A Studio Protector® Publicationby CERF+

More info: www.studioprotector.org

BUSINESS INSURANCE Guidebook For Artists

Table of Contents

Introduction ........................................................................................1

RiskManagement.........................................................................2–3

Liability:AvoidingaHigh-StakesBet.....................................4–5

TypesofBusinessInsuranceCoverage..................................6–9

BusinessProperty...............................................................6

Liability...................................................................................7

OtherCoverage.............................................................8–9

Flood.............................................................................8

Earthquake.................................................................8

WorkersCompensation.........................................9

CommercialAuto.....................................................9

What’saBOP?:BusinessOwnersPolicy.......................................9

StepsinGettingCoverage.....................................................10–12

ThingstoWatchOutFor................................................................. 12

Summary.............................................................................................. 13

Resources............................................................................................. 13

What if…

➠ A lightning strike or electrical fire burned your studio to the ground one night, or

➠ Heavy winds caused a tree to fall on your studio, destroying expensive tools and work in progress, or

➠ Your art show display collapsed, destroying the work in a neighboring booth or severely injuring a child?

Areyouwillingtogambleyourassets,yourfinancialfuture,andyourabilitytopursueacareerasanartistbybettingthatnothinglikethiswillhappentoyou?

Businessinsuranceisatoolyoucanusetotransferunacceptableriskstoaninsurancecompany.

Did You Know?

Homeownersorrentersinsuranceusuallyexcludes mostbusinesspropertyandallliabilityrelatedto businessactivities,unlessyouhavespecifically purchasedahomebusinessendorsement(rider).

Homeownersinsuranceexcludesbuildingsonyour propertyiftheyareusedforbusinesspurposes.

Forinsurancepurposes,youareinbusinessifyou offergoodsorservicesforsale.

Homeowners,renters,ANDbusinessinsurance policiesexcludelossesfromfloodsandearthquakes.

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Risk Management

Riskmanagementiscriticaltorunningyourbusinesssafelyandresponsibly.Itinvolveslesseningyourexposuretoriskby

Employingsafetyprecautionsparticulartoyourbusiness

Protectingagainstcatastrophicandunanticipatedlosses throughadequateinsurancecoverage

Managingrisksmeansbeingproactiveaboutthefutureofyourcareerbyprotectingnotonlyyourstudioandmaterials,butalsoyourabilitytoearnanincome.Agoodriskmanagementplanincludestakingallreasonablestepstoreducethepotentiallossfromtheserisks,whetheratyourstudio,intransit,oronlocation:

• Bodilyinjury(yourself,employees,customers, andothers)

• Property(structure,inventory,tools,supplies,records, etc)lossfromfireornaturaldisaster

• Theft

• Propertyofothersinyourcare

• Pollutionorotherhazardsthatmaybeaconsequence ofmaterialsorprocessesspecifictoyourmedium

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To Do — IDENTIFY RISKSMakealistofrisks,whetherornottheyareinsurable,frommostserioustoleast.Trytomakethislistprettycomprehensiveandincludethingslikedatalossaswellasnaturaldisasters,firesfromvariouscauses,theft,trees,etc.Addstepsyoucantake,includinginsurance,toprotectyourselffromeachrisk.

To Do — STUDIO INVENTORYAvitalprecautionarysteptotakeforyourriskmanagementplanistohaveanup-to-dateinventoryofyourassets,andtohaveacopystoredinasafeoff-sitelocation(and/orinaninternet“cloud”backup).Documentyourtools,equipment,finishedworks,andotherassetswithphotosandstorewithyourinventoryrecords.Thisinventorywillhelpyoudeterminehowmuchpropertyyouhaveatriskthatneedstobeinsured.Ifyoudoexperienceapropertyloss,theserecordswillbeinvaluableinestablishingvaluesforaninsuranceclaimorfordisasterassistance.

TIP — The Studio Protector Online Guide:

www.studioprotector.orghasinformationtohelpyoutakestepstoprotectyour “A’s”—your art, your assets, and your archives,andtohelpyoutakeeffectivestepstorecovershouldanemergencyhappen.

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Liability — Avoiding a High-Stakes Bet

Evenifyouareverycareful,unforeseenthingscanhappenthatresultinbodilyinjuryorpropertydamagetoothers.Whilethechancesofsuchanoccurrencemayberelativelylow,theconsequencescanbecatastrophictoyou,yourfamily,andyourcareer.Considerthesescenarios:

Someone slips and falls at your studio during a holiday studio tour, and their insurance company sues you to recover medical costs. Your homeowners insurance company refuses the claim because the tour was a business-related activity.

Your art show booth gets blown or knocked over, destroying $50,000 worth of blown glass in your neighbor’s booth, or worse, injures a child. The injured party contends that you are at fault because your booth was not adequately secured.

