For business owners, as well as craftspeople, insurance is a key way to protect an important investment. It may, however, be difficult to know exactly what kind of insurance will help best when it comes to handcrafted goods. Beyond simply covering accidents and unexpected calamities, some insurance has liability limits that may be impacted by the kind of products your business stocks, or products that a particular artisan makes.
"Insurance is a key way to protect an important investment."
Here is a guide to some forms of insurance and how they may benefit craftspeople and artisan retailers:
Property insurance should be purchased to protect a specific location and its contents from loss or damage caused by natural and unnatural events. Making sure that your retail location is covered by property insurance means that in the event of a fire, vandalism, or a break-in that damages or destroys your merchandise, you can receive compensation for the items loss. Property insurance gives you the option of actual cash value or replacement value reimbursement, with replacement value typically being the stronger choice for small-business owners.
The key to getting the most out of property insurance is to maintain an accurate inventory, to insure your store and merchandise for its full value, and to have the receipts to prove that value. Property insurance may also cover the machinery used to create handcrafted items, if those items are kept on-site in your insured location.
General liability insurance
General liability insurance is one of the most common forms and most useful of insurance there is. It is used to protect small-business owners in the unfortunate event that a product they sell:
- Damages someone's property.
- Causes physical harm.
- Infringes on copyrighted material.
- Damages a person or business via libel or slander.
This type of coverage includes damage and defense against lawsuits caused by crafts, handicrafts and other unique products. Be aware that GLI only covers a single location, typically a retail store, meaning that if a product you sell harms a customer in their own home, you will not be protected by GLI.
It's not just your products that need insurance coverage, it's you and your employees as well. Workers' compensation insurance is offered to business to help pay for costs related to an on-the-job injury, including medical expenses and lost wages. Depending on the state you operate in, you may even be required to carry the coverage.
Product liability insurance
Once your product leaves your store, your liability doesn't simply end. When it comes to handcrafted items — particularly beauty care products with topical or bodily applications, like soaps, oils, facial scrubs, makeup and more — no one wants to find out the hard way that their product caused an adverse reaction.
That's where product liability insurance can help. Various independent insurance providers like the Indie Business Network, Handmade Artisans Insurance and Handcrafted Soapmaker's Guild offer coverage to artisan business owners for handmade products as diverse as handmade jewelry, candles, lotion, soap, bath salts, perfume, essential oils, perfumes, fragrance oils, base oils, waxes, powders, masks and scrubs.
The Indie Business Network PLI coverage goes up to $1,000,000, with the option to buy additional $1,000,000 in coverage for only $55 more. Its program even covers cosmetic pet products like dog and cat shampoos.
Products that require FDA approval — like drugs, nutritional supplements, products requiring a prescription, cosmetics designed for internal use, coffee, tea, as well as children's toys and meat products — are not eligible for PLI. Other edible products, like cookies or candies, are covered only if sold in a set alongside covered products — like as part of a makeup gift set.