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Thread: What should I know about business insurance?

  1. #1
    Join Date
    Nov 2006
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    Constantine, MI
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    What should I know about business insurance?

    As I build more and more items for customers I have become more aware of the possibility of being liable should someone hurt themselves on something I have built, fall off a chair, bump into a table, etc. So, I recently got a quote from our local insurance agent for business insurance. It would cover replacement cost of all my tools and liability should someone hurt themselves on something that came out of my shop.

    I have to assume that many of you who are selling things from your home-based business have some form of insurance. Does anyone have any pointers as to what should or should not be included? Should anyone wish to see specifics I would be happy to share the quote that I received. In short, I am covered for $20,000 replacement cost on tools and $300,000 per occurrence on liability. There are lots of other things included like glass breakage and such that I have no idea if I really need or not. But, as I understand it, these are commonly included in business insurance.

    Any and all advice or comments are most welcome.
    Host of the 2017 Family Woodworking Gathering - Sunken Wood

    “We all die. The goal isn't to live forever; the goal is to create something that will.” - Chuck Palahniuk
    www.wrworkshop.com

  2. #2
    Join Date
    Nov 2006
    Location
    Austin, Texas
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    1,448
    I have no insurance, but I am a solo woodworker. If someone is hurt by something I build, they know they can blame me, and can sue me personally, not just the limited funds in the company. I do not build anything "unusual" that I could be blamed for (and I make sure everything is stable and far stronger than necessary).

    If you have helpers or employees, then who made the mistake that led to the failure and accident is hard to determine, so the company is more likely to be sued, rather than being at personal risk.

    I absolutely do not do any installation or work that could be called "contractor" since there is too much risk of the screw in the wall hitting a wire and causing a fire years later. (And lots of other things that you can imagine). If you are a contractor, then you probably need a lot more than $300,000 coverage (the house burns down with all the contents, and someone is hurt or killed.)
    Charlie Plesums, Austin Texas
    (Retired early to become a custom furnituremaker)
    Lots of my free advice at www.solowoodworker.com

  3. #3
    Join Date
    Dec 2006
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    Yorktown, Virginia
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    5,022
    I did a cursory look for insurance a couple of years ago through the same company that insures my home. I wanted coverage for tools and liability. The subsidiary they sent me to wanted to know my sales volume. I don't sell anything, but gave them an estimated amount of 3k per year. The guy laughed and said their lowest policy was geared to 50k in sales per year, and the cost was way too high....in excess of my estimated sales After that, I gave up.

  4. #4
    Join Date
    Dec 2006
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    RETIRED(!) in Austintown, Ohio
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    When I had my Property Management business, I had a one million dollar liability policy. Back then - over ten years ago - it cost me something like $900 annually.

    I also had - and still have - a one million dollar "umbrella" policy that covers any excess liability over and above my automobile and homeowner's coverages. The umbrella policy is relatively cheap - about $175 per year.
    Jim D.
    Adapt, Improvise, Overcome!

  5. #5
    Join Date
    Aug 2014
    Location
    St. Mary's, Georgia
    Posts
    398
    I have insurance throw my school but its throw one of my clients, since there is no cost for someone coming to the school ( they only need to pay if they don't bring material with them) an they sign paper work for not at fault of instructors or school if they didn't follow safety procedures or report a safety problem. Now if they are hurt due to a malfunction of the equipment, not due to being maintained but a defected part they can go after the manufacture.
    But a lot of people get lawsuit happy theses days so I cover all basses Inc. your wood working business an that's all they can go after

    I have never had a problem with anyone due to something being made by me or the school an I've been doing this for a while the school is only 3 years old an only had one problem with 1 individual an it was due to racism with one of the instructors. The instructor was form Middle East but an American Citizen at the time of the remarks made ( I do want to learn from a Rag Head ) I don't tolerate this behavior an sent the individual on his way. He tried to sue the school said he paid to be there an was sent away due to his 1st amendment right way violated an it wasn't when he tried to choke the instructor other instructors stopped it.
    He was sent to us form the VA with about 16 others for different courses , an the other Veterans agreed with the Instructors an helped toss him out. VA was notified of the behavior an removed him from the school until his mental health was better. But 2 weeks later he found a lawyer an tried to sue me for violating his 1st amendment right. There's a sign on all doors an they signed the paper work stating Polical an religion statements are not allowed nor tolared on the school property. 9/10 of the instructors are from overseas an they are here to teach not play games an they follow the rules so must everyone else
    Judge dismissed case an made him pay for court fees an my time for been there
    That my 2 cents
    https://www.facebook.com/BgCouger