Someone is injured by your work and their health insurance company sues you to recover $150,000 in medical payments, the injured person sues for pain and suffering, or both.

Artistswhowouldneverconsiderdrivingacarwithoutliabilityinsurancetoooftenoperatetheirbusinesseswithoutthisvitalcoverage.Manyartistsmistakenlybelievethattheirhomeownersinsurancewillcovertheminsomeoftheseinstances.Goingwithoutliabilityinsuranceforyourbusinessistrulyahigh-stakesgamble.

Becauseriskexposureforliabilityiscalculatedbyannualgrossbusinessreceipts,mostartistswillfindliabilityinsurancetobesurprisinglyaffordable.

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Liability — Things Worth Considering: Homeownersandrentersinsurancegenerally excludeliabilityarisingfrombusiness-relatedactivities.

Yourlandlord’sinsurancecovershim, not youfor liabilityandpropertyloss.

Evenifyouarefoundnotatfault,aliabilitylawsuit couldcostyouthousandsofdollarsinlegalfeesto defend.Liabilityinsurancegenerallycoverslegal coststodefendsuchsuits.

Liabilityjudgmentsarenotdismissedbybankruptcy andwillfollowyouuntilsettled.

Forproduct liability,thepolicythatisinforcewhen alossoccurspaysthecosts—soyouneedto maintainyourliabilityinsurance.

Showpromoters’insurancepoliciesgenerallydonot coverexhibitors,andmanyshowcontractsrequire youtoassumeliabilityforyourowndisplayand actionsatashow.

Increasingly,showsandpublicartscommissions requireproofofliabilityinsuranceintherange of$500,000to$2million.Whilethatsoundslike awiderange,theremaybeonlyamodestdifference inpremiumstopurchasecoveragewithhigher limits.Insurancecompaniesroutinelyprovide proofofinsurancewhenitisrequiredasaservice totheirclients.

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Types of Business Insurance Coverage

BUSINESS PROPERTY

• Property (Building)—Coversthephysicalstructureof yourstudio.Ifyourstudioisinabuildingonthesame propertyasyourhome,donotassumethatyour homeownersinsurancecoversit!

• Business Personal Property—Coversthecontentsof yourstudiosuchastools,equipment,rawmaterials, workinprogress,finishedproducts,etc.

• Inland Marine—Coversyourworkandotherproperty intransitorawayfromthestudio,suchaswhen teaching,doinganinstallation,oratanartsfestival.

• Personal Property of Others—Ifyoudorepairor conservationworkyouneedinsuranceforworkinyourcare, howeveritdoesnotcoverdamageyoumaycauseinthe courseofworkingontheobject.

Does not cover:

Flood Damage—Damagefrom“risingwater” requiresspecialfloodinsurancetobecovered.

Earthquake Damage—Damagefromearthquakes orotherkindsofearthmovementrequiresearth- quakeinsurancetobecovered.

TIP—PropertymaybeinsuredforeitherReplacement Cost or Actual Cash Value(replacementcostminusdepreciation).Replacement Costisusuallythebetterchoice,butcostsmore.

TIP—Ifyourstudioisinthehomeandbusinessvolumesmall,youmaybeabletogetabusinesspropertyandliabilityendorsementaddedtoyourhomeownersinsurance.

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Types of Business Insurance Coverage

LIABILITY

• General Liability—Liabilityinsuranceprotectsyouif someoneisinjuredwhileonyourpropertyorifyour propertycausesdamagetoothers.Liabilityinsurance stayswithyouwhenyouareatalocationotherthan yourstudio.

• Product and Operations Liability—Coversyouin theeventsomeoneisinjuredbyaproductorwhileyou areperformingyourworksomewhere.

• Errors and Omissions—Ifyouwriteorteachyoumay beinterestedinthiscoverageincasesomeoneis injuredfromfollowingyouradviceorbecauseofan instructionyouomitted.

• Umbrella—Protectsbeyondliabilitycoverage,kicks inwhenallotherliabilitycoverageisexhausted,usually inincrementsof$1million.

Does not cover:

Lossestoyourownproperty

Lossestopropertyofothersinyourcare

TIP—Ageneralbusinessliabilityinsurancepolicyfollowsyouwhereyougo,soyouarecoveredwhetherinthestudiooratashow.

TIP—Productliability:youarecoveredbythepolicyinforcewhenalossoccursnotbythepolicyyouhadwhenanobjectwasmade.

