Tuesday, April 24, 2012

To have insurance or NOT to have insurance?

So, this is a MUCH debated question amongst the soapmaking community.  But then again, anything humanly-minded can be debated and lets face it, common sense is an oxymoron, right?  Now-a-days people sue over almost everything; hence the reason why our premiums on everything is so high.  But, have you ever heard of a soapmaker being sued over their soap?  Personally I haven't and I have not been able to find of anyone who has been sued over their soap.....sooooo, does that mean it won't happen or can happen or will happen?  I like to always think of "Murphy's Law" and what can happen, WILL happen.  So, do I have insurance, yes, yes I do.  And yes, it's an expense, not cheap.  I go with my membership from the Soapmakers Guild and purchase my insurance through them. 

Do people sell their products without insurance?  Of course they do.  Is it safe?  Can't answer that, it's a personal preference and how comfortable you are with your business.  I'm a Sole Proprieter, so my business assetts are not seperated from my personal assetts.  If you are a registered LLC with your state, then this should seperate your business assetts from your personal assetts therefore if sued because your product caused someone a bad rash, then your business alone would take the hit.  Well, you say, what about the Sole Proprieter?  If you have some major personal assetts, they can take it all if you have no product liability insurance!  I personally have no personal assetts.  We rent, our cars are paid for and old, so they wouldn't get much from them if they were taken, we wear hand-me-downs and Goodwill clothes, and barely have any savings.  We have no fancy high price toys and no ownership of real estate such as land.  So, I feel safe with being a Sole Proprieter for my business at this time.  AND I still have insurance! 

Now, some people of this craft community will say, "well, with just soap I won't get insurance cause it rinses off the skin and insurance is too expensive.  But if I sold lotions or anything that requires a preservative, then I would get insurance."  While this is maybe logical in some sense, soap is still placed on the skin and how many of us has bought commercial detergent bar or bodywash, used it and have it break us out or cause our skin to burn, etc do to a reaction to an ingredient in the product?  I know I have.   Yes, it's is expensive, but it is more expensive to go without it IF Mr. Murphy decides to place residence with you.  And trust me, Mr. Murphy likes you!  ;)

Then there is the argument, or shall I say heated discussion, on when you do have insurance, for your policy to "truly" cover you, how much record keeping should you have, what extra things need to be placed on labels, testing of preservatives, etc.  This makes perfect sense and haven't really thought of this until today, actually.  I have insurance, but I have not had my preservative tested in my products.  So, does this make my insurance valid if someone was to sue me over my lotion?  Will my insurance deny the claim?  Hm, I'm not sure at this time, and will have to look further into that.  Let me add, that I do not test my lotion's preservation because it is SUPER expensive from the last time I researched this.  I'm talking $1,000's via going through the FDA for the testing.  Now, can I go to any lab and it cost the same?  Not sure, I'll have to research this some more and get back to you.  I will also add too, that I preserve at the recommended manufacturer percentages in my formulations of my lotion and creams.  All my recipes and formulations are done by percentages which makes for a more accurate and safe product. 

If anyone has more information on this, please respond.  I would like to hear (or read, haha) how insurance companies are handling things regarding when a claim is filed and what is actually involved on accepting and denying claims.  (Regarding soaps and cosmetics)

As my conclusion, the world is the world and humans treat each other badly.  And, no matter if you have listed on your label "use at own risk, external use only, if rash/irritation occurs, stop use immediately" people will still try to sue you, even when they KNOW what you have warned them about.  God refers to us as sheep for a reason.  (By the way, sheep are not very smart animals!)  I use these types of warnings on my products as well, but only because truly some people just don't know.  Remember the common sense thing?  So, if you are serious about this type of business, get insurance.  You can't do any craft shows or farmers markets without it.  And, just a side note, if you think you're going to make money at this business from the get go, you're in for a rude awakening.  Just like with any business, there is start up cost, and it takes a good while to make that money back because most of your money goes right back into your materials.  So don't get your hopes up too high in the beginning.  Treat it as a hobby business for the first year (with insurance still!) and see how it goes.  You'll know by the end of the year whether you want to take it further or keep it as a hobby just to replace your materials so you can keep making more goodies. 

Happy Soaping!

1 comment:

  1. You're right, Jodi. Part of starting a business is taking risks. Photographers may lose their cameras, electronics shop owners may have their products malfunction, and several other bad things could happen. In your case, people may have allergic reactions to your soap, which may lead to them suing you. Therefore, getting insured not only keeps your personal property safe, but also make you ready for any eventuality. Thanks for sharing!

    Clifton Johnson @ Insuring the Product