Last week’s questions and answers with Bomba Insurance Agency helped demystify why gift basket insurance provides peace of mind for our personal and professional lives.

The last four questions continues this valuable education.

Q: Can I deduct the cost of business insurance on my income taxes?

A: Yes; this cost is part of doing business and is deductible.

Q: What else is covered in a business insurance policy?

A: There’s lots of coverage, including:

• Liability for bodily injury
• Property damage, including losses that occur after the sale (also known as product liability)
• Personal/advertising injury in case of slander or defamation of character (you are dealing with the public and false advertising claims)
• Some form of no-fault medical payment coverage
• Other types of coverage that can insure your business property, equipment, inventory, supplies, and loss of business income

Q: If I’m sued, what about attorney or lawyer costs?

A: These costs are included with the insurance policy, but it’s wise to ask your agent or company if the cost of defense is what’s known as “inside or outside of the policy limits.”

If inside the policy limits, that means they subtract the cost of defense from your insurance coverage. That’s not the best way to go, as the cost of defense is usually more than the lost, and you may run out of coverage.

Outside the policy limit coverage is best. That means all legal fees are covered with no limit, and it is not subtracted from your liability coverage.

Q: What else should I look for in an insurance policy?

A: Make sure that the insurance company is an “admitted” company to your state and that they are at least an A-rated company.

Admitted means they maintain offices in your state and therefore are usually covered by your own state’s “insurance guarantee fund” in case they become insolvent when you have a loss.

This information, as well as an insurance company’s rating, should be available from your agent and can also be checked by a reputable rating company such as A.M. Best, an independent rating company that is not funded by insurance companies.

Most importantly, ask lots of questions, and make sure you understand what you are buying. There is no such thing as a stupid question because you’re smart enough to ask!

What questions or comments do you have? I encourage you to share your feedback in the comments section below.

My thanks to Bomba Insurance Agency for their participation in this Q&A, being a partner of this blog, and sponsor of the fifth edition of How to Start a Home-Based Gift Basket Business.

Shirley George Frazier

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The topic of business insurance isn’t glamorous or fun, but it’s essential for gift basket business owners who are serious about protecting their personal and business assets.

Thankfully, Bomba Insurance Agency specializes in our industry’s insurance requirements, and their answers to the following five questions are meant to provide clarity and peace of mind whether you’re searching for coverage, considering a policy change, or wondering if your existing coverage is adequate.

Q: Why do home-based businesses need insurance?

A: You need insurance because as a business owner, you accept the responsibility of injury to your customer and/or to their property.

Q: I’m operating a hobby that’s not necessarily a business. Would my home’s insurance cover me?

A: Your home insurance may cover you, but if you file a tax return for the hobby and you are selling and making/losing money from it, then the hobby is excluded for liability coverage under your home insurance policy.

Q: My homeowner’s insurance agent says I can get a policy for about $10 a year under my home’s existing policy. Why not do that?

A: You must read the policy to learn what’s covered under the section entitled “Business Pursuit.” In most instances, it only protects you if a customer is injured in your home. This works for tutors and similar practices but does not provide coverage if you exhibit outside of the home.

Q: Isn’t business insurance expensive?

A: Not necessarily. Prices can be very different, so it’s best to shop around to compare rates. Some companies offer coverage for as low as $200 a year depending on the type of business.

Q: How much insurance is enough?

A: A general rule of thumb is to cover your business for what you have to lose. Cover your assets to start. Of course, with the current economy and the possibility of juries awarding substantial sums of insurance company’s money, it’s hard to put a number on it. Usually, the more insurance you buy, the cheaper it gets. I always tell new clients that even if they start with basic coverage, it is more protection than they had yesterday!

What questions or comments do you have for Bomba Insurance Agency? I encourage you to share your feedback in the comments section below.

This may be a scary subject, but isn’t it best to get answers now while questions are on your mind?

Stay tuned next week for four more questions about insurance coverage.

I’m pleased that Bomba Insurance Agency supports our industry, is a partner of this blog, and is sponsoring the fifth edition of How to Start a Home-Based Gift Basket Business.

Shirley George Frazier

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As a gift basket designer, your main focus is finding products, making deliveries, and earning revenue.

