Information requested by Insurance Company

Pi Rho Peppers

Pi Rho Peppers

Hello All,
 
I'm currently securing everything I need to start up my sauce business.  I have read in previous posts that insurance should be in place from day 1, so I went to talk to a local agent.  The following is the information she requested of me:
 
1)      Prospectus
2)      Web site address
3)      Copy of Label for products
4)      Warning labels
5)      List of ingredients
6)      List of items selling (sauces, mustards, etc)
7)      Estimated sales for year
8)      List which items are your own recipe & list of items under any third party label
9)      Transit coverage (who is shipping products & covering products when transported)
10)   Will quote product recall & replacement, transit coverage, data breach & cyber liability
 
For now, I'm just looking to sell at FMs and festivals to establish a following for potential internet sales.  I thought this list seemed quite detailed and I was just wondering... is this par for the course?  I will certainly do what is required, but I'd just like to know.  I know many of you have been through this numerous times and I sure would like to benefit from your experience.
 
Thanks!
Mark (TSK)  
 
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AlabamaJack said:
someone chime in here if I am wrong...if you create an LLC, all the liability is on the company and not your personal stuff...
 
that's why my business was set up as an LLC....this was on advice of my lawyer...
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+1 Setting up an LLC is a good thing, since if (deity forbid), someone sues you for your sauce being too hot, any personally owned things (your house/car/etc.), are untouchable, only things on the business-side of things
 
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Well, I am setting up as a Sole Proprietorship right now with the eventual goal of "upgrading" to an LLC.  While I know it provides more (not total) protection from personal assets, I think the SP should be okay for the first year of operation or so... until I get a little capital.  While I'm sure I'm just going to be pumping any profits right back in for the first few years, I'd like to be a little more established before I make that jump. 
 
SP vs. LLC... that shouldn't have any effect on premiums, should it?
 
I guess I'll get start on collecting this information tomorrow.  Projections will be a pain, but the labels are the real question. I have nothing finalized with any companies yet.  I'm talking to a few people to try to get reasonable prices on a good quality product.  I don't want to skimp too much there if I can help it.  I think the label is HUGE when it comes to the presentation and first impression of the product. 
 
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with the LLC set up, I didn't even bother with insurance...may have been a mistake but my lawyer said I could only lose assets that were associated with the business if someone sued me...
 
besides, IMO, LLC's are very cheap to set up...
 
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AlabamaJack said:
with the LLC set up, I didn't even bother with insurance...may have been a mistake but my lawyer said I could only lose assets that were associated with the business if someone sued me...
 
besides, IMO, LLC's are very cheap to set up...
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Not in CA they're not - $800 a year. And if you're the sole owner/proprietor you're hosed without liability insurance.

An LLC isn't a magic wand you wave to make lawsuits go away. If you're in a partnership it can help to protect assets, but even LLCs have product liability insurance.
 
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Lucky Dog Hot Sauce said:
Not in CA they're not - $800 a year. And if you're the sole owner/proprietor you're hosed without liability insurance.

An LLC isn't a magic wand you wave to make lawsuits go away. If you're in a partnership it can help to protect assets, but even LLCs have product liability insurance.
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Agreed.
From what I remember reading and knowing, while an LLC does offer your business some protection, I don't think (you personally) are 100% in the clear should something go awry..But an LLC is a way to go...and get as good as insurance as you can afford at the time....
 
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Hey, ScovilleKid, glad to see you're getting the ducks in a row for all this stuff.  I've never heard of having to fill out a business plan, website, warning label, copy of labels.... :crazy:....to get insurance!
 
 
We've been self employed for 15 years.  About 5 years as Sole Propeietor and 10 as an LLC.  In WA state, once you set up the LLC for about $400, it's a yearly renewal.  If you can afford it, I'd suggest it.  It's not foolproof, but does offer a layer of protection.
 
When we started in business as electrical contractors, the www hardly existed.  Website??? Not Even!  I have a website for the food business now, but not for the electrical.  I can't understand why an insurance company would ask for that. 
 
First thing to check is if the person/agency you are working with deals with business insurances as a major part of their business or are they basically a car insurance business who is trying to suck in your business insurance just for the income?
 
For the food business insurance I have, the only questions the insurance agent asked were-
how many units of refrigerated in plastic containers
how many units of shelf stable in glass containers
 
 
Others have vehicle and event riders for their FM's, festivals, and events.  It will probably help when looking for insurance if you have your business entity in place.  If you are going Sole Proprietor, that's all you need.  Get your State/City business license before looking for insurance.  The insurance companies will want a business license of some kind.  In WA state, it's $25 for a state business license outside of incorporated cities/towns.  Cities/Towns have their own business license prices. 
 
