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Insurance for your business is a necessary, cost positive expense. Try as you may, there will eventually be something – or someone – outside your control. Mistakes will be made. Accidents will happen. The more you grow, the greater your exposure to risk. Everything you’ve worked hard to build can be threatened in an instant.
No punch list for starting a photography business – or any business, for that matter – is complete without the line item “Get insurance.” It’s right up there with “Buy a camera” and “Pick a name”.
Most photographers, however, don’t begin their businesses by diving in head first. They begin by dipping toes into the water. This creates a we’ll-buy-it-when-we-need-it approach to most expenses. So… when do you need it?
In discussions around this topic, I’ve heard everything from the practical to the hair raising. It makes sense for a solo photographer, working from home, not yet advertising for clients, to put insurance farther down the list. Some may even justify to themselves that equipment insurance is a bit of a lottery; if their entry-level camera meets with catastrophe, they’ll worry about that when it happens. These are low risk decisions based on low risk situations. For the moment, that may be the correct decision.
But situations change. And they can change quickly.
Good things come in threes
There are several misconceptions about insurance. This is obvious from some of the comments I get when I mention the topic. First, there is more than one type of insurance. People often think about the kind that covers them against accidents or injury to a client while work is taking place. The same insurance that pays for the ankle sprained tripping over your cables is not the insurance that comes to your rescue when your client sues for breach of contract. And neither of them will replace the camera that falls out of your bag onto the pavement.
As a result, some photographers tend to weigh the likelihood of risk and forego one or more of these three types of insurance.
(NOTE: Yes, there are more than three types of insurance. Data compromise, key person, commercial automobile, life, health, and disability are examples of insurance that every business needs. For our purposes, we’re going to stick to the most basic needs of a photography business.)
What are these different insurance components and what are the possible arguments for/against each?
The three basic types of insurance pertinent to your photography business, and what they cover, are:
- General liability insurance
- Physical injury to people or damage to property arising from your daily operations
- Professional liability insurance
- Negligence related to professional services or advice. It’s generally related to financial loss versus physical injury or damages. Sometimes referred to as errors and omissions insurance.
- Property insurance
- Your equipment, gear, workspace, or other property used in your business
It’s worth mentioning that a fourth type of insurance is available and necessary if you operate an unmanned aircraft (drone) as a Part 107 Certified Airman. While the other three types are commonly combined into a single policy, many underwriters exclude aircraft of any type, including drones. There are, however, insurance providers out there and considering that your certificate may be at risk without insurance, it’s well worth the modest cost. And yes, you are required to hold a Part 107 certificate to operate a drone. You will never win the argument with the FAA that your flight was recreational if you also operate a photography business.
So, even knowing that these types of insurance cover different things, and that an insurance provider can economically combine all types into a single policy, some people still choose otherwise.
Irrational rationalization
One common justification against insurance is “I have nothing to sue for. When I have something worth protecting, I’ll get insurance then.”
Or how about “I’m just building my portfolio with free work for friends and family. Nothing will happen, and even if it does, we’ll work it out.”
Another frequent sentiment is “I’m protected by my LLC/Corp/separate business entity. My personal assets are safe.”
Finally, there’s the old favorite, “I work out of my home, so my homeowner’s policy covers me.”
Wrong. Wrong. Wrong. And wrong.
Let’s start debunking some things with a reality check into how business really works.
“I have nothing to sue for…..”
Insurance is not just something to protect you now, it protects everything you want to have in your future. We live in an extremely litigious society and you might think you have nothing to lose, but a judgement attaches to anything you might earn or have in the future. No one wants to work for someone else the rest of their lives because they didn’t want to pay $500-750 a year for insurance.
“…free work for friends and family…we’ll work it out.”
As we say in the American South, bless your heart. Creative businesses tend to be emotional. So are personal relationships. It’s one thing to have a bad experience with a client that you never have to see again. The family picnic can get really awkward when bad experiences are hanging in the air. Sadly, family and friends are more likely to take advantage of you – or to be taken advantage of – because one thinks the other won’t mind. To Aunt Alma, you might still be the baby of the family, not the adult trying to run a business for profit.
“I’m protected by my …business entity. My personal assets are safe.”
A single member LLC is called a disregarded entity for a reason. Many small businesses also take this to heart in all the wrong ways. It is incredibly simple and easy to keep your business and personal money, activities, and assets separate. It is also incredibly easy not to. Any crossover between the business and personal baskets of your life is called commingling, and it is the key to ‘piercing the corporate veil’ that you count on for protection. A good attorney – or even a mediocre one if your methods are lax – can put all your assets back into a single basket and lay claim to everything inside. You are only protected by your business entity if you operate and act like one. Strictly.
“my homeowner’s policy covers me.”
