sillywabbitz Posted 10 Aug 2011 , 2:28pm
post #1 of

I am one of the lucky people who gets to take advantage of the new Texas Cottage Food law as of September 1. I have a full time job and plan to only do cakes and cupcakes for friends, family and friends of friends. I'm not looking to build a big business because I don't have the time or inclination.

That said I understand that I should have insurance. My husband and I already have a 2 million dollar umbrella policy if we get sued for ANY reason. Does anyone know if this is enough to cover liability for the business. I'm not looking to cover my equipment because that should be covered in my home owners policy. I just want to cover if someone gets sick.

I do plan on getting a tax id to shop wholesale but plan to do a sole proprietership in the beginning if that makes a difference.

Thanks
Cristy

24 replies
cakeandpartygirl Posted 10 Aug 2011 , 2:44pm
post #2 of

I talked to our insurance agent a few weeks ago about getting an umbrella policy. He told me that if I were to undertake any business venture that I would need to get a separate liability policy. If I was only doing it occasionally for friends and family the umbrella policy would cover me. Honestly for me I would get a separate policy especially since you are going sole proprietorship. Oh how I wish that I could be with you all!!

I wish you the best!!!!

jason_kraft Posted 10 Aug 2011 , 2:58pm
post #3 of

Umbrella policies are for personal liability, business liability is almost always excluded.

Here is an example of umbrella exclusions:
http://www.travelers.com/personal-insurance/umbrella-insurance/coverage-basics.aspx#exclusions

sillywabbitz Posted 10 Aug 2011 , 3:21pm
post #4 of

Ya'll are the best!!! Thank you both for your responses. Looks like I will need a business liability as well. I love CC.

Cake and party girl, did you get transferred?

Thanks again for all the help.

LorienSkye Posted 10 Aug 2011 , 3:31pm
post #5 of

I know you already got great advice, but I also just wanted to add that in my case (similar to yours- home based cottage foods business with low projected annual revenue) the additional business liability policy was CHEAP. Less than $200/annually with nice limits. It was worth waaay more than that to me for the peace of mind. Also, in my area the reputable venues want to keep a copy of your business-specific liability policy on file if you are providing cakes for events being held there. I'm happy for you and your new adventure!

jason_kraft Posted 10 Aug 2011 , 3:38pm
post #6 of
Quote:
Originally Posted by LorienSkye

the additional business liability policy was CHEAP. Less than $200/annually with nice limits.



Who is your business liability insurance provider? We are paying $425/year with The Hartford (for a rented commercial kitchen in CA).

Cakeuhlicious Posted 10 Aug 2011 , 3:46pm
post #7 of

I used to manage small business property/casualty accounts, in my past life, and I can tell you that they are right, you will need an entirely separate policy. I can also tell you that there is no way to determine what "enough" insurance is. However, as someone stated - if you're a sole proprietor, your personal assets could be tampered with if your claim exceeds your limits on your business insurance.

Typical liability coverage for small business starts at $1,000,000 per claim, $2,000,000 per aggregate (year). I wouldn't sell anything less than that. Those limits are going to be your most costly, so I always recommend getting an additional quote for $2,000,000/$4,000,000. In some cases higher limits cost under $10 a policy term because some companies lower rates for insureds who value good coverage.

You may also find that your personal policy won't cover your equipment because it is used in your business. Insurance companies spend gazillions of dollars hiring people who will find out the difference between what you use for your business and what you don't, in the event of a claim. I would recommend looking into a Business Owners policy, which is a small package that can include property coverage and liability in the same policy at a really affordable price. The annual fee for this policy starts at $500 per year for the basics. It also generally includes a coverage for Business Income expenses which helps in various situations should something occur that disables you from running your business. It doesn't protect against your personal illness or anything of that nature but should something happen to your home and you're unable to work, it can help you rent another kitchen, pay business expenses, etc. while repairs are made.

The only other thing I would note is that if you're making deliveries from a personal vehicle, your standard auto policy will not cover you. You would need to contact your insurance company and request an endorsement to add business use to your vehicle (it's not always available with personal insurance carriers) or get a quote for commercial auto insurance. I also recommend getting commercial auto because it will still allow for personal use of the vehicle and the limits also generally start at $1,000,000 and the premiums are comparable.