    If you are going to make something nice, make it with a statement, use quality an do it right the first time

  6. #6
    Join Date
    Jul 2011
    Location
    The Gorge Area, Oregon
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    4,701
    Have more liability coverage than you're personally worth by some reasonable percentage, this basically make it more attractive to sue the insurance company than to sue you (and it's usually another ins company doing the suing not a poison). The umbrella policies are usually a decent deal (I think $1m was less than $100/yr from our carrier for personal coverage) but require good base coverage (usually maxing out the base ins more or less). Personally I'm less worried about losing my stuff (which would be rough no doubt) than I am about someone getting hurt. Medical bills add up really fast, a complicated broken leg ended up running well over $400k. Of someone got crippled for life or something you're in the millions before you get started.

    I'd also inventory your tools (good idea anyway) and see what actual replacement cost ends up looking like ( ins for replacement cost is usually more expensive so your need to decide if that was worth it). I suspect you might be surprised how much you have. Cross check on coverage for inventory as well if you carry much wood, etc in stock. Also be aware that your policy probably doesn't cover shows or farmers markets, etc... Check the details carefully, if it doesn't say it carries it then make sure you have a rider for anything in writing. Remember your agent likely isn't the adjuster wood handle a claim.

    This is partially why I don't sell anything at the moment (and work rules are complicated as well), I just don't need the hassle and risk for the small (tiny really) amount I'd have time to do.

  7. #7
    Join Date
    Nov 2006
    Location
    Constantine, MI
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    7,892

    What should I know about business insurance?

    Quote Originally Posted by Charlie Plesums View Post
    I have no insurance, but I am a solo woodworker. If someone is hurt by something I build, they know they can blame me, and can sue me personally, not just the limited funds in the company. I do not build anything "unusual" that I could be blamed for (and I make sure everything is stable and far stronger than necessary).

    If you have helpers or employees, then who made the mistake that led to the failure and accident is hard to determine, so the company is more likely to be sued, rather than being at personal risk.

    I absolutely do not do any installation or work that could be called "contractor" since there is too much risk of the screw in the wall hitting a wire and causing a fire years later. (And lots of other things that you can imagine). If you are a contractor, then you probably need a lot more than $300,000 coverage (the house burns down with all the contents, and someone is hurt or killed.)
    Charlie, I am solo as well. As for unusual builds, something does not have to be unusual for someone to hurt themselves on it. They could be leaning back in a chair, standing on a bench, etc. they might misuse something like hammering in a nail with a jewelry box. Does not much matter if the are not using it correctly, they can still sue. Might not win, but it will still cost you money to defend yourself.

    I do some installation (I am building a lawn sign that I will be installing for a local business) but no cabinets or such. I also deliver so it's conceivable that I could put a table leg through a storm door or knock over a priceless vase. So I believe the possibility of my being libel for something exists and that was enough for me to look into it.

    Quote Originally Posted by Jim DeLaney View Post
    When I had my Property Management business, I had a one million dollar liability policy. Back then - over ten years ago - it cost me something like $900 annually.

    I also had - and still have - a one million dollar "umbrella" policy that covers any excess liability over and above my automobile and homeowner's coverages. The umbrella policy is relatively cheap - about $175 per year.
    Jim, I have an umbrella policy as well, $1 million and the cost is about $14 a month, but it does not cover my tools or business liability.

    Quote Originally Posted by Ted Calver View Post
    I did a cursory look for insurance a couple of years ago through the same company that insures my home. I wanted coverage for tools and liability. The subsidiary they sent me to wanted to know my sales volume. I don't sell anything, but gave them an estimated amount of 3k per year. The guy laughed and said their lowest policy was geared to 50k in sales per year, and the cost was way too high....in excess of my estimated sales After that, I gave up.
    Ted, my agent ask about sales as well but did not laugh when I told him $5k. I was concerned that my homeowners policy would only cover about 10% of the value of my tools if stolen or lost. Also, noting in my homeowners would cover me should hurt themselves using something I built.

