s website.

    Thanks for a great post!

    • Oh my goodness, sweetie – this is HEARTBREAKING. I am so sad for you. It sounds like you are really having a great attitude about learning and sharing your story though. Thank you for that. It looks like from your blog that you restarted your business though. Yay!

      Thank you for sharing your story so that others can learn from it – and best of luck with your business (and your health issues – speedy recovery from that surgery!) in the upcoming years.

      A-M

  15. Thanks for this super post, I love how you keep your readers and customers informed, not only about how to make great products, but how to grow a business as well. IBN loves serving its members and we are so grateful to the Soap Queen for including us in your post! Your blog is one of the best out there for the handcrafted industry and I read it nearly every day. Thanks again!

  16. Excellent post, Anne-Marie! Having proper Product & Liability Insurance is a must when you are in business. As you mentioned in your post the HSMG offers this coverage to their membership at $395/year plus membership ($500/year total). Coverage includes:

    $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, $100,000 Damage to Rented Premises Limit, $5,000 Medical Expense Limit

    In addition the HSMG has just added $15,000 in Identity Theft Protection at no additional cost to the member. We are also offering coverage to Canadian Members starting in June!!

    Thank you for posting about this important topic.
    Cathleen Timberlake
    HSMG Vice President

  17. Thanks for this. Last year South Africa brought in a new Consumer Protection act and I got concerned that we should protect ourselves as a company. If we do a Show or Bridal fair and someone trips on our stand we have to be protected as well as the “faulty” product issues. I keep telling myself that it is worth the money spent to be protected. It seems that you have very different options in the States. I guess that applies worldwide.

  18. I currently am not selling enough soap to pay for the insurance and my customer base is mainly friends and neighbors. The topic of insurance keeps coming up in my mind, at what point in time should one get insurance? I maybe sell/give away a couple hundred bars a year. Your thoughts on this would be greatly appreciated!!!!

    • It really depends on when you feel comfortable getting it. If you want to cover all your bases or you feel like you will be selling more soap I would definitely look into it.

      Even if you don’t end up getting insurance, looking into what it covers and the price would be something I would suggest doing! 🙂
      -Becky with Bramble Berry

  19. I have RLI and I’m very happy so far. I do have a question though, I had to pay RLI’s amount all at one time. For the other insurance companies listed, can you guys talk about whether you are allowed to pay each month, or supposed to pay all at once please =-)

  20. I have my insurance through RLI and I’m very pleased with the coverage. I pay what amounts to $17/mo. and it includes product liability up to 1,000,000 as long as my sales are less than $5000/year. For someone just starting out it’s an excellent deal!

  21. Thank you for this article! I’ve been shopping for insurance lately, so found this very helpful.

    Since we’re on the subject, I’ve heard that HSG membership earns you occasional discounts with BB—is that true? If so, about how often and for what amount is the discount? That alone might make it worth it for me to go HSG instead of Indie.

    • Both HMSG and IBN have discount codes when you join that are good towards fragrances, essential oils and molds with Bramble Berry =)

  22. Interesting timing of this article. I just purchased liability insurance through HSMG just a handful of days ago.

    It works out to just over $33.00 a month and well worth it for the piece of mind I have.

    • I completely agree!!! The piece of mind I have now that I have insurance is completely worth the reduced stress that I have.

  23. Thank you for posting this! I have my insurance through RLI and their rates are very affordable. 🙂