Let’s talk about something essential for your business’s success: insurance. It might not be the most glamorous part of running a business, but getting it right can save you from a lot of headaches down the road. To make this easier, I spoke with Russ Taylor from SecureCPG. Russ has a wealth of experience helping brands like ours navigate the insurance landscape. His insights will help you understand the process, avoid common pitfalls, and ensure your business is well-protected as it grows. Let’s dive in and turn this daunting task into a manageable and even empowering part of your journey!

Understanding the Insurance Application Process

Maybe you know you need business insurance from the beginning or suddenly, a retailer asks for an insurance certificate during your onboarding. You should get business insurance early on in the process of starting your business. You’ll work with an insurance agent to get coverage. While there are many “small business” insurance agents, I highly recommend working with a CPG specific insurance agent like SecureCPG . They’ll be able to ask questions about your product, business model, and what kind of coverage you need.

You’ll start by filling out an application where you’ll provide your revenue, business type, ingredients, and supply-chain setup. This info helps them assess your risk and give you a quote. It’s usually straightforward but can vary based on your needs.

Choosing the Right Coverage and Carrier

As your business grows, your insurance needs will too. General liability, product liability, workers’ comp, property insurance—you might need all of these. And if you’re making something high-risk like CBD products, you might need different carriers.

Work with an insurance agent who understands how to properly classify your business. Each classification has different risk profiles. A manufacturer will be rated differently than a consultant. That said, the industry is a bit outdated, so even if you outsource production, you’ll still likely be classified as a manufacturer. Getting this wrong can lead to being underinsured. Clear communication with your agent about how you make and package your product is key.

Maintaining Adequate Coverage as You Grow

A common issue is not updating your insurance as your business evolves. New products, production methods, or locations can change your coverage needs. Set quarterly meetings with your insurance agent to make sure they understand the changes in your business to make sure you’re properly covered.

Red Flags and Common Pitfalls

Some products are trickier to insure, like alcoholic beverages or those with unusual ingredients. Make sure your contracts with manufacturers and suppliers are clear to manage liability properly.

Be careful with revenue projections. Underestimating can lead to higher premiums at audit time, while overestimating ties up funds you could use elsewhere. Aim for realistic projections and review them regularly.

Determining Pricing and Compensation

Insurance pricing can seem mysterious. Generally, for liability insurance, it’s based on your revenue divided by a thousand and then multiplied by a rate specific to your product. Understanding this can make the quote process clearer.

Agents usually earn about 10% of your premium, so choose one who provides real value without extra fees.

Planning for Future Needs

Start with basic coverage, but as you grow, you might need more. Investors, for example, might require directors and officers insurance. Planning for these needs can save you from unexpected costs later.

Insurance may not be the most exciting part of running a CPG business, but it is crucial for long-term success. By understanding the application process, regularly updating coverage, and planning for future needs, founders can ensure their businesses are well-protected. Reach out to professionals who understand the nuances of the CPG industry to avoid common pitfalls and secure the right coverage for your business.

SPONSOR: I wrote this in partnership with SecureCPG a modern insurance agency that works with emerging brands to get the best coverage at the most affordable price. They work with founders on general liability, workers comp, product recall, cyber liability, and more.