 
 
 
 
Based on the first CheckList you have.....I'd get a 2nd or 3rd opinion!!!  (aka...QUOTE.... :)  )
 
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salsalady said:
Hey, ScovilleKid, glad to see you're getting the ducks in a row for all this stuff.  I've never heard of having to fill out a business plan, website, warning label, copy of labels.... :crazy:....to get insurance!
 
 
We've been self employed for 15 years.  About 5 years as Sole Propeietor and 10 as an LLC.  In WA state, once you set up the LLC for about $400, it's a yearly renewal.  If you can afford it, I'd suggest it.  It's not foolproof, but does offer a layer of protection.
 
When we started in business as electrical contractors, the www hardly existed.  Website??? Not Even!  I have a website for the food business now, but not for the electrical.  I can't understand why an insurance company would ask for that. 
 
First thing to check is if the person/agency you are working with deals with business insurances as a major part of their business or are they basically a car insurance business who is trying to suck in your business insurance just for the income?
 
For the food business insurance I have, the only questions the insurance agent asked were-
how many units of refrigerated in plastic containers
how many units of shelf stable in glass containers
 
 
Others have vehicle and event riders for their FM's, festivals, and events.  It will probably help when looking for insurance if you have your business entity in place.  If you are going Sole Proprietor, that's all you need.  Get your State/City business license before looking for insurance.  The insurance companies will want a business license of some kind.  In WA state, it's $25 for a state business license outside of incorporated cities/towns.  Cities/Towns have their own business license prices. 
 
 
 
 
 
Based on the first CheckList you have.....I'd get a 2nd or 3rd opinion!!!  (aka...QUOTE.... :)  )
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Hey SL... thanks for the response!  Yeah... seems like a lot of hoops, but can't hurt to have all that on hand anyway.  I've got the local permits, my EID (for security purposes), and the DBA being processed.  Also need my ServSafe.  I'm within a nose hair of having my processing location secured and inspected.  That part is huge.  Pickins are slim around here and the place I found would be perfect if I could get them to agree to it.
 
I will call tomorrow for my 2nd and 3rd contacts.  Who knows... maybe I'll meet up with less resistance.  I am only going to deal with companies mentioned here or my own, which is extremely reputable.
 
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It's really not much to ask for. 
 
For the prospectus, just say "N/A". There's no requirement for you to have one as a company and "N/A" is a sufficient response. 
 
For warning labels, "N/A" also works, unless you actually have one. 
 
For annual estimated sales, just say "$5K" or something - no one's going to hold you to this. 
 
:cheers: 
 
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Lucky Dog Hot Sauce said:
It's really not much to ask for. 
 
For the prospectus, just say "N/A". There's no requirement for you to have one as a company and "N/A" is a sufficient response. 
 
For warning labels, "N/A" also works, unless you actually have one. 
 
For annual estimated sales, just say "$5K" or something - no one's going to hold you to this. 
 
:cheers:
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Roger that.  These are the little gems of info that are going to save me a lot of time.  Thanks.
 
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elcap1999 said:
 
+1 Setting up an LLC is a good thing, since if (deity forbid), someone sues you for your sauce being too hot, any personally owned things (your house/car/etc.), are untouchable, only things on the business-side of things
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Assuming no gross negligence on your part, that is true for a multi-member LLC.  However, a single-member LLC is treated by almost every state law as a sole proprieter, which is not afforded that luxery.  Your spouse will not count as a second member.  
 
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PepperDaddy said:
 
Assuming no gross negligence on your part, that is true for a multi-member LLC.  However, a single-member LLC is treated by almost every state law as a sole proprieter, which is not afforded that luxery.  Your spouse will not count as a second member.  
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Exactly my point. For a single owner, setting up an LLC is not going to shield you from anything. Much more cost effective to be a sole proprietorship & have 2M liability insurance.
 
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As far as I understand those tax things (Dave's way better at that than me), for a single or a married couple (who are treated as a single on an LLC), S Corp is the way to go....we made a mistake and registered before taking to the accountant...woops!
 
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FeistyParrot said:
As far as I understand those tax things (Dave's way better at that than me), for a single or a married couple (who are treated as a single on an LLC), S Corp is the way to go....we made a mistake and registered before taking to the accountant...woops!
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I'm not a lawyer, nor do I play one of TV, but I think a business structure can be easily changed if needed from an LLC to an S Corp.
 
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Alright... anybody in the northeast... I need agent names.  I've provided all of this information to a couple of different people.  I have not heard back from one and I was quoted a piece of $1750/yr. (prohibitive) by another.  I have been outright denied by a couple more.  I have EVERYTHING in place except for the insurance and I will not produce one bottle without it. 
 
Bottom line... can anyone give me the name of an agent that might be able to provide me with a reasonable quote.  I never thought insurance would be my biggest hurdle to this whole thing.  I want to get a few bottles sold before the end of the year for start up purposes so I need this pronto... HELP! 
 
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