Have you verified this? Or are you assuming this is the case? Maybe you’ve chosen a “don’t ask, don’t tell” policy (no pun intended) when it comes to disclosure with your homeowner’s carrier.
It is actually quite rare that a homeowner’s policy will cover your business enterprise without at least a rider (added terms for specific circumstances and benefits) to your policy acknowledging the increased risk. Increased risk also means increased premium.
The last thing you want is to have a catastrophic loss to your 2000 square foot home, only to find that your carrier excludes the 200 square feet it discovers you were using for business purposes. This includes any equipment, props, or other assets stored there for that purpose. Ouch.
Home studios have added risk of bringing people onto your property. More people, more exposure to accidents, higher risk, higher premium. Your homeowners policy may cover your guests, but guests for business purposes are called customers. There is a difference, at least to the insurance company.
So the harsh fact is that most homeowners policies will not cover your gear, or even the portion of your home that you use for business if they find out you’ve been running a business from your home. At the very least, check with your provider before you make any assumptions. They may have a solution, or refer you elsewhere for the coverage you need. At the very least, you’ll understand the risks as well as your options.
Stuff happens … to your stuff
The previous scenarios deal with general and professional liability risks. A wise business owner understands that there will forever be things outside their control. No matter how careful, ethical, or professional they strive to be, sometimes… stuff happens. Liability insurance is not so much an expense as an investment. This insurance is either added right away, or as soon as it becomes practical – and necessary – to do so.
The third type of insurance, on the other hand, is frequently the one that start ups opt not to purchase: protection for their own property. For people just starting out, this may seem to make sense. They are careful with their equipment – it’s their money maker, after all – and the plan is to buy more and better equipment at some point anyway. Then there is the cost-versus-benefit analysis that goes with every business expense. Some people believe that it’s cheaper to put aside money because they are doing it anyway in plans to buy that new equipment (or at least they should be).
Confession time. We stayed self insured for years in our own business, thinking it saved us money. Then one of our photographers bounced a camera off a rock. Hint: cameras do not bounce well. We needed that camera replaced right then and right there. It turns out that the camera body was also attached to a – you guessed it – very expensive lens. This caused us to take a serious look at our inventory and decide that if someone dropped one of our road cases, instead of a single camera, we’d be in a world of hurt.
Do the math…
This is often the case with photographers. Over time, more and more equipment is added. Cameras, lenses, lights, stands, props, cases, trolleys, the list goes on.
For people saying their gear isn’t worth the cost of insurance, the gear portion is actually the smallest portion of the policy. For our carrier, at the time of this writing, the cost is $15/per thousand in increments of $5,000. So $75 covers $5,000 in equipment annually. You don’t realize how much gear you have until you have to replace a piece. And frankly, $6.25 a month is less than one fast food lunch.
You will typically provide a list of your equipment when you apply for a policy. The property portion of the premium will be based on the value of your gear. Make sure that your policy covers replacement cost, not market value after depreciation.
Because photography is a mobile trade, it’s important that your policy cover not only equipment in your business location, but equipment that travels from place to place. This is called inland marine. Also, because photographers have opportunities to rent, borrow, share, or loan equipment, you want these assets covered in your policy.
Insurance should be budgeted in as a necessary cost of doing business. When you consider that your business is much more than a single camera and lens, without which you can not do the work, it hardly makes sense to not insure the plant that makes your money. When you think about equipment that you borrow, rent, transport, hand to someone, or what happens if someone hands you their camera and you accidentally drop it, business without insurance is unthinkable.
Besides, if you spend money on equipment, you want it to be new – or new to you – equipment, not replacing something to keep you at the same place you were.
Do the legwork…
Remember that like everything else about your business, your insurance coverage should be unique to your needs. When researching insurance, ask other working photographers whom they use, and why. Get three or four quotes and compare them side by side.
Questions to ask when seeking recommendations or interviewing carriers:
- Why did you choose this carrier?
- Have you ever filed a claim? What was that like? Are you satisfied with the outcome?
- Do you have a dedicated account representative or do you at least get to speak to a real human when you have a question or problem?
- How easy is it to change my policy?
- Can I add third party coverage if my client requests it?
- Can I get a proof of insurance certificate and how long does that take?
Then do what you need to do
In summary, insurance for your business is a necessary, cost positive expense. Try as you may, there will eventually be something – or someone – outside your control. Mistakes will be made. Accidents will happen. The more you grow, the greater your exposure to risk. Everything you’ve worked hard to build can be threatened in an instant.
The good news is that while you can’t avoid every potential bad thing, you can do everything possible to protect against it. As with so many things in business, the cost is well worth the benefit. Some things in business may be optional, but insurance should not be one of them.
Your hard work is worth it.