How to Understand & Get the Soap Business Insurance You Need

There are a ton of different kinds of insurance on the market, both for you and your family as well as your business. In general, insurance is there to protect you, your assets, or your business. But how do you make sure you get what you need and understand your coverage?

For your biz, you might need general liability, product liability, professional liability, commercial property insurance, home-based business owner's insurance. Or you might opt for a bundle of several of these called a business owner's policy.

And for you and your family, especially in the United States, you might need to look into health, vision, dental, and life insurance. If you are new to the world of being self-employed, shopping for your own insurance can be daunting. But we are here to help you navigate.

Also, keep in mind that if you hire employees, you will need to add workers comp. Plus, you may need to shop for health, vision, and dental plans to offer as part of your team members' benefits.

Types of Insurance for Your Soap Business

General Liability Insurance

General liability protects against financial loss as a result of bodily harm, property damage, medical expenses, libel, slander, defending lawsuits, and settlements or judgments. This coverage protects you against things that are out of your control such as accidents or lawsuits. Every business should have it.

Product Liability Insurance

Product liability insurance protects against financial loss as a result of a defective product that causes injury or bodily harm. When soapmakers ask about insurance, this is the type of policy they are usually talking about.

Remember, just about every product liability policy out there requires that you follow good manufacturing practices. Sure, they will take your premium money. But they won't cover your claim unless you can show that you followed GMP.

Professional Liability Insurance (aka Errors & Omissions Insurance)

Professional liability insurance protects against malpractice, errors, or negligence. This covers you if you teach someone how to make soap in a way that causes them harm. You only need this coverage if you teach, advise, or consult.

Most folks assume if they are not in a classroom or selling classes online, they don't need a professional liability policy. But, if you write a blog post, create a YouTube video, pop on Facebook Live, or communicate with an audience about soapmaking anywhere, in any way in an instructional manner, you could be held liable for the info you provide. And you should make sure you are covered.

(Note that videos that are more like commercials would not be considered instructional. People may see you stirring, pouring, and cutting to spark interest and show that your product is handmade. But, you are not showing them how to make soap or providing directions.)

K and K Insurance is one of many professional liability insurance options that cover soap-related teaching.

Commercial Property Insurance

Commercial property insurance is coverage against loss and damage of company property. For a soap business, this covers things like finished products, raw material, your workshop building, your storefront, and your craft show tent and displays. This policy may protect against fire, smoke, hail, high winds, vandalism, and similar hazards that are out of your control. But check your policy for specifics.

If you do craft shows, you will often be asked to add a show to your list of additional insureds. That's totally normal! But, be mindful of that when choosing a policy, and go for an option that makes those additions easy to do.

Home-Based Business Owners Insurance

Home-based business owners insurance is an addition to your regular home owner's insurance. It can offer coverage for a small amount of equipment as well as limited liability coverage for third party injury.

It's tempting for small soapmakers to add this coverage and call it good. However, the coverage it offers is so slim that we don't recommend that.

Also, please pay special attention to your home owner's insurance policy when operating a business out of your home. You may be void your coverage by operating a manufacturing business out of your home. Or you may need to deal with higher premiums and deductibles.

Some soapmakers have been able to find state-based carriers or a carrier through their credit union. Their policies allow them to operate out of their home if they provide proof of additional insurance coverage for the business. But sometimes operating from a separate outbuilding is the only option.

Business Owners Insurance

Business owners insurance is a package that combines the different types of business insurance into a single bundle. Grouping your coverage in this way lets you deal with a single company and policy.

Find Insurance Coverage Tailored to Your Soap Business

Here's what you need to consider:

1. What is the price for the coverage you are getting? Knowing the price for the coverage you are getting lets you compare apples to apples as you shop around.
2. Does the policy cover your products? Many policies don't cover candles, children's products, products containing cannabidiol (CBD) oil, or other common goods. So, be sure everything you plan to sell is covered.
3. Does the policy cover property? And is that coverage sufficient? Even if you don't own a stand-alone workshop or storefront, ingredients, equipment, supplies, and finished product values add up. So, tally up all of your commercial property so you can get a quote for the coverage you need. Many product liability insurance policies recommended in our industry do not provide sufficient property coverage.
4. Is the policy coverage available where your business is located? Don't get sold a worthless policy! Make sure your area is covered.
5. Does the policy have a revenue cap? If there is a cap, you want to be sure it is high enough that you won't top it during your policy period, which is usually a year. And don't confuse profit with revenue, your revenue is your total income from sales.
6. Can you add additional insureds? And does that cost extra? Remember, this is a big one if you do craft shows, farmer's markets, and other live events.

Where Can I Find the Perfect Soap Business Insurance Policy?

Our social media polls show that members of our tribe join trade organizations primarily to obtain insurance. It's the easy route, and they assume those groups know more about soap business insurance than they do.

But, once you start crunching the numbers, you might see it isn't what is best for your business.

Should I Join a Trade Organization for Insurance?

Joining an industry-specific trade organization like the Indie Business Network or Handmade Soap and Cosmetic Guild gets you a business owner's insurance bundle. (Pro tip: both organizations currently offer the exact same coverage.)

You'll want to look carefully at those dollar amounts under that coverage as well as the specifics. If a workshop fire destroys your equipment and supplies, will $5,000 cover your loss? If you operate your business from a separate structure on your property, does the policy cover the structure itself?