If you're looking to deviate from your personal insurer for a commercial quote, I'd recommend Travelers Insurance Co. or Safeco Insurance Co. Travelers seemed to have great small business pricing, but Safeco had been developing a lot of "at home" business classes, specialized for people working from home. You may find some unique coverages there that give you more bang for your buck.

Good Luck! icon_smile.gif

Cakeuhlicious Posted 10 Aug 2011 , 3:57pm
post #8 of

[quote="jason_kraft"]

Quote:
Originally Posted by LorienSkye

We are paying $425/year with The Hartford (for a rented commercial kitchen in CA).




^^^ Hartford is also a good, mainstream option. They used to be kind of finicky about certain types of business that just seemed so normal to me but they saw something "risky" about it. They'd def. be worth getting a quote from as well.

You can likely find a local broker who works with all of these companies to give you multiple quotes without having to do as much leg work.

I don't know who would sell a $200 policy but unless they expressed that it is a specialized program from at-home bakers, I would be incredibly weary. That's not standard for commercial liability coverage. Certainly a nice price icon_smile.gif but I would read the policy, including the conditions and exclusions sections, carefully. I used to find often that people who came to us for quotes had agents who wrote policies that expressly excluded a large portion of the insured's business. If you have a liability policy with a food born illness exclusion, what is the point? LOL

jason_kraft Posted 10 Aug 2011 , 4:15pm
post #9 of

The actual cost of our business GL policy is $243 ($54 for $2M/4M general/products/personal injury/advertising aggregate and $184 for $2M auto), but Hartford's minimum premium is $425...if it was bundled with other Hartford insurance products it might work out to around the $200 level as an add-on.

leah_s Posted 10 Aug 2011 , 4:31pm

State Farm does indeed sell a policy targeted at very small bakeries and home bakeries. Mine just increased to $275 per year.

thecakeprincess Posted 10 Aug 2011 , 4:39pm

A lot of great information!!!

LorienSkye Posted 10 Aug 2011 , 4:42pm

I did indeed use a local brokerage agency who obtained quotes from several different underwriters. I ended up getting the best rate and plan from a Michigan based regional company called Auto Owner's.

Cakeuhlicious Posted 10 Aug 2011 , 5:11pm
Quote:
Originally Posted by LorienSkye

I did indeed use a local brokerage agency who obtained quotes from several different underwriters. I ended up getting the best rate and plan from a Michigan based regional company called Auto Owner's.




That's good info! They don't serve my state, but they do serve a lot of others toward the mid west and east coast. thumbs_up.gif

Cakeuhlicious Posted 10 Aug 2011 , 5:29pm
Quote:
Originally Posted by jason_kraft

The actual cost of our business GL policy is $243 ($54 for $2M/4M general/products/personal injury/advertising aggregate and $184 for $2M auto), but Hartford's minimum premium is $425...if it was bundled with other Hartford insurance products it might work out to around the $200 level as an add-on.




Actual cost is irrelevant if you have maximized your coverage limits within the minimum premium (like you have). That's a good point, most people aren't as business literate as you are. A lot of people don't know (or think it will cost double) to check on $2/$4 limits of liability in cases where they are paying minimum premium. A lot of times it can cost absolutely nothing!!

I'm going to assume that the $2m auto you mentioned is for hired and non-owned auto liability, and I just want to clarify for those reading that Hired and Non-Owned auto liability does not cover your liability for driving your own vehicle, even if the policy is in the name of your business and the vehicle is in your personal name.

Non-Owned auto liability is only intended to cover YOU when employees use their own vehicle, and the vehicle is not owned, rented or contracted under your name, your business name or on your behalf. Hired auto covers a vehicle you are driving that is rented/borrowed, but is not registered in your name.

