Candle Making Insurance Explained
Figuring out insurance for candle making is difficult, especially if you’ve never run a business or worked with insurance of any kind. Most people want to dive head-first into making candles as a business and forget about insurance, or ignore it because it’s “confusing” or “expensive”.
Unfortunately, insurance is part of doing business. The right insurance will protect you from risks and potentially business-ending legal costs, even if you’ve made the safest possible candle and aren’t responsible for claims made against you or your business.
Insurance for candle making is not that confusing once you understand the basic concepts. This article covers:
- Fundamental concepts of insurance
- Relevant candle making insurance examples
- How product liability insurance may be the most important investment of your business
- How general liability insurance may be important for you
- Other types of insurances
- Why an LLC is not the same as an insurance policy
Insurance Basics
Let’s start with some basic insurance concepts before going crazy over the specifics to build a common language as our foundation. Insurance companies pay your fees when something goes wrong.
What they pay depends on your policy, which outlines those items in great detail. How much they pay comes from the policy, too. When you think something has gone wrong and want the insurance company to pay for it, you open a claim with that information. This service exists in exchange for you monthly, semi-annual, or annual payments known as premiums.
Car insurance is easy to understand.
If your car is damaged by hail, and your policy includes “hail damage”, the insurance company pays for the repairs. You’re not on the hook for anything included in the policy. This example is grossly over-simplified, but illustrates the basic idea of insurance:
- You – pays monthly premium to cover hail damage
- Hail Damage – Hi, car!
- Insurance Company – pays cost of repair bill
Vehicle insurance is a fine example, but what about candle making? The potential “events” that pay out are not as simple as hail damage, unfortunately. There are a few major assumptions we want to make as candle makers.
First, you want to promise consumers your product is safe and your store is safe to shop in. Second, you want to promise your employees (which might just be the cat) a safe working environment. Third, you want to promise your property it will never be damaged by anything you do while making candles.
The real world won’t reward your relentless optimism.
Accidents happen, and they’re almost always expensive. In America, consumers blame companies for problems all the time. This is expensive for everyone, even if the company is innocent. The blame game known as Liability requires time, research, and money to work through. Insurance exists to manage the financial threat of lawsuits to your company. It may even protect your personal assets if you don’t operate in the benefits of an LLC.
Candle Making Insurance Examples
The pure volume of different situations you might encounter as a candle maker are as numerous as humanities creativity allows it. It’s impossible to cover every scenario, but here are a few of the most common considerations insurance can help with:
Candle starts a house fire
Candles left unattended or in violation of a variety of safety concerns are an obvious fire hazard. Also, burning a candle near a curtain or directly next to a house plant is a risky move.
Candle container overheats and shatters
It’s important to use jars that meet industry standards, but sometimes they get too hot from environmental effects and explode anyways.
Consumer burns hand picking up candle
Maybe the glass didn’t shatter, but when the consumer picked it up to move it they burned themselves and had medical bills.
Visitor to your craft fair booth hurt themselves on the display
Even though you carefully arranged each scent alphabetically and in terms of relative “bougie-ness”, a real Karen tripped over herself into your display and had medical bills for the incredible display of athleticism.
Everyone in these examples has a right to try and come after your business for money. Whether they’re right is a matter of law, but if you have the right insurance policy in place you can avoid footing the bills (legal, medical, or otherwise).
What policies do you need, then? That entirely depends on the rules you have to follow. Certain localities may require you to have a minimum coverage. It’s pretty common for larger craft fairs to require insurance, but not all. Otherwise, the insurance market is yours to engage or ignore. All work comes with risks and serious companies understand insurance is a necessary cost of business.
Product Liability Insurance
Arguably the most critical coverage for most candle makers is product liability insurance. These policies explicitly exist to cover financial liabilities related to physical harm or damages caused by the product. This would protect a small business from paying a significant amount in legal or other fees if a lawsuit was brought up for candles causing fires or harm to the customer.