    The policy I am looking at covers all these things including replacement cost of tools. The cost is under $400 per year.
    Host of the 2017 Family Woodworking Gathering - Sunken Wood

    “We all die. The goal isn't to live forever; the goal is to create something that will.” - Chuck Palahniuk
    www.wrworkshop.com

  8. #8
    Join Date
    Nov 2006
    Location
    Constantine, MI
    Posts
    7,892

    What should I know about business insurance?

    Quote Originally Posted by Ryan Mooney View Post
    Have more liability coverage than you're personally worth by some reasonable percentage, this basically make it more attractive to sue the insurance company than to sue you (and it's usually another ins company doing the suing not a poison). The umbrella policies are usually a decent deal (I think $1m was less than $100/yr from our carrier for personal coverage) but require good base coverage (usually maxing out the base ins more or less). Personally I'm less worried about losing my stuff (which would be rough no doubt) than I am about someone getting hurt. Medical bills add up really fast, a complicated broken leg ended up running well over $400k. Of someone got crippled for life or something you're in the millions before you get started.

    I'd also inventory your tools (good idea anyway) and see what actual replacement cost ends up looking like ( ins for replacement cost is usually more expensive so your need to decide if that was worth it). I suspect you might be surprised how much you have. Cross check on coverage for inventory as well if you carry much wood, etc in stock. Also be aware that your policy probably doesn't cover shows or farmers markets, etc... Check the details carefully, if it doesn't say it carries it then make sure you have a rider for anything in writing. Remember your agent likely isn't the adjuster wood handle a claim.

    This is partially why I don't sell anything at the moment (and work rules are complicated as well), I just don't need the hassle and risk for the small (tiny really) amount I'd have time to do.
    Ryan, thanks for your input. The policy I'm looking at has about 20 different things it covers including off-site activity of my business. I will doublecheck, but I assume that would include things like shows and farmers markets. The agent also suggested I do a complete inventory of my tools noting replacement cost for each. I have decided to build a spreadsheet on my iPad and go through each drawer and note the name manufacturer and serial number of each item and then have some fun shopping online to see how much it would cost to replace each.

    The policy I'm looking at, for $400, also covers raw and completed inventory. So anything I am holding for sale online, or my huge stack of wood, are all covered. The trick here is to keep an accurate inventory.

    Overall, for under $400 a year, it covers many many items. Including inventory off site operations and tools it also has money for medical expenses outside of those that fall under liability. I will have to read a little bit further but I think it may also cover catastrophic loss of equipment due to things other than wear and tear, for instance if a motor catches on fire. I will have to double check that.
    Host of the 2017 Family Woodworking Gathering - Sunken Wood

    “We all die. The goal isn't to live forever; the goal is to create something that will.” - Chuck Palahniuk
    www.wrworkshop.com

  9. #9
    Join Date
    Mar 2007
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    Escondido, CA
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    5,175
    Couple of things, having BTDT.

    Looking at court judgments, $300,000 doesn't cover the lawyers. I'd ask about a lot more! Like $10M.

    Don't assume anything about your homeowners' policy. Generally speaking that whatever is 'tainted' by the business designation is not covered by your homeowners. Example, if a client came to talk with you at your shop about your work and slipped and fell, your homeowners would probably not cover that.

    Look into the legal format of your business and see how that affects rates and offers protection from piercing the business shield and going after personal assets. The reason for the business insurance is to sustain a loss and not lose your personal belongs, house, cars, etc. Potential lawsuits are only one way to lose. Fires, natural catastrophes, human catastrophes, etc also play a part. Maybe Rob's wife will chime in as she has a background here. My insurance agent told me that the more important information of what a policy covered was what it did not.

    FWIW. Dos centavos in the pot.
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  10. #10
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    Dec 2006
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    Rennie, $400 doesn't sound too bad. The tool replacement limit on my homeowners policy wouldn't even replace my lathe and they said if a fire was caused by a tool and I was engaged in business, i.e. I sold even a few bowls, they would not honor the policy. That's why I was looking. Your agent's deal sounds pretty good for the amount of sales you project, and it protects your tools too.

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