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OTHER COVERAGEKeepinmindthatbasicbusinessinsurancepoliciescoverriskstopropertylikefire,lightning,explosion,windstormorhail,smoke,riot,theft,waterdamage,vandalism,weightofsnow,andsoon.Itmaybecalled“all-risk”coverage,butwillmostlikelyhaveexclusions.Flood and earthquake are generally not coveredinastandardinsurancepackagesoitisimportanttoevaluateyourrisksforthese.Understandwhattheexclusionsinyourpolicyare.Alsoknowtheamountorlimitofcoverageandmakesureyougetasmuchprotectionasyouneed.

• Flood Insurance—Almostallbusiness(andhomeowners)insurancepoliciesexcludedamagefrom“risingwater”orfloods.FloodinsurancepoliciesareavailablethroughtheNationalFloodInsuranceProgram,andyouragentmaybeabletoobtainapolicyforyou.Youcanevaluateyourfloodriskandgetanestimateofthecostoffloodinsuranceatwww.floodsmart.gov.Youdonothavetobeinadesignatedfloodzonetofloodorownyourbuildingtopurchasefloodinsurance.

• Earthquake Insurance—Mostpoliciesexcludedamagefrom“earthmovement”includingearthquakes.Evaluateyourriskandlookintothecostsofinsuringforthishazard.RememberthatCaliforniaisnottheonlystatethatissubjecttodamagingearthquakes.

• Business Interruption—Coversthelossofbusinessincomeincurredduringtheperiodoftimeyourstudioisclosedduetoacoveredloss.

• Extended Business Income—ExtendspaymentforlossesofbusinessincomebeyondBusinessInterruptioncoveragetimelimits.

• Extra Expense—Paysforre-locationofyourstudio,ifnecessary,duetoasignificantloss.

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• Employee Dishonesty—Coverslossesduetodishonestactsofemployees.

• Workers Compensation—Coversmedicalcostsandlostwagesforaworkerthatisinjuredonthejob.Somestatesrequireallbusinesseswithemployeestohavethiscoverage,andsomeallowexemptionsforbusinesseswithfewemployees.However,ifyoudonothavecoverageyouarepersonallyliableforthesecosts,whichmaybelongtermifaworkerisdisabled.

• Commercial Auto Coverage—Ifyouhavevehiclesthatyouuseinyourbusiness,eveniftheyarealsoyourpersonalvehicles,theyshouldbeinsuredforbusinessuse.Inmostcases,personalautoinsurancewillnotcoveralosswhenthevehiclewasbeingusedforbusinesspurposes.Ifyouhaveemployeesandtheyusetheirownvehiclesfortasksconnectedtoyourbusiness,youalsoneedcoveragefor“non-owned” vehicles.Iftheyhaveanaccidentwhiledoingworkforyou,theirinsurancemaynotpayandyoucouldbeheldliablefordamages.

What’s a BOP?

ABOPorBusiness Owners Policyisaninsurancepackageforsmallbusinessescombinesthemostcommonpropertyinsurancecoverageandcommercialgeneralliability.Thiscanbeaneconomicalwayforasmallbusinesstoinsureandformanyartiststhecostmaybelittlemorethanthecostofaliabilitypolicyalone.Generally,thesameexclusionsforfloodandearthquakeapply.

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STEPS IN GETTING COVERAGE

Prepare a Business “Commentary”

Tohelpyourinsuranceagentunderstandyourbusiness,prepareaonetotwopagedescriptionofyourbackground;experience;andsizeandscopeofoperations.Behonestandstraightforwardaboutyourbusiness.Theagentwillusethisinformationtoweedoutunderwriterswhohavelittleinterestinyourtypeofbusiness.

Find an Insurance Representative

Shoparound.Lookforagenciesthatspecializein“commerciallines.”Justbecauseanagencysellsautoorlifeinsurancedoesnotmeanthattheyareexperiencedinbusinessinsuranceorevensellit.Askfriendsand/orcolleagueswhomtheyuse.Makesuretochoosearepresentativeyoufeelcomfortableworkingwith,someonewhoiscommunicativeandresponsivetoyourneeds.Youmaydecidetoworkwithanagentwhorepresentsaspecificcompanyorcompanies,orgowithabrokerwhoindependentlyanddirectlyrepresentsyoutothemarketplace.Brokersmayofferabroaderrangeofcoverageoptionsbecausetheyrepresentyouandnottheinsurancecompany,buteitherchoiceisfine.Justbesureyourrepresentativeunderstandsyourinsuranceneedsandhelpsyoutodesignapackagethatprovidesthecoverageappropriatetoyoursituation.It’sokaytobewaryofinsurancesalespeople.Ahealthydoseofskepticismmeansyou’llusegoodjudgmentwhenmakingyourdecisionaboutwhotoworkwithandwhatcoverageyou’regoingtochoose.Alistingofbusinessinsuranceplansdesignedforartistsisavailableatwww.studioprotector.org.

