If you make and sell candles at home, you may be risking much more than you think if you believe your homeowner’s policy is protecting you.
Recently, someone asked what types of coverage is needed for their candle making business.
Generally speaking based on the states I’m licensed in, and not necessarily specific to your state – There are various “home based business” insurance products available, albeit most are geared towards “professional trades” ie accountant, lawyer, online business, sales office (where there is low foot traffic if any) etc…
As a candle maker, the type of coverage desired is in (and I use this term loosely) manufacturing, with candles being the product manufactured.
“Rented Premises” as I believe you’re referring to within this context is often found as part of a general liability policy and is designed to cover losses that the business operation may cause to the occupied building of the business. And for protecting your home (or rented/leased building), this is often the part of general liability that offers protection.
Regardless, there are two key areas of vulnerability, one is when you sell a product. If the product is defective and causes injury, you may be strictly liable. Defective may include a defect in design, manufacturing, and/or warning. So for example, if you don’t have a warning that the candle may cause a fire, your candle may be defective and if it causes a fire to someone’s home, the buyer may have a valid claim against your insurance (or you if you don’t have coverage). There’s a reason why when we buy some things there’s seven gazillion warnings , with some of them appearing (to me anyway) kinda dumb, but each “dumb” one is often born from a lawsuit.
The next type of vulnerability is your own home/office/place of making. That’s called property coverage and there are two types. “real property”, which is improvements upon land, i.e. buildings and homes, and “personal property” which is (generally) anything physical that isn’t real property. In order to protect your building and personal property, the CORRECT type of property insurance is required. Correct meaning commercial property coverage.
Going back full circle, the type of coverage is “commercial general liability” to protect you from others, and “commercial property” (personal and building) that protects you from you (you being your business and employees).
It’s a big big big mistake to think your homeowner’s policy offers any type of protection from anything caused by your business. In other words, if your house burns down (or anything else) due to “business pursuits”, do NOT expect your homeowner’s policy to approve a claim unless you already have in writing from your agent that it will for the type of claim you’re filing. In other words, have a conversation with your agent (and/or give me a call) in detail of what you’re doing, and either get an endorsement that allows coverage for your activity, or get a separate policy.
Otherwise, if something happens, you may not have the protection you thought you had. Also, some wrongly believe that having a LLC or Corporation will provide all the protection they need. The weakest link in the chain is if someone sues your LLC, they’re also likely to sue you personally. Unless your homeowner’s offers liability protection for “business pursuits”, and every policy I’m aware of doesn’t as standard, you’ll have to lawyer-up on your own dime. You may prove you don’t have personal liability because your LLC / INC protects you, but you’ll maybe still have to pay out because the cost of litigation is greater than the lawsuit.