Bob is a woodworker. He has always loved the craft and turned it into a small business after retiring. From local craft fairs to online marketplaces, Bob is getting noticed, and he’s starting to make money.
However, an unexpected storm combined with a leaky garage roof ruins his inventory of both materials and finished pieces. With an event coming up and nothing to sell, he’s in a tough spot.
And it gets worse. Bob doesn’t have insurance. With a small inventory, he assumed the coverage wouldn’t be worth the cost. For Bob, it’s a hard lesson to learn: the risks for small craft makers are bigger than they appear.
Here’s how craft business insurance can help protect your inventories and assets at a price that won’t break the bank.
The Hidden Value of a “Small” Inventory
The craft industry is doing big business. According to Grand View Research, the market now generates more than $155 billion in revenue annually.
For individual vendors, though, “small” is the operative word. Many make items on a small scale using small inventories; they’re more a labor of love than a pursuit for profit.
As a result, it’s easy for craft makers to overlook inventory risks. Let’s say an artist loses $500 in supplies like brushes, paints, and canvases. The result could be thousands of dollars lost because they cannot produce new works until these items are replaced, and they may not have this money on hand.
Risks Craft Vendors Face Beyond Inventory
Craft vendors also face other costly risks, including:
Liability
Liability can result from injury or accident. A prospective customer might slip and fall at your booth, injuring their hand, or a buyer could experience an allergic reaction to skincare products or jewelry. Depending on the severity of the injury or reaction, you may be on the hook for thousands or tens of thousands of dollars in medical bills.
Theft or damage
Your supplies may be damaged by bad weather or stolen from your car. While the inventory itself may only be worth $500 to $1,000, many craft creators don’t have the budget to immediately replace lost items. That means they can’t sell at the next event, making it harder to recoup costs.
Shipping
If goods are damaged in transit, buyers can request their money back. This leaves vendors with a net-negative profit because materials are lost and no revenue was made.
Essential Insurance Types for Craft Businesses
There are three essential kinds of craft business insurance that owners should consider:
General liability insurance
General liability insurance covers third-party injuries such as slips, trips, and falls. It also covers property damage in the event that you accidentally damage or break tables, chairs, or other items at a market space. A GL policy can offer some coverage for products and completed operations, but a standalone product liability policy may make sense in instances where a business may have increased risks.
Product liability insurance
Product liability insurance provides coverage for injuries or damages sustained from handmade items. Consider a candle. If design issues make the candle unsafe and it causes a small fire, customers may take legal action. Product liability insurance helps cover the cost.
Business personal property insurance
Business personal property insurance protects your inventory, tools, and equipment both at home and in transit. If a storm damages inventory in your garage or a car accident ruins your finished products, business personal property insurance covers the cost.
Why Home Coverage Isn’t Enough
Many craft makers have some insurance in place, such as home insurance that covers items in their house or garage, however, it may not be enough.
Here’s why.
While home insurance covers personal property, it typically excludes business inventory. This means that if you have art supplies in your garage for personal use, such as making paintings for your home or giving them to friends and family, these supplies are covered. If you make art to sell, though, these supplies become inventory, which is not covered by your home insurance.
Affordable Coverage Options
Gone are the days of one-size-fits-all insurance policies. Now, small craft businesses can find insurance options tailored to their needs, from inventory size to business activities. Vendors can set custom coverage limits and create plans that best reflect their typical risks.
Taking Action: Next Steps
Ready to protect your small craft business? Start with these four steps.
1. Assess
First, take stock of your inventory including materials, equipment, and finished goods. What is the total approximate cost, and how much revenue could you lose if these items were lost or damaged?
2. Evaluate
Next, evaluate any other coverage you may need, such as general liability for market stalls or product liability to protect against injury or damage claims.
3. Compare
Once you’ve identified your baseline insurance needs, compare multiple craft business insurance options. See what different providers offer in terms of coverage, premiums, and customization.
4. Purchase
Once you’ve found a best-fit insurer, purchase your policy and obtain your certificate of insurance (COI). Keep a digital copy for reference at home, and print a physical copy to display in your market stall.
The bottom line is that no craft business is too small to protect. Find the coverage that works for you. Get a quote here.