To be clear, product liability insurance doesn’t mean you can’t be found responsible for the damage. If your candle really is responsible (which is determined by insurance companies and/or a court of law), the insurance company will typically pay out any fees (up to a certain amount) you’re liable for, even if it’s just legal fees. Without insurance, your business is on the hook to pay out, and a single case can swiftly bankrupt you without insurance.
Lining up product liability insurance for candle making can be tricky, so make sure you understand what you’re getting into. Whatever you choose to do, consider whether:
- the policy explicitly covers candle sales from your markets (home-based, fair-based, internet-based)
- instructions for opening a claim are easy to understand and clear
- policy limits are reasonable for the premiums requested
General Liability Insurance
While product liability insurance financially protects you from damage and harm to consumers from your products, general liability insurance covers the majority of other common business risks.
Every serious candle making operation should carry general liability insurance to protect against the common horror story of someone hurting themselves on the property. Again, even if you’re technically not at fault for it, claims often come with legal fees to defend yourself. These policies sit in place to cover risks common to almost every kind of business.
Exactly what is covered in general liability insurance varies. Some policies even include product liability insurance, but this doesn’t seem to be common. Read carefully and ask good questions to understand exactly what’s included. This insurance type is typically required by larger craft fairs and may even ask for the show to be listed as “additional insured” on the policy.
Other Insurance
Insurance comes in great variety to serve almost any need, risk, or fear you might have as a business. For example, Workers Compensation is required by the government most of the time, such as in the state of Minnesota, which protects you and your employees if harm befalls anyone on the job.
Your insurance needs depend on the personality and maturity of your candle shop. There’s a policy for just about anything you can think of, but not everything is reasonable! If you want to get extra crazy, open “lottery” insurance policy to cover costs for hiring and training staff if your existing staff all…. win the lottery and decide to leave all at once!
Insurance should be treated as part of your normal business costs, like rent and utilities. It’s expensive, especially if you’re just getting started, so open a policy when it makes sense for you. Most people don’t need to be convinced of the value of insurance for candle making, but the relatively high premiums often prevent many from opening a policy early in their growth.
If or when to open a policy is your choice to make, but remember that it only takes a single lawsuit (even if you’re innocent) to “pay for itself”. In the event someone does come after you, your insurance will guarantee your craft has a future.
Does an LLC count as insurance?
Registering for an LLC protects your personal assets, like your home or bank accounts from being touchable by the businesses financial liabilities.
An LLC is not a substitute for insurance in any way.
The purpose of an LLC is to distinguish your personal assets from your businesses assets. Ignoring insurance completely, if your LLC owed a million dollars over a legal dispute, only your business would have to pay. They wouldn’t be able to collect anything from your personal bank account or property if your business didn’t have enough to cover it.
On the other hand, insurance simply deals with making payments on your behalf. You can have insurance for your candle making operation without an LLC, just as you can have an LLC without insurance. An LLC is not the same as insurance – do not make this assumption.
Homeowners Insurance
Candle shops start as home-based businesses more often than not. Does homeowners or renters insurance already cover some of these risks?
It depends.
Home-based business ventures usually require additional policies, because damage caused by your operation might be out of scope for what home insurance typically covers. The last thing you want to do is file a claim for damage to your home from a candle only to find the insurance company won’t cover the damages because they don’t appreciate the amazing craft like you!
Conclusion
Choosing insurance comes down to a few questions that only you can answer.
- What activities are you taking part in as a business, and what risks are associated with those activities?
- Where are you selling? Does your local government require you to operate with a license and a minimum coverage? Does the e-market have requirements?
- What would happen if someone came after your business? Would they be able to come after your personal accounts if the business couldn’t handle the financial obligation?
- Are you comfortable with the current level of protection you have from financial liabilities, or are there obvious vulnerabilities?
- Is it worth forgoing insurance to save a few bucks at the risk of losing it all the first time something happens?
Insurance is part of doing business as much as it’s part of living life. Liabilities are inevitable if you’re serious about the craft and remain consistent for long time. They might not be career-ending injuries or lawsuits, but they eventually happen. Choosing insurance isn’t something businesses do out of fear, but out of necessity. Lawsuits are too expensive to pay for and deal with, and can cripple any business if the right protection isn’t in place.
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