In either case it is a liability only coverage that provides no coverage for your own auto, and does not cover property damage to the employees vehicle, only to the opposing party. It stands to note that your hired and non-owned liability coverage also wont defend your employee, only your business. They can still be named in a lawsuit if driving their own vehicle so they still need to maintain their own auto liability coverage. You can get hired auto physical damage, however, which is usually required when you do something like rent a truck from a commercial business.

cakeandpartygirl Posted 10 Aug 2011 , 5:32pm
Quote:
Originally Posted by sillywabbitz

Ya'll are the best!!! Thank you both for your responses. Looks like I will need a business liability as well. I love CC.

Cake and party girl, did you get transferred?

Thanks again for all the help.





Yes! icon_sad.gificon_cry.gif

Cakeuhlicious Posted 10 Aug 2011 , 5:34pm
Quote:
Originally Posted by leah_s

State Farm does indeed sell a policy targeted at very small bakeries and home bakeries. Mine just increased to $275 per year.




I worked at a brokerage, myself, and State Farm does have a fairly competitive business program. They definitely made my company have to think outside the box for what we could offer that wasn't apples for apples.

It's nice to see some specialty programs popping up for home businesses. It's risky from an insurance stand point because although the risks themselves are low, so are the premiums. One major loss can ruin your ratio of loss to profit when premiums get so low. It'll be interesting (to a nerd like me) to see how that continues to pan out. icon_lol.gif

Totally-Frosted Posted 11 Aug 2011 , 6:27pm

This has been some helpful information. Thanks for the info Cakeuhlicious!

CrazyCatLady Posted 12 Aug 2011 , 10:19pm
Quote:
Originally Posted by leah_s

State Farm does indeed sell a policy targeted at very small bakeries and home bakeries. Mine just increased to $275 per year.




I called a local State Farm agent, and they said that they do not offer any liability policies for home based baking... do you happen to know what the policy type is called?

I will apparently have to be very specific when calling for quotes. I've been asking for liability policy quotes and explain the new law to them, but everyone seems so clueless. I've called multiple agencies, but I was really hoping that State Farm could help me.

Thanks for any info you have!

Launa Posted 26 Aug 2011 , 2:50am

I, too, have contacted my agent at State Farm and they don't have anything available. Farmer's Insurance has been the only thing I've found and they quoted $600/year. Ouch! I'd love to know what policy you have leah_s. Any information you can pass along would be very helpful!

HotChocolates Posted 26 Aug 2011 , 3:15am

I can recommend Raptor Insurance in Hurst, TX (817-282-4060). Pat Sprague is the owner and she helped my business get a specialty policy when we were in the start-up phase and sub-leasing a restaurant space. She is great at thinking outside the box.

Launa Posted 26 Aug 2011 , 3:48am

Thanks HotChocolates! I'll give her a call tomorrow!

jiya11 Posted 11 Apr 2013 , 2:39pm
Quote:
Originally Posted by leah_s 

State Farm does indeed sell a policy targeted at very small bakeries and home bakeries. Mine just increased to $275 per year.


Leah, I know its an old post but could you enlighten me? I am looking into it and dont see anything at State Farm.. Thanks in advance.

jason_kraft Posted 11 Apr 2013 , 3:03pm

A

Original message sent by jiya11

Leah, I know its an old post but could you enlighten me? I am looking into it and dont see anything at State Farm.. Thanks in advance.

Did you contact your local State Farm agent? If they don't provide commercial insurance they should be able to refer you.

Another alternative is: http://www.fliprogram.com/

jiya11 Posted 11 Apr 2013 , 6:30pm
Quote:
Originally Posted by jason_kraft 


Did you contact your local State Farm agent? If they don't provide commercial insurance they should be able to refer you.

Another alternative is: http://www.fliprogram.com/

 

Thanks!!

I looked into fliprogram and I am very tempted. Has anybody had experience with it? 

StrawnCakznBakz Posted 12 Aug 2013 , 8:50pm

I'm so glad I found this!!! My brain  has been afire trying to get evrything in place by years end! Today I'm making labels. I'm basically down to insurance. I've read so much my eyeballs are sweating and I think my brain may have oooozed from my ear. So, from what I've read here, I'll start with my current auto insurance company since they also offer business insurance and work my way from there.

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