Woodworking and Insurance Risks
Woodworking is risky business. In an insurance company's view, combining sawdust, products made of wood, hazardous and flammable glues and finishes, and electrical machinery that can generate sparks makes an explosive situation that many insurers want to avoid. And keep in mind that most homeowners' policies limit coverage to $2,500 for business-use items on premises and $250 away from home. So for protection, separate business coverage is a must. But most professional woodworkers have trouble getting property insurance and sometimes casualty, liability, or even health and life insurance at reasonable rates.
In Ohio, Ray Murray makes bunk beds and children's play forts in addition to less risky furniture. He can't find a company to provide product liability insurance for the beds, and the premium for play sets is so high he goes without. Instead, Ray has customers sign liability waivers. Then, he hopes nothing goes wrong. Worse still, when Ray's health insurer found out that he was a woodworker, the company canceled him. Once canceled, he couldn't find other coverage, except for a health maintenance organization required by state law to enroll anyone (albeit at a rate of more than $700 a month).
Fortunately, things can sometimes get better. David Smith, a woodworker with manufacturing and retail operations in Ohio and Florida, found insurance coverage expensive when he started more than a decade ago. Now, with a larger business and a good track record, David has reasonable rates from a major carrier.
Woodworkers looking for insurance can reduce risks to increase the chances of finding some at reasonable rates, according to Chris Kendall, administrative manager for commercial lines at Cincinnati Insurance Companies. His company covers woodworkers and other small businesses across the nation, and he suggests the following steps to help obtain insurance:
- Ground all electrical equipment and buildings.
- If you smoke, quit, and don't let anyone in your shop smoke.
- Keep a clean shop. Proof of janitorial service helps.
- Spray or paint in an appropriate booth or have it done.
- Use dust-collection equipment.
- Store flammable and hazardous materials in locked cabinets away from sources of combustion. Keep paperwork, such as receipts from licensed hazardous waste haulers or dumps, to prove you dispose of hazardous materials properly.
- Keep your inventory of expensive woods to a minimum. If possible, store wood in a building separate from the workshop, just in case of fire.
- Reduce your liability by keeping customers out of your shop. Do business in a separate room.
Many of these steps are expensive. But the trade-off for not spending money on safety is paying higher insurance rates or simply going without insurance.
Written by: Jack Neff, a Batavia, Ohio, business writer and author of How to Make Your Woodworking Pay for Itself.