Cake Central › Cake Forums › Cake Talk › Cake Decorating Business › Cottage Business Liability Insurance vs Umbrella Policy
New Posts  All Forums:Forum Nav:

Cottage Business Liability Insurance vs Umbrella Policy

post #1 of 25
Thread Starter 
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
Visit me at www.keeponcaking.com for tutorials and other cake stuff.
Reply
Visit me at www.keeponcaking.com for tutorials and other cake stuff.
Reply
post #2 of 25
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!!!!
Failure is not an option!!
Reply
Failure is not an option!!
Reply
post #3 of 25
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
post #4 of 25
Thread Starter 
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.
Visit me at www.keeponcaking.com for tutorials and other cake stuff.
Reply
Visit me at www.keeponcaking.com for tutorials and other cake stuff.
Reply
post #5 of 25
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!
-Skye
Reply
-Skye
Reply
post #6 of 25
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).
post #7 of 25
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
post #8 of 25
[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
post #9 of 25
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.
post #10 of 25
State Farm does indeed sell a policy targeted at very small bakeries and home bakeries. Mine just increased to $275 per year.
Answers to the most often asked questions re: SPS. SPS instructions are on Page 15 of the Sticky at the top of the Cake Decorating Forum. Supplies can be ordered from Oasis Supply, Global or BakeryCrafts.
Reply
Answers to the most often asked questions re: SPS. SPS instructions are on Page 15 of the Sticky at the top of the Cake Decorating Forum. Supplies can be ordered from Oasis Supply, Global or BakeryCrafts.
Reply
post #11 of 25
A lot of great information!!!
post #12 of 25
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.
-Skye
Reply
-Skye
Reply
post #13 of 25
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
post #14 of 25
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.
post #15 of 25
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
Failure is not an option!!
Reply
Failure is not an option!!
Reply
New Posts  All Forums:Forum Nav:
  Return Home
  Back to Forum: Cake Decorating Business
Cake Central › Cake Forums › Cake Talk › Cake Decorating Business › Cottage Business Liability Insurance vs Umbrella Policy