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Get Several Quotes

ArmedwithrelevantknowledgeofyourbusinessfromyourBusinessCommentaryandknowledgeoftheinsuranceindustry,youragentwillorganizespecificationsforquotationandidentifydesiredoptions.Thesespecificationsaretranscribedintoinsurancepolicyapplications.

Manyindependentbrokerswillbeabletoofferquotesbycompetinginsurancecompanies.Insomecasesagroupplanofferedbyanorganizationtowhichyoubelong—orapolicydesignedspecificallyforartists—mayofferabetterpriceandsetofoptions,butmaynothavetheadvantageofhavingalocalagent.

Weigh the Merits of Quotes Gathered

Ideally,youragentwilllisteachsuggestedcoverage,includingitsparticularcost,inorderofthecatastrophicpotentialthatriskrepresentstothebusiness.Thisway,youcanmakeeducateddecisionsaboutaddingtoorcuttingbackoncoveragetoachievethebestcost/benefitbalance.Ifyoufeelthequoteistoohighforyourbudget,askwhatoptionsyoucouldchangetoreachapriceyoucanlivewith.

Ask Questions

Askaboutwhatiscovered,andevenmoreimportantly,whatisnotcovered.Ifyouarenotsatisfiedwiththequalityoftheanswersordonotfeelthattheagentisbeingresponsive,keepshoppingandfindacompanyyoutrust.Whenyougetyourpolicy,readit,andagain,askforclarificationofanythingyoudonotunderstand.

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Things to Watch Out For:Proper protection—Don’tbeuninsured.Ifyoucan’t affordcompletecoverage,purchasingsomeinsurance isbetterthanhavingnone.Avoidunnecessarycoverage.

Gaps in coverage—Makesureyouunderstandthescopeofyourcoverage.Ifthereareknowngapsduetocost,understandwhattheyareandmakeanalternateplan.

High deductibles/low deductibles—Insurancecompaniesofferlowerpremiumsforpolicieswithhigherdeductibles(theamountyoupaybeforeinsurancekicksin).Theyareunderstandablywaryofcustomerswhomakemanysmallclaims.Weighthevalueoflowerpremiumswithyourtoleranceforaloss.Askyouragentforquoteswithdifferentdeductiblelevels.Adeductibleof$500–$2,500isprettystandard,withdeductiblesatthehigherendoftherangeastheamountofpropertycoverageincreases.

Exclusions—The policy giveth and the exclusions taketh away.Readthepolicy,knowwhattheexclusionsare,anddon’tbeafraidtoaskquestions!

Stability of the insurance carrier —It’sagoodideatocheckthefinancialstabilityoftheinsuranceunderwriterbeforesigningupforthepolicy.A.M.Bestprovidesfreebasicratingreportsoninsurancecompanies.

Claims—Askyourinsurancerepresentativeifanyclaimshavebeenmadeonthetypeofinsurancethey’reofferingandwhatturn-aroundtimeyouwouldexpectintheeventofaclaim.Ifnoclaimshavebeenmadeoryoufeelserviceisunreasonable,chooseadifferentcompanywithwhichtowork.

It is All Part of the Cost of Doing BusinessRemindyourselfthathavinggoodinsurancecoverageisoneofthecostsofdoingbusinessandpartofyourresponsibilitytoyourself,yourcareer,andotherswhodependonyou.Theratesforcoveragewillvarydependingonwhereyoulive,constructionofyourbuilding(andwhetheryouareinsuringabuilding),coveragelevels,andinsurancecompany.Basedonwhatweknowaboutthesizeofartist-ownedbusinesses,mostartistsshouldbeabletopurchaseabasicbusinessownerspolicyforaround$500iftheydonothaveabuildingtoinsure.Ofcourse,everybusinessisuniqueandyoursmayrequirespecialcoverage,whichcanraisetheoverallcost.

ResourcesCERF+maintainsanup-to-datelistingofinsuranceresourcesandalistingofpoliciesdesignedforartistsatwww.studioprotector.org.Thereyouwillalsofindmoreinformationinsurancetopics,emergencypreparedness,andrecovery.Inadditiontoprovidingemergencyresourcestoartists,CERF+providesdirectassistancetocraftartistswhohavesufferedcareer-threateningemergencies.Formoreinformationvisitwww.craftemergency.org.

Thisguidewasmadepossiblewiththegeneroussupportofthe

WindgateCharitableFoundation

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CERF+ is a national artists’ service organization whose mission is to safeguard and sustain the careers of craft artists and

provide emergency resources that benefit all artists.

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Allrightsreserved.CERF+doesnotwarrantorguaranteetheaccuracyorsufficiencyoftheinformationprovided.

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