Starting a button making business from home? - Do I need insurance? July 17 2012

The insurance question pops up pretty frequently.  You are starting a button making business at home: when do you get insurance?  What are the liabilities for a home business?  If you make the buttons at home and sell at events or to stores, do you need insurance.

The quick answer is that strictly speaking you do need liability insurance and I know this is not the answer you wanted to hear.  If you are selling a product in stores, online or at events you do have liability exposure that you may want to cover but a business policy is costly for a small business just getting going ($1000 + per year) and not everyone uses their button making business as a full time business but that makes no difference to the price even if it is part-time.

Most home insurance companies will do a small business insurance extension to a home policy for $200 - $350 per year. If your insurance company does not allow button making as a home business then try a different company or get your broker to look around. You should get the additional coverage for the aprox $250 a year.

Do consider that in the research & development stage or whilst making samples and developing your business plan for your button making business you do not need liability insurance.  As soon as you start selling you do need business insurance.

Many people have of course worked from home for years and never had insurance.  Some event organisers will want a copy of your liability insurance as part of the application for vending but THE MAJORITY DO NOT in my experience.

The events that usually require liability insurance are the larger commercial events or events run by the city, province, state or municipality. These are often the better events for sending so there may be no way around the insurance issue.

My personal experience is that I did not get insurance for a couple of years, whilst I was setting up my business.  I suppose I took a risk and I was lucky. If you ask a financial adviser, insurance broker or lawyer, they will tell you to get insurance.  If you can afford the lawyer you can probably afford the insurance.

This article was written in response to multiple questions over time on the insurance question:

Hi Button Guy, I’ve got a strange question for you and hope you’ll be able to answer it.

 I’ve ordered 2 button makers from People Power Press and love them.  (2.25 and 1” models) I bought the machines so I could make some “environmental” buttons and have had a lot of fun making a bunch of environmental ones and others as well.

 I want to sell buttons, mirrors etc. at our local craft fair (and anywhere else I may be able to), but to do so, I had to get a business licence from the municipality.  I did that ($75 a year), but they also require that I have liability insurance.  

 Our home insurance carrier will not allow us to add my “business” to our policy as a home based business (the $250 a year option). They say that making buttons at my kitchen table and selling them is too risky  because of choking and pricking hazards to customers.  Apparently I need a business liability policy costing approx $1000 a year.  If I choose to have a website, that might be higher. Their reasoning being that I might attract business from other countries and different laws would be in effect. Crazy, eh?  Especially since I doubt I’d make more than $1000 a year.

Thanks to Ryan Mitchell from Mitchell Sandham Brokers for his input on home and small business insurance.