Business insurance

[Mike Cruz]

I'm a hobby woodworker by definition. I do it because I like it. I give my stuff away. Lately, there has been interest in my stuff...in a "paying" way. So, why not, right?

Well, right now, my 24 x 30 detatched shop is covered under my home owner's insurance policy. According to my insurance company, if I sell ANYTHING that I've made (via the shop), I am a business, and that building and my tools and any liability would not be covered. So, I asked for a quote. Basically, it would be around $1000 per year for property and liablility. I figured the shop was about $25-30K and equipment/tools/etc in the shop are about $20-25K. I simply can't afford to have a fire, or a tree fall on top of the shop in a rain storm, or a 4 foot snow to collapse the roof, or whatever...destroying everything. I don't have $45-60K to replace it all.

As much as I'd love to sell my stuff, that's a lot of sales just to cover my insurance costs...let alone cost of materials and a little in my pocket.

So, my question is: Who do you use for your business insurance? About what do you pay? And what are you getting for what you pay?

I realize that there are those that throw caution to the wind. They don't get insurance. They think "no one will ever know" or "how can they prove anything" or whatever they come up with to convince themselves that it'll be okay to do it sneakingly. I'm not one of those people.

So, I'd like to hear what those who have insurance have to say. Thanks!

[Lee Koepke]

I have a business rider on my homeowners, its not terribly expensive and I cannot recall the exact cost now. It covers my basement shop, the tools/equipment to a stated dollar limit, and general liability for when I go to craft shows. As a rule, I carry an umbrella policy that would cover excess over the small limits of my policy.

For me....its not worth it to give an underwriter a reason to NOT cover a loss. Last thing I need is something happen to my primary residence and they see a business card and try to deny a claim. Maybe I am paranoid??

[Jamie Donaldson]

I also found a rider on my homeowners policy to be a good fit and price. It even covers liability for teaching, and I believe an independant insurance agent has more options than a single company agent.

[Tim Rinehart]

Mike, you got me thinking about this again as well. I just had a heat alarm tied to home security system for my detached shop... but insurance is a must. I'm curious about the insurance that is listed in the AAW site for members, are you aware of that? If you're not a member, it may be a tipping point depending on what the costs of the policy is. Not specifically thru AAW, but probably some broker for various agencies.

[Roger Chandler]

Mike ......the AAW has insurance for Hobbyist woodturners who do sell on occassion, and it is available for $250 per year...I think for each $25,000 of cost of tools etc????? Check out the link on the AAW website.......this is something I plan to do, not because I am selling........like you I give most of my stuff away, but on the occasion when I do/have I want to be covered for a loss/fire, etc.

Likely you have to be a member of the aaw, but who wouldn't with the great magazine and all else available as a member for a fairly nominal fee.

Here is a link: http://www.woodturner.org/org/mbrship/insurance/business.htm

[Kyle Iwamoto]

I think I need to review my policy too. I think I have coverage. It was one of the questions I had when I signed up, but that was years ago.
Maybe get a different insurance company that allows a home business at less than a grand a year?

[Clint Baxter]

Mike, I am a self-employed general contractor and had business insurance set up for that. When I realized the amount of tools and other equipment that I just store in my shop, I realized that I needed some coverage on it as well. It was set up as business insurance and covers both structure and contents. We also put flood insurance on it, (shop was flooded in 2011 about 7 feet deep). Between the normal business insurance and the separate coverage for the structure and contents, I pay close to that $1K you quoted. The flood insurance tags me for quite a bit more, especially since I've had a previous claim against it. That amount would be rather stiff for the turner/woodworker who sells pieces occasionally, but is entirely reasonable to one who pays his bills doing it. Don't know if anything I mentioned helps.

My insurance is set up through State Farm.

Clint

[Harry Robinette]

Mike
I have Farmers Insurance and my basement shop is covered under the contents of the the whole house. My insurance man came just last week gave me the new policy with the new coverage it increased my home owners $190.00. I added $40,000 to my policy.

[Reed Gray]

I had Farmers years back, and they wouldn't touch a woodshop. I ended up with separate insurance, covering me, tools, building, going to shows, students, and visitors. Went through a couple till they got too high and wanted sprinkler systems installed. I ended up with the Hartford, about $1200 a year.

robo hippy

[Jim O'Dell]

LOML is self employed, piano teacher, with her studio in our house. She got a rider on our home owners insurance through State Farm, and about 1 mil in liability coverage. Don't remember how much it added, but it wasn't bad. And yeah, the flood insurance is about the same price as the house and contents. But that's a whole 'nuther can of worms....Jim.