That's not to say that trade organizations aren't worthwhile. You just need to understand what they cover and what they don't. For some soapmakers, the benefits of joining a trade organization make the membership worth it. But they may opt to buy additional property insurance from another broker.

What are My Other Options When Shopping for Soap Business Insurance?

• Handmade Artisan Insurance (USA)
  Pay special attention to income caps, location availability, and coverage of product types.
• RLI Corp / www.insuremyhomebiz.com (USA)
  Take note that the revenue cap is very low and best for hobby businesses or sole proprietors.
• Veracity (USA)
• Campbell Risk Management (USA)
• The Hartford  (USA)
  Has multiple insurance options for a wide range of coverage. Offers the possibility of getting a better deal on a business owner’s policy that gives you what you need (and not what you don’t.)
  
• State Farm (USA)
• AustBrokers Country Wide (AUS)
• Cowden (AUS)
• The Handcrafted Bath and Body Guild (CAN)
• HUB (CAN)

What if My Products Contain CBD Oil?

These companies are currently offering coverage in the USA for CBD products. Quotes for annual coverage for micro and small bath and body businesses are in the $4,500 to $6,800 range.  (Thanks to Tina from our Facebook group for sharing her research!)

• New Growth Insurance
• Veracity
• Cannabis Insurance Company
• Brown & Brown

What if I Contract Manufacture Products? Or Have Products Manufactured for me?

Pay special attention to your policy to see what it covers!

Some policies only cover product that you manufacture and assume liability for (your label). Others cover product you manufacture (private label/contract manufacturing). Still others are available for products that you did not manufacture that you purchase to resell. 

What About Health Insurance for My Family?

One roadblock that keeps soap business owners in the United States from going full time is losing insurance benefits from their current job. Shopping the Health Insurance Marketplace can be frustrating. Costs are high and availability is lacking in some areas. And not all of us have a spouse with a job that offers insurance.

Here are some resources for when you are ready to strike out and find your own healthcare:

• National Association for the Self Employed (NASE) is a trade organization that has a lot of options. Choices including medical, dental, and vision benefits, a slew of discounts, and a ton of other tools. While industry-specific associations are great, this trade organization may be well worth the additional cost.
• Just Works is a Professional Employer Organization. So, you get access to insurance and other benefits by allowing them to be your co-employer. Please thoroughly research PEOs before considering them as an option.
• Stride Health is a much easier way to find health, dental, vision insurance than the marketplace. Stride offers all the same plans as the marketplace, plus some, and is a lot easier to use.
• Healthcare Co-ops in the United States are limited and often faith-based. But, if you fit the criteria, one might be a good option.
• Direct Primary Care is a subscription with your physician's office. You pay a monthly fee to see your doctor for basic care. This is NOT insurance. (So if there is a tax penalty for not carrying insurance, you'll be paying it.) But it does provide healthcare access.
• Teladoc allows you to talk, text, or chat with a licensed physician. The team of doctors can prescribe a treatment without an in-person visit. Again, know that this is not equivalent to health insurance.
• Sesame Care connects you with affordable healthcare providers with upfront pricing and no insurance required. Search by location or by the type of treatment you are looking for (like primary care, eye exams, teeth cleaning, or more specific things like birth control or thyroid evaluations - you can't tell what I've done, can you?)
• Better Help is a low-cost online counseling option similar to therapy. The service can be helpful regardless of whether you have insurance coverage and a regular therapist. Owning a small business gets lonely. And entrepreneurship tends to attract folks with mental health challenges anyways. (I'm very open about my own mental health challenges!)
• Nurx is an online option for birth control prescriptions. The service is an option for those who are unable to obtain medical insurance coverage and do not live near a clinic. It is not available in every single state yet, but they have been growing steadily.
• VantageOne is a discount dental plan that makes dental care more affordable. As you may know, I had extensive dental work done a couple of years ago. And VantageOne saved me over $3,000 on the final bill. Similar discount plans are out there for vision, too!

I hope that healthcare access and insurance becomes easier to navigate in the future, but for now, it's a bit of a mess.

Don't forget other benefits that you might be losing by being self-employed, like life insurance, disability, etc.

What Business Insurance Do I Need When I Hire Employees?

Many states require an employer to carry an insurance policy to protect employees that get hurt or sick at work. That's a worker's compensation insurance policy. The NFIB has a very in-depth guide about requirements from state to state.

It can be challenging to find a policy that will cover work soap manufacturing employees might be doing.

For instance, if you milk your own goats, that's an additional risk that may be better covered by a farm policy. Or you may not need the coverage because farm laborers are exempt in your state.

So, lay out exactly the hazards an employee may be exposed to. Speak honestly with your agent to find the right coverage.

Here at Modern Soapmaking, we use Gusto for our payroll, HR, and benefits. They contract with brokers to provide various kinds of coverage. We had no issue using their services. But we do not have any employees manufacturing. (I do all of that!)

A few states also require offering disability coverage. So make sure to evaluate your state's requirements when diving in.

You may also want to offer additional benefits to your employees, such as health insurance, retirement benefits, etc. Gusto offers all of these services through third-party partners, so that's what we use. But there are a lot of options out there! Keep in mind that benefits are not free and you need to budget appropriately for them when considering offering them.

We get it, insurance is expensive. And confusing. But, obtaining appropriate coverage is part of being a smart, responsible business owner. Hopefully, the worst will never happen, but knowing you have coverage if it does can help save you a lot of worries!

Still have questions about what insurance you need for your business, employees, and family? Let's hear about it in the comments!