Business Insurance

[Jesse Busenitz]

I'm a one man shop( just moved) , in Kansas, working out of a 40x80 shop that is my dad's (which he has insured) but i'm looking to insure all my tools, equip, etc. I build mostly furniture and cabinets, so there is some install work involved, and most of what I've done has been for family and friends(I have a lot...:-)to keep my busy full time thus far, but I'm sure that will change. Do I need to get liability? What company do you use for your woodworking business? I've been slowly turning this hobby into a business the last 3 years and had liability with my last plan at my old shop but is it necessary? I know there's a lot of pieces of the puzzle missing(feel free to ask) but any advice is appreciated! Jess

[Ben Rivel]

Check out your local Statefarm office. Ive had various kinds of equipment insured through them for business use over the years and its always been very reasonable. Not sure if they offer liability insurance though as Ive never needed that, but you can certainly ask.

[Michael Zerance]

Your best bet, to get accurate information that pertains to the specific requirements for your locale, would be to call a local agent.

If you're working in people's homes you should have general liability and workers comp. You may be able to get an exemption for the workers comp because you are a one man shop but that would still leave the homeowner liable if you have an accident in their home.

[Jerome Stanek]

I used an independent agent and found my insurance was a lot cheaper than a large company agent. I did have the same insurance from him that I was paying more for from another agent.

[Kevin Jenness]

As Michael Z says, consult with a local agent and/or your state department of commerce or equivalent for local requirements. You probably won't have to carry workmen's comp as a solo show.

I just went through securing a commercial policy with liability and property coverage for my home-based one man shop. It was a bit of a process. First of all very few if any homeowners' policies will cover property used in a business; in fact my insurer told me they would cancel my policy when I let them know I was re-launching my business, so I had to get new homeowner's coverage too. Added to that was the fact that both my shop and home are heated with wood. Many insurers were not willing to deal with that so I was looking at investing $6k or so in heat pumps for both buildings. I talked to at least 6 independent agents before I found one that got me coverage with Merchant's for my business and Traveler's for homeowner's coverage. Interestingly enough, the business policy had a lower premium than all the others that were quoted with more restrictions.

Those companies may or may not do business in your state, and may or may not have the same underwriting standards as here in VT. My agent said that insurers will write policies for a certain sector like woodworking shops until their underwriters decide that they have sufficient exposure in that sector, then they refuse to take on more such risk.

Another local shop owner told me that he had tried to switch carriers to save money but couldn't get coverage, and was told that his current insurer wouldn't pick him up now if he didn't already have a policy with them. About 18 years ago my carrier dropped me after 15 years for no stated reason, and I had to find another insurer. So it is a bit of a crapshoot whether you can find affordable coverage, and you have to balance that against your appetite for risk.

I have a substantial investment in my shop and machinery and don't want to risk losing my livelihood, so I have property insurance on what I consider a reasonable estimate of replacement cost. I also have liability insurance for my products and in case a client or other visitor slips and gets hurt on my premises. If you build a chair that breaks and you get sued for injury, it won't matter whether you installed it in the client's house. I also have a rider to cover portable tools used outside the shop, though that is not often the case for me. I believe in minimizing exposure, so I make sure my electrical situation is legit, dust is kept to a minimum, the chimney is cleaned regularly, and so on. If you do everything right and are lucky you can get by with self-insurance, as some folks around here do- not my choice. Good luck.

[ALAN HOLLAR]

One thing for certain, if you are looking for fire insurance coverage for a woodworking business, be prepared to pay a huge premium for minimal coverage. If you are working out of a home shop and selling your work, that will void many homeowner policies.

[Yonak Hawkins]

Call your agent to see if you homeowner's policy or your dad's homeowner's policy will cover your tools and liability within the shop.

[Martin Wasner]

Talk to a your agent or get an agent and find out what you need. It's doubtful anyone on here can give you anything accurate as to what you need.

I need to update my insurance, I'm way under insured for my equipment. Replacement value is just shy of $300k and I'm only insured for about $200k at the moment. (Last year was a big growth year) As a reference. With $200k on the equipment, I think $2m in liability, something like $50k for product in transit, and another $5k(ish) for covering installation tools I'm paying around $3k or $4k a year I think. The pickup and trailer I used for delivery and install is insured separately through me, not the business. For some reason I couldn't clump the trailer in with the rest of the shop stuff. Insurance for this stuff is pretty reasonable.

That doesn't cover workmen's comp. I've skated that for years, but now I'm going to have to do something about it as I can't run contract labor anymore in the shop like I used to. The IRS is really cracking down on that according to my accountant, and the fines are steep. Covering employees for work injuries isn't too horrible for a cabinet shop either. At least compared to carpenters or roofers where heights come into play on the regular. It's typically a percentage of the employees wage, and it drops each year you go without reportable injuries. You get some of it back as well I think. This is new territory for me as well, so I might be feeding massive amounts of misinformation on the worker liability stuff.

You might want to look into incorporating as well. It gives your personal assets a small amount of distance from the business should things go horribly sideways on you, ie; building something that hurts someone, burning a house down, or burning a house down with someone in it. (Any situation where you'd get your pants sued off) In Minnesota they passed then repealed a law a few years later where if you were operating as a sole proprietor, the contractor had to do withholding. Most said I'm not dealing with that, and just found someone else. There are tax benefits as well to incorporating if you play the game, but that's a different thread.

[Michael Zerance]

I would have to check to be certain but, if I remember correctly, my workers comp is approximately 9% of payroll. You can exempt yourself from workers comp if you are the owner and the payroll calculation would not apply to your pay or owner's draws. I dropped my exemption and carry workers comp on myself as well because it protects my customers. Also, most commercial projects require it. Like Martin said, the premium does go down a good amount after the first couple years.

[Alan Trout]

I don't know that much but I have been a sub S corporation with one employee (me) for 30 years. I am technically a contractor and I am in and out houses on ladders in attics etc. I carry a 2 million general liability policy and a commercial auto policy that is all wrapped up together. Mine is under 1k a year. I purchase insurance through an independent agent that specializes in commercial policies. You will save money that way vs. going through a captive agency. As the owner I have never had workers comp and I do a lot of commercial jobs. The only thing they cared about was my general liability coverage. If you are working on peoples property IMHO you need a general liability policy. If you are transporting product with a vehicle you need a commercial auto policy at minimum.

[Jesse Busenitz]

Call your agent to see if you homeowner's policy or your dad's homeowner's policy will cover your tools and liability within the shop.


I don't think they would cover my tools, especially since this is a business(50K+ worth of tools). Also I'm the only employee of my business which is becoming an S Corp this year, so I don't really need work comp. I do think I need to get liability soon. Anybody our there "Self Insure" on equipment/building????

[David Kumm]

When you buy insurance you are buying the agent as much as the company. It is the honesty and credibility of the agent that determines how much juice he has with the company when working on your behalf. A good one is worth a little higher premium. Keep in mind this is coming from an accountant. ( I've been a CPA for 40 years and trying to understand why a business with no employees would need to be an S corp. ) They do make more money for us in the accounting business but usually only the preferred entity for a single owner making 250K +. Dave