It might be the last thing on your mind when you are setting up your fabulous new craft business and we all like to think that "things will go all right on the night" but, unfortunately, things going unexpectedly awry tends to be part and parcel of life. We live in an increasingly litigious society which means that, perhaps more than ever before, creative business owners need to consider purchasing business insurance, particularly if considering selling at craft fairs, shows, public events, open studios, workshops etc.
What type of insurance do you need?
Generally speaking it is wise to purchase Public and Product Liability insurance (PPL):
- Public Liability Insurance: covers you against claims made against you by a third party for accidental injury to people (including death), accidental loss or damage to other people's property and, depending on the policy, may also cover legal fees, costs and expenses, hospital treatment claimed from you (check the small print!)
- Product Liability Insurance: covers you in the event that you are held liable for damage or injury arising from defects in your product, design or manufacture, even if you have not been negligent.
Legally products must be "fit for purpose" so if you manufacture or supply a faulty product which causes damage or injury to someone (this includes products which are given away and not just sold) you may be subject to a claim against you for compensation. This type of insurance, however, won't necessarily cover you against financial losses to a business or person caused by a faulty product you made, supplied or repaired so check with your insurer.
Other types of insurance to consider
Protecting your stock and equipment
Home insurance: If you work from home it's worth contacting your home contents insurance provider to tell them that you are working from home and check to see if your stock and equipment will be covered. Some policies may be voided if you work from home, so it is in your best interests to check with your insurer!
Premises insurance: If you rent a studio or workshop, check with your landlord what cover they have and whether your stock or equipment is covered. Ideally, you want your stock (at cost at least) and equipment (as new if possible) to be replaced in the event that something happens to the rented premises such as fire or burglary. Your landlord is legally required to let you know what cover is in place.
All Risk Insurance: Some insurers offer the option to purchase extended cover to include accidental loss or damage to:
- stock anywhere in the UK whilst in transit or overnight at shows/events;
- display equipment whilst at shows; and
- equipment and machinery whilst at your premises/workshop.
Exhibition Cover: You can also get specific cover against losses due to cancellation, curtailement or postphonement of an event, fair, show etc. it's worth looking into if you envisage doing a lot of events.
Trade Credit Insurance: if you have stock placed with stockists on a sale or return (credit) basis then this type of insurance will cover you in the event that the stockist goes out of business. Worth considering in the current economic climate if you have a lot of stock placed with various stockists around the UK.
Money Insurance: this is fairly self explanatory but covers you in the event that your money is stolen e.g. petty cash in your studio or whilst taking money from sales to deposit in the bank.
Protecting your income
Critical Illness Insurance: if you fall ill with certain specified critical illnesses e.g. cancer, coronary artery bypass, heart attack, kidney failure, major organ transplant, multiple sclerosis and stroke, to name the most common critical illnesses or become permanently disabled as a result of injury or illness, this type of insurance covers you by paying out a tax free lump sum.
Key Person Insurance: if you are running a company and you are a "key person" in that company (e.g. without you the business would struggle to continue) then you might wish to consider taking out this kind of insurance which is essentially life insurance on the "key person" (you) in your business. The purpose of this type of insurance it to help the company survive the loss of the key person who makes the business tick.
If you are advising/teaching
Professional Indemnity Insurance: this is something you might wish to consider if you are in the business of selling your knowledge e.g. running workshops, giving tuition or writing craft books as it will cover you in the event that any claims are made against you for negligent advice.
If you are an employer
Employer's Liability Insurance: if you run a small creative business employing others e.g. you have employees, it is a legal requirement for you to have this type of insurance for at least £5 million. This ensures that you can meet the costs of damages and legal fees for employees who are injured or made ill at work through some fault of you the employer. There are some exceptions to this requirement where you won't need compulsory Employer's Liability insurance:
- if your business is not a limited company and you are the only employee; or
- you only employ close family members; or
- limited companies with only one employee who also owns 50% or more of the issued share capital in the company.
How much do I need to insure for?
This is one of the most frequently asked questions and ultimately will come down to a personal judgment as to what is appropriate for your particular business but, generally speaking, for PPL insurance most insurance companies offer insurance between £2million to £5 million as relatively standard.
Where can I purchase this type of insurance?
There are a number of suppliers of insurance aimed at designer-makers and craft businesses. This is by no means an exhaustive list but here are a few that our UK Handmade members have mentioned or recommended:
- The Artists Information Company - PPL insurance with cover upto £5 million is included as part of the annual Artist + Air membership. The 'online only' subscription costs between £28 to £30 depending on your payment method (direct debit is cheapest). Check the PPL scheme FAQ for more details. You can subscribe online.
- Ian W. Wallace: An insurance scheme designed specifically for Crafts People (Individuals / Partnerships/ Companies etc.) and Craft Groups and Clubs in the UK and Republic of Ireland. This offers three different limits of upto £1 million, up to £2 million and up to £5 million which costs £71, £87 and £101 annually, respectively. You can apply online.
- Combined Market Traders Insurance: CMTIA offer annual PPL insurance with cover upto £5 million for £48. You can download an application form.
There's also a useful list of insurance providers so that you can shop around here:
You can also contact the British Insurance Broker's Association to find an insurance broker near you:
The information supplied in this article is provided for general reference purposes only. Whilst every effort is made to ensure that the information is up to date and accurate, the authors do not warrant, nor do they accept any responsibility or liability for, the accuracy or completeness of the content or for any loss which may arise from reliance on information contained in any articles. General information is not the same as getting financial or other professional advice. For advice based on your own circumstances, talk to a professional adviser.
© Anna Stassen; all right reserved