[Mike Cruz]

Thanks all for your input. I really appreciate the info that has been given. Some has been really helpful and just might send me in the direction I needed.

[Mike Cruz]

I have a business rider on my homeowners, its not terribly expensive and I cannot recall the exact cost now. It covers my basement shop, the tools/equipment to a stated dollar limit, and general liability for when I go to craft shows. As a rule, I carry an umbrella policy that would cover excess over the small limits of my policy.

For me....its not worth it to give an underwriter a reason to NOT cover a loss. Last thing I need is something happen to my primary residence and they see a business card and try to deny a claim. Maybe I am paranoid??

Lee, what might be the big difference for me is that my shop is detatched. So, I'm insuring the building, too...not just the tools. While I have about $25K in tools, the building is another $25K+. Your basement was already there, and part of the house. So, that might make things cheaper for you. Also, we have an Umbrella policy for us, personally. But I asked my agent if that would apply to the "business" and she said no. So, depending on what liability is offered in whatever insurance policy I get, I may or may not still need another Umbrella.

[Mike Cruz]

Mike, you got me thinking about this again as well. I just had a heat alarm tied to home security system for my detached shop... but insurance is a must. I'm curious about the insurance that is listed in the AAW site for members, are you aware of that? If you're not a member, it may be a tipping point depending on what the costs of the policy is. Not specifically thru AAW, but probably some broker for various agencies.


Mike ......the AAW has insurance for Hobbyist woodturners who do sell on occassion, and it is available for $250 per year...I think for each $25,000 of cost of tools etc????? Check out the link on the AAW website.......this is something I plan to do, not because I am selling........like you I give most of my stuff away, but on the occasion when I do/have I want to be covered for a loss/fire, etc.

Likely you have to be a member of the aaw, but who wouldn't with the great magazine and all else available as a member for a fairly nominal fee.

Here is a link: http://www.woodturner.org/org/mbrship/insurance/business.htm

Tim and Roger, I do believe I already am a member of AAW. I'll go check them out. Might be a great option. The $250 sounds great. But since I have to do my building, too (not sure if they'll cover that), I'd have to at least double that...

Upon further review...no I'm not a member. I'm a "forum member". I'll go sign up and see what if it helps me. Thanks.

[Mike Cruz]

I think I need to review my policy too. I think I have coverage. It was one of the questions I had when I signed up, but that was years ago.
Maybe get a different insurance company that allows a home business at less than a grand a year?

Kyle, I have Erie. They generally have unbeatable prices. Usually, when insurance agents try to get me to "switch", they bow out as soon as they hear I have Erie. That said, if some other agency, like State Farm, Nationwide, or Allstate would have lower business prices, then combined with homeowners, it might be lower. I'd have to look at it, and will. Thanks.

[Mike Cruz]

Mike, I am a self-employed general contractor and had business insurance set up for that. When I realized the amount of tools and other equipment that I just store in my shop, I realized that I needed some coverage on it as well. It was set up as business insurance and covers both structure and contents. We also put flood insurance on it, (shop was flooded in 2011 about 7 feet deep). Between the normal business insurance and the separate coverage for the structure and contents, I pay close to that $1K you quoted. The flood insurance tags me for quite a bit more, especially since I've had a previous claim against it. That amount would be rather stiff for the turner/woodworker who sells pieces occasionally, but is entirely reasonable to one who pays his bills doing it. Don't know if anything I mentioned helps.

My insurance is set up through State Farm.

Clint

Clint, thank you, and yes, that does help. The challenge I have is that what I have, my shop and tools, are more than the typical hobbyist. "Most" of us hobbyists don't have 720 square foot detatched shops (no that isn't the biggest shop around, but many people have smaller basement shops). "Most" hobbyists don't have $25K in tools and equipment (no that isn't the most expensive stuff, but many people have contractor grade tools and get by with what they have). I'm NOT bragging about what I have, just saying that I am (and KNOW I am) very very fortunate to have as nice a shop as I do...as a hobbyist. So, my tools, equipment, and shop are more of what a small business would have. And therefore, it puts me in the price catagory that you are in. Now, an advantage that I have is that I don't have to worry about floods. If I do, I had better build an Arc!!! I'm on a hill crest, so, the flood would have to be so high that insurance companies would go bankrupt anyway. So, for that, I am again fortunate.

