Thinking about quitting your day job and living your dream of living as an artist who sells handstitched raincoats for farm animals? Now has never been an easier time to live your dream with small business e-commerce sites like Etsy.
Starting your own business can mean making your long-time dreams come true, but sometimes these dreams come with hefty upfront costs. There’s packaging, marketing, materials—but one thing you shouldn’t skip out on is insurance for your business. You want to protect your dream right?
Read: Insurance Needs for Your Online Business
Coverage Offered by Etsy for Sellers
Etsy offers tools and services for sellers, including a “Sellers Protection Policy.” This policy enables Etsy to work on your behalf to resolve customer disputes such as packages never arriving or items not being sold as described and other payment issues.
However, Etsy does not provide product liability insurance.
What is Product Liability Insurance?
Product liability insurance protects you in a circumstance where a customer is dissatisfied or aggravated by the manufacturing or design of a product. When you have this kind of liability insurance, the insurance company will act as your representative if this customer brings their issues to court and initiates a legal dispute about the product.
Do You Need Product Liability Insurance?
Absolutely. If you run an online e-commerce shop as a side hobby or as a full-time business, you should have product liability insurance. Product liability insurance is especially important if you sell a physical product and products for children. If death or injury occurs as a result of the use of your product, the purchaser cannot sue Etsy as they do not regulate items—the seller will sue you instead.
Product liability insurance will act as legal protection for you and ensures you are not spending the money you made from your business on court costs.
The premium for this coverage for Etsy sellers depends on many variables but is most dependant on the type of business and product you have. For example, because products sold to children have very high regulatory standards, the premium for insurance may be higher than products intended for a regular market.
Read: Are there some products that can't be insured for product liability?
How Can I Protect My Products?
If you have commercial goods or products that you sell on your property, your personal home policy will not cover these items under your personal property. Some insurance companies may have a “home-based business” endorsement that can be added to your personal policy.
This add-on covers a limited dollar value of items related to your business may also extend your personal liability to your business property as well. For example, your policy may cover up to $10,000 in business property including packaging, equipment, and products. The limits and price for this add-on can vary from company to company and may depend on the type of product you sell and the total revenue you make from this side business.
If your insurance provider does not offer this endorsement on their personal policies, you may also consider a commercial property policy. Often these policies come as packages that include premises liability if you have a physical location, loss of income, or other expenses associated with business loss. These policies may be more expensive as they include more extensive coverage for brick-and-mortar businesses.
What Coverage is Best for My Etsy Business?
Determining whether you need product liability, a home-based business endorsement, or a full commercial policy depends on many factors. In order for your broker to find the best insurance policy for you, you should have the following information on hand:
- Identify the type of business you’re in (i.e. food products, home goods, antiques, art sales etc.)
- The total value of the business property including packaging supplies, product materials, and equipment.
- The total revenue acquired from business.
- Location (do you have a storefront?)
- Where do you sell your products (US and Canada only? Worldwide?)
- Who is on the title for the business? Do you have any business license documents?
Read: Working from Home? You Might Need Insurance for That
The Bottom Line
The bottom line is that you’ve worked hard to create your dream business. Consider insurance as another necessary start-up cost, rather than something you will get when you reach a certain revenue point.
As a business owner, you know that every dollar matters, which is why it is important you protect your business’s financial future through insurance.