Acquiring insurance can be broken down into several sequential components \u2013 ![\"\"](\"http:\/\/thumb7.shutterstock.com\/photos\/thumb_large\/776821\/124465699.jpg\")
determining (1) what types of insurance you want and need, (2) finding a broker, (3) presenting the business plan to the broker, (4) finding an insurance company,\u00a0 (5) negotiating coverage, and finally, (6) abiding by any rules or regulations your insurance company requires as a result of granting you coverage.<\/p>\n
1. The Types of Insurance Required<\/strong><\/p>\n There are two main drivers determining what insurance is required: the lease, and the government. \u00a0Commercial leases have sections dedicated to \u00a0insurance to ensure compliance. Lack of compliance results in eviction. The government also requires insurance\u00a0as a legally operating businesses,\u00a0 dependent on \u00a0employee numbers and the work they do.<\/p>\n Landlords generally want to be named on all of your insurance policies as additional insured<\/em>. This means that your insurance covers your landlord, in case someone wants to sue them or claim damages against them.<\/p>\n Legislated insurance vary by province and country, but the common types of\u00a0governmentally-required insurance<\/em>\u00a0are:<\/p>\n 2. Finding a Broker<\/b><\/p>\n A broker is your liaison to an insurance company, which you may never talk to directly. The insurance company is the entity that provides your insurance, not the broker. Think of the broker as a real estate agent \u2013 they sound like they\u2019re speaking in your language, but they\u2019re actually speaking a dialect of your language to insurance companies. All brokers are not created equal; most are specialists. Contacting a machine shop, or manufacturing company regrading their broker is a good start in locating an appropriate broker for a makerspace.\u00a0It is important the broker understands the business plan, as they must be able to convince an insurance company to cover the endeavour.<\/p>\n 3. Presenting the Makerspace<\/strong><\/p>\n After locating a broker with experience insuring manufacturing-related businesses, they must be met in-person and brought \u00a0up to speed on the makerspace. Generally brokers are less interested in how money is spent, and more interested in how money is made. At this point, they\u2019re looking to understand the makerspace, so they can interpret the business plan into their insurance company dialect and present it appropriately.\u00a0 Makerspaces like Artisan’s Asylum<\/a> had to provide the following information:<\/p>\n It is important to be careful and be truthful during this stage, as these questions need answering before any company will be willing to insure you.\u00a0<\/b>T Note \u2013\u00a0it is not wise to present the makerspace as a new, ground-breaking type of business that your insurance broker has never heard of before.\u00a0The insurance profession is about quantifying and accepting known risk \u2013 not taking chances on unknown risks. Frame the business as a slight modification of an existing business. Some makerspaces have been insured as craft schools with a membership component to allow for extracurricular work, and others have been insured as a membership-enabled machine shop that offers training on its equipment.<\/p>\n Once they\u2019ve got a good idea of the business plan and model, the broker is \u00a0going \u00a0fill out a couple of forms that look like this<\/a>, for every type of insurance being applying for.<\/p>\n 4. Finding an Insurance Company<\/strong><\/p>\n <\/strong>Once the application is complete, the broker will look to locate an insurance company to cover the makerspace. Insurance companies are grouped into markets that bid on insurance applications. The two main \u2018insurance markets\u2019 that the broker will choose from are:<\/p>\n It may help to tell the broker that you don\u2019t expect to find an insurance company in the primary market. They\u2019ll have to go through the motions of looking for insurers in it anyway, but they\u2019ll have more confidence in you and your knowledge of the insurance industry.<\/p>\n 5. Negotiating Coverage<\/strong><\/p>\n Negotiations will be conducted with the potential insurance company before a fixed quote is provided\u2013 or, if \u00a0a fixed quote is given, the company may have conditions to meet prior to getting insurance. Some conditions of insurance and negotiating points seen in makerspaces\u00a0included:<\/p>\n These restrictions will likely loosen as you develop a history of good performance as a business, but may be required at the start to get an insurance company to give you the final check-off.<\/p>\n One interesting negotiating point is asking for property to be insured as At Cash Value<\/em>\u00a0<\/strong>instead of\u00a0Replacement Cost.\u00a0<\/strong><\/em>Replacement cost for property like tools means the insurance company will pay for brand-new tools to replace older tools if they\u2019re damaged, no matter what the wear on them may be. At Cash Value<\/em> means that the insurance company will pay enough money to buy a tool that\u2019s equivalent in wear, tear, and age to the tool currently owned. The ability to offer \u201cat cash value\u201d instead (which is much lower cost and thus, lower risk to the insurance company) is a significant bargaining chip.<\/p>\n 6. Follow the Rules<\/strong><\/p>\n <\/strong>After the policy is closed \u00a0(if the building is big enough, or property value high enough) the insurance company will send an inspector to verify the building quality and floor-plan are consistent with the report.<\/p>\n After that initial inspection it is expected to send updates to the broker if any significant changes in the business model occur. If there is an accident, \u00a0a group of inspectors will come to the site looking for violations of the plan or model submitted. If they find any discrepancies, they\u2019ll use that as an argument against covering the accident.\u00a0 Discrepancies could include having a tool on-site not included in the list; training members on the use of a tool in a way that wasn\u2019t documented, <\/strong>not training your members sufficiently, not having features like cameras or door access systems that were promised, etc.<\/p>\n If rules are followed, there is \u00a0little to worry about.\u00a0 If the rules are onerous, either find a quote with another company or use good behavior over the course of the business operations to petition for a loosening of the rules upon renewal.<\/p>\n Discussion:<\/strong>\u00a0 Insurance is a critical\u00a0topic for all businesses including makerspace enterprises. What are some of the most significant risks that you feel may be associated with setting up and operating a makerspace?<\/p>\n Discussion Summary:<\/strong> Based on cohort discussions, other factors that may be considered in this topic are:<\/p>\n Please view the cohort experience in the comments below. If you are accessing this OER after November 3, 2013, you are welcome to further contribute to the discussion.<\/p>\n\n
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