One of the main challenges I have is that my shop IS insured...under my homeowner's insurance. It is just that if I start to sell my turnings (or anything else), then they consider me a business, and I would need separate insurance then. And yes, it is rather stiff for the occasional seller...

[Mike Cruz]

Mike
I have Farmers Insurance and my basement shop is covered under the contents of the the whole house. My insurance man came just last week gave me the new policy with the new coverage it increased my home owners $190.00. I added $40,000 to my policy.

Harry, do you sell stuff? If not, yeah, your shop would be covered under your homeowners. And as I replied to someone else, what you added is only to cover your tools. You shop is in the house, so it is already covered by you homeowners either way. I have a separate building, and I think that is a price hiker... I may have to look into Farmers, though. $190 for $40K of coverage sounds great! Thanks.

[Mike Cruz]

I had Farmers years back, and they wouldn't touch a woodshop. I ended up with separate insurance, covering me, tools, building, going to shows, students, and visitors. Went through a couple till they got too high and wanted sprinkler systems installed. I ended up with the Hartford, about $1200 a year.

robo hippy

Thanks, Reed. Sounds like you're spending about what my insurance company is quoting me. Though I believe you are more of a business than I am planning to be, so it likely serves you better and might be easier to swallow.

[Jack Lemley]

Clint, thank you, and yes, that does help. The challenge I have is that what I have, my shop and tools, are more than the typical hobbyist. "Most" of us hobbyists don't have 720 square foot detatched shops (no that isn't the biggest shop around, but many people have smaller basement shops). "Most" hobbyists don't have $25K in tools and equipment (no that isn't the most expensive stuff, but many people have contractor grade tools and get by with what they have). I'm NOT bragging about what I have, just saying that I am (and KNOW I am) very very fortunate to have as nice a shop as I do...as a hobbyist. So, my tools, equipment, and shop are more of what a small business would have. And therefore, it puts me in the price catagory that you are in. Now, an advantage that I have is that I don't have to worry about floods. If I do, I had better build an Arc!!! I'm on a hill crest, so, the flood would have to be so high that insurance companies would go bankrupt anyway. So, for that, I am again fortunate.

One of the main challenges I have is that my shop IS insured...under my homeowner's insurance. It is just that if I start to sell my turnings (or anything else), then they consider me a business, and I would need separate insurance then. And yes, it is rather stiff for the occasional seller...

Mike,

I have been in insurance claims for 30 years. There are likely a large number of folks out there that have $25,000 worth of tools but have no clue. I did an inventory a few years ago to give to my agent and the total came to $15,000 in a 16x24 detached shop. You can still sell some stuff from time to time and still fall under the hobby definition. I recommend you sit down with an agent you trust and he/she can give you good detailed information so you can make an educated decision. Even if you decide against selling stuff you need to be sure you have adequate contents coverage in the event of a total loss. Unless you live pretty spartan your current contents limits probably will just cover you household stuff to say nothing of your tools.

Jack

[Mike Cruz]

Jack, by all means, I know I'm not the only one with that much in tools, and there are PLENTY of people with more!

Regarding still being able to sell stuff from time to time...no, I can't. You used to be able to, but straight from the horses mouth, I can't.

I do trust my agent. She is with Erie. I've been with her since 1992. Her rates are incredible. When others were quoting me $600 every six months for car insurance, Erie covered me for $600 a YEAR. And FULL coverage. I just looked over the quote I got from them and, if I am reading it correctly, the quote covers $50,000 for the building, and $55,000 for tools and equipment. IIRC, she did that before I actually gave her the actual numbers of the value of my equipment. So, they are a little higher than actual...

As for whether my shop and tools are fully covered under the homeowner's policy, if I decide not to sell, yes it all is. I confirmed that with her already. But thanks for the heads up.

[Harry Robinette]

My insurance man said That everythings covered, But I can't have people coming into my shop to buy. Other then that I can sell at craft fairs,on line, wood of mouth anyway I want ,just nobody coming in the shop.

[Mike Cruz]

Harry, that is with business insurance, not homeowners insurance, right?

[Andrew Joiner]

One of the main challenges I have is that my shop IS insured...under my homeowner's insurance. It is just that if I start to sell my turnings (or anything else), then they consider me a business, and I would need separate insurance then. And yes, it is rather stiff for the occasional seller...