Business is moving along and hopefully increasing each day, but there’s also a chance that an unforeseen situation may come your way. Here are three examples.

Liabilities happen against many businesses, and because your business is food based, there’s a good chance that such a situation will occur. It’s your responsibility to make sure you are protected against these circumstances.

Insurance isn’t a glamorous topic, but it is a service that provides peace of mind while you continue to create beautiful gifts and baskets.

Many insurance carriers call gift basket coverage “crafter’s insurance,” but don’t let that arts-and-crafts name fool you. Such insurance provides you with a minimum $1 million in liability protection and other built-in coverages that let you rest comfortably at night.

Review this business insurance information page to consider your options. You want the media to talk about your gorgeous designs, not a customer seeking damages because of a tainted product.

Shirley George Frazier

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When I began my business in 1990, there was no information available anywhere on how to store gift basket products.

So, where would an aspiring designer put all of her inventory? The logical choice for me was in my home attic, as it’s big and easy to access.

The basement was also an option, and if I were in an apartment, I’d also consider turning one of the rooms into my workspace/storage facility.

If you are home based and store inventory within your premises, it’s wise to make sure that all of the contents are insured against theft, fire, or flood. Theft may not occur at home, but the latter two are possible.

Monday’s activities around my home brought the potential for fire too close for comfort. I talked about this on another blog Wednesday and decided to bring this situation here for your benefit.

A fire occurred in the house next to me. It was a tense time as the block was completely shut down to passersby while an army of firemen ended the ordeal.

My home was completely spared of damage, including trapped smoke in the halls and rooms. I cannot tell you how thankful I am that all worked out for me.

When the attic area acted as my storage facility, I estimated the inventory’s worth each year and adjusted my business insurance to cover the contents.

What about you? Is your valuable inventory covered by an insurance policy, or do you hope that what happened to me on Monday won’t occur in your area?

As you bring new baskets, foods, gifts, and supplies into your workspace for holiday orders, be sure to protect the contents against problems that may happen in your facility and situations that you have no control over on other people’s property.

You’ll learn more about your insurance options on this page.

What’s been your business experience with fire, theft, and flood?

Shirley George Frazier

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What would you do if your business no longer existed due to fire?

That’s what happened Sunday night to a Long Island, New York-based florist. You can read the story at Newsday.com.

Everything was destroyed including the gift baskets also sold by the florist.

When asked about the value of his merchandise, the owner said,

“…he could not estimate his losses. ‘I couldn’t even fathom it,’…”

What a terrible situation.

Do you have a backup plan in case of fire, flood, or other situation that temporarily or permanently halts your business? Here are some things to do now before the week ends.

1. Take photographs of your workspace, inventory, and equipment.

Years ago when my husband’s car was stolen, he had lots of tools in the trunk. The insurance company would not pay him for the loss because he had no proof of ownership.

Even though he no longer had receipts, photographs would have provided proof and allowed him to recoup some of the investment.

2. Review your business insurance to learn which documents are best kept in a location outside of your workspace.

Insurance carriers don’t object to cashing your premium checks as much as they seem to object to paying you for losses. Make sure you understand the policy for your own protection.

3. Install a fire alarm in your workspace.

You may not be able to install a sprinkler system, but a fire alarm will create attention.

The florist’s fire occurred during the Columbus Day weekend. If your office is closed on certain days, perhaps unplugging all equipment before leaving is also wise.

Here’s where to learn more about photography and insurance.

What precautions have you taken against unforeseen circumstances?

Shirley George Frazier

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“Where can I get insurance? Do I really need it?”

This question is asked at nearly every adult school gift basket class I teach, and I bet new and current designers in future classes will ask the same.

It’s important for every designer to consider investing in the type of business insurance that matches their level of liability.

For us, that includes product liability insurance (even if products are prepackaged) and fire/flood/theft (for your workspace and if you sell on consignment).

You’ll also qualify for other types of coverage, but it’s best to talk to an insurance agent who’s knowledgeable about small business policies to learn your options.

Insurance isn’t a glamorous topic, but neither is the thought of receiving a summons or losing everything you’ve worked so hard to obtain.

This page provides more information on insurance requirements.

Shirley George Frazier

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