Mike, I agree. Even if I sell a $10 item I'd have to commit to a lot of money for insurance. It's a lot for a start up business. My main concern is product liability. The quote I got was from Hartford a year ago. It was $500 a year for $500,000 product liability, if I sold less than $15,000 a year gross. With my personal umbrella liability I have 1.5 million coverage. I'd want a commercial umbrella to cover 1.5 million. I haven't gotten any quotes, but it looks like commercial umbrellas cost way more than personal umbrellas.

[Mike Cruz]

Yup, Andrew, that is the issue in a nutshell. Though, I'm not THAT concerned about product liability. I mean, I make things of wood, by nature, they are fragile. What I make/turn would be large enough that it couldn't be swallowed, though I do turn pens, but even my smallest pen is larger than a bic, so, I think some sort of common sense applies there (but maybe I shouldn't hold my breath on that...), and with one of my products, I do disclose that even though it made "for use", that it is made of wood, and has its limits that you would expect wood to have. That said, I'm not saying I wouldn't want/wouldn't get liability, rather that it isn't as much my concern as loss of my shop and/or my equipment. But your example above hits the nail on the head... Even for the occasional seller, the requirement for business insurance can proclude one from selling anything.

[Russell Eaton]

Mike I asked the same question of my agent several months ago when I got my sawmill. It is covered at my house but not when it leaves. I also run a small business out of my house and was told that as long as it is not my sole source of income that it is still considered a hobby. The same applied for the wood shop. I did increase my whole policy but I probably need to go up again.

[Mike Cruz]

Wow, Georgia rules! Unfortunately, Maryland isn't the same. Apparently, according to AAW, North Carolina is like Maryland..."Laws that regulate insurance vary from state to state. In North Carolina, it used to be that activities that were occasional in nature and did not amount to a “substantial” amount of income were covered by one’s homeowner’s policy. A few years ago, it changed to say that “any” activity that was commercial in nature, no matter how few dollars were involved, was not covered. That means that if someone came to my home to buy a piece and was injured, or if my shop burned, or my tools were stolen, or I taught a private class, I would not be covered."

[Don Jarvie]

Have you sold anything yet? If you haven't see if you can sell a few things first before you jump in. I understand you want to be cautious but it doesn't make a lot of sense to become a business and then only sell a couple of things.

Think of it this way. A neighbor asks you to paint their house and ask you how much you want. Unless you want to do it for free you ask for 500 say. Since you are getting paid are you going to become a business and get business insurance before you paint even though it maybe only one time. Probably it but if more people ask you and you could make some good money you may but not until then.

Just something to think about.

[Mike Cruz]

Don, I've been asked so many times, and have turned away a lot of opportunities to sell because of this insurance issue. I tend to be a stickler of rules (except on here for some reason from time to time... :rolleyes:, but a wrist slap usually sets me straight :D), so I've haven't been selling. My UPS driver asked at least 3 times, neighbors, friends, people that have seen things that I've given away, those who come to the house and see stuff I have laying around. Now, granted, cost is usually never addressed, so interest is based on desire and wonder...not on seeing a price tag. ;)

But you point is valid, and noted. Thanks for the insight and forethought (something I've been known to lack on occassion).

[Joe Meirhaeghe]

[QUOTE=Mike Cruz;2014943]I'm a hobby woodworker by definition. I do it because I like it. I give my stuff away. Lately, there has been interest in my stuff...in a "paying" way. So, why not, right?

Well, right now, my 24 x 30 detatched shop is covered under my home owner's insurance policy. According to my insurance company, if I sell ANYTHING that I've made (via the shop), I am a business, and that building and my tools and any liability would not be covered. So, I asked for a quote. Basically, it would be around $1000 per year for property and liablility. I figured the shop was about $25-30K and equipment/tools/etc in the shop are about $20-25K. I simply can't afford to have a fire, or a tree fall on top of the shop in a rain storm, or a 4 foot snow to collapse the roof, or whatever...destroying everything. I don't have $45-60K to replace it all.

As much as I'd love to sell my stuff, that's a lot of sales just to cover my insurance costs...let alone cost of materials and a little in my pocket.

So, my question is: Who do you use for your business insurance? About what do you pay? And what are you getting for what you pay?

I realize that there are those that throw caution to the wind. They don't get insurance. They think "no one will ever know" or "how can they prove anything" or whatever they come up with to convince themselves that it'll be okay to do it sneakingly. I'm not one of those people.

So, I'd like to hear what those who have insurance have to say. Thanks![/QUOTE
Mike I faced the same problem. I looked into about 10 different companies with the same response as you. Your OK as long as you don't sell anything. Once you sell something your no longer covered.
I finally found a company to cover me ( Farmers Mutual ) . They added a home business rider to my home owners policy that will cover my separate shop building & contents for only a additional $50. per year. It's good as long as I stay under $20,000 per year in sales.
I took this policy & cancelled the policy I had from a company I'd been with for over 20 years. I have to say I feel much more comfortable & sleep better now knowing I'm now covered.

[Mike Cruz]

Thanks, Joe. I have an agent (not my agent) looking into other possibilites for me. If he comes up short, I'll ask him about Farmers Mutual. If he can't do anything with them, I'll find someone who can...

Since this discussion started, I've formed an LLC. Honestly, I don't care if my shop and equipment are covered under my home owner's policy or whatever...as long as they are covered. BUT I do want to keep/have separate business liablility insurance since the reason for setting up the LLC is to keep the business and personal stuff (our farm) separate. I appreaciate the info, Joe.

[Stephen Cherry]

Since this discussion started, I've formed an LLC.

If you have a LLC, do you even need insurance? What are you making that could LEGITIMATELY do that much damage?

[Andrew Joiner]

Unfortunately it has little to do with legitimacy. Even a nuisance lawsuit has to be defended and it gets expensive. Say you made a "widget" it could be a cutting board ,table,chair or a bookcase. Some child uses your widget for something idiotic. Like uses a bookcase as a ladder. The child falls and breaks his neck. There is a good chance a lawyer will say the bookcase maker is responsible.
Even if you put labels all over the widget that outline it's intended use, the widget maker could have to defend any abuse of the product that caused harm.

[Mike Cruz]

Andrew, you don't know how many people don't understand that... I shouldn't say that, maybe you do. But through my search for answers about what others do, I don't find that my belief in your example scenario is as real a possibility in others' minds as it is in mine. And for those that "get it" that it is in the realm of possibility, I don't find that they see it as probable as I do. Hence, my "need" for an LLC, separate business liability insurance, separate bank account, credit card, everything... Believe me, it isn't cheap. It isn't fast. It is simple enough, but it isn't "easy". Yeah, it isn't rocket science, but if you are going to do this whole thing, there are a lot of things to think about and make sure are "covered". All to sell a couple of widgets. The "Man" doesn't make it easy on the small business man...I'm learning that fast!

Not sure, but Steve knows me. He may have been pulling my leg a little with that statement. ;)

[Stephen Cherry]

Not sure, but Steve knows me. He may have been pulling my leg a little with that statement. ;)

If you sell someone a bowl, or a putter, and they come back and say that it contributed to their loss of marital harmony, my guess is the llc is intended to protect your personal assets from that. Then an umbrella policy if the llc fails. Of course, if you plan to make furniture, this may be different, but it seems that you should first think to insure yourself.

THis is all really just chit chat though- it's stuff you would really want to talk about with an attorney familiar with the laws in your particular state.

[Mike Cruz]

From my meets with my accounant (and other research I've done), the idea of an LLC is that it does separate the business from personal assets and liability...except in cases of gross neglegence. So, forming the LLC puts a barier between my business and my family. Can the barrier be broken? Anything can happen. But at least, there is a barrier, not an open door. According to my insurance company, selling ANYTHING makes me a business, which means NONE of my personal insurance (including my umbrella) would cover anything relating to said business. So, separate insurance is needed.

Now, that said... I'm looking into different insurance companies.

[Stephen Cherry]

People that I have talked to about this sort of thing have umbrella policies for just this reason. Each small business in its own llc, and an umbrella policy if the llc fails. Just what I heard though.

Remember that song, http://www.youtube.com/watch?v=S5puAN1PGQw

[Mike Cruz]

I'm getting more and more of the feeling that ERIE has some really odd policies... That's why I'm "looking" elsewhere.

As for the song... I can't say I'd ever heard it. Not sure if that is a good thing or a bad thing...

[Don Jarvie]

Don't forget Uncle Sam, he's going to want his cut, i.e Sales Tax.

If this is what you want to do go for it. You have to sleep at night.

Now you need to go sell something before your wife tells you to go sleep in the shop, but at least you will sleep!

[Mike Cruz]

HA! Wanna hear what is better, Don? I don't know how it works in everyone else's states, but in the great state of Maryland, I have to pay the state...get this...$300 A YEAR for the privilage of collecting sales tax...which I then have to give THEM. Great scam they have going, isn't it?