Forget Etsy’s policies. Here’s the product liability insurance that actually protects your Shopify store.
The Candle and the Curtain
You handcraft beautiful candles and sell them on your own Shopify store, but you follow Etsy’s seller rules as a guide. Business is booming. A customer buys a candle, and one evening, a microscopic flaw causes the glass jar to crack, spilling hot wax that sets a curtain on fire. The customer’s insurance company sues you for the damages. You realize with horror that Etsy’s policies mean nothing here; you are the manufacturer and retailer. Product liability insurance, which covers damages caused by your products, was the only protection that would have mattered.
Stop chasing more SKUs. Chase a solid stock throughput policy for your growing inventory instead.
The Flood in Warehouse B
You’re obsessed with growth, constantly adding new product SKUs to your e-commerce store. To manage the expansion, you store your inventory across three different third-party logistics (3PL) warehouses. A pipe bursts in one warehouse, destroying $50,000 of your stock. Your standard business property policy won’t pay because the inventory wasn’t at your own address. You needed a stock throughput policy. This specialized insurance covers your inventory from the moment it leaves the supplier until it reaches the customer, no matter where it’s stored or who is handling it.
The hidden truth about insuring goods sold via Amazon FBA that Amazon won’t admit.
The Case of the Lost Pallet
You meticulously pack and ship a pallet of your products, worth $20,000 at retail, to an Amazon FBA warehouse. It’s checked in, and then it vanishes. It’s lost somewhere within Amazon’s colossal system. After weeks of back and forth, Amazon reimburses you based on their policy—a fraction of the wholesale cost, not the sales price. The hidden truth is that while Amazon is efficient, their scale means significant losses can happen, and their reimbursement won’t make you whole. Only your own separate inventory insurance policy can cover the full value of your lost goods.
What nobody tells you about the liability of selling custom 3D-printed products.
The Drone Part That Cracked
You build a successful online business selling custom, 3D-printed parts for high-end drones. A customer buys one of your landing gear components. Mid-flight, the part fails due to a micro-fissure from the printing process. The customer’s $3,000 drone plummets to the ground and shatters. He sues you for the cost of the drone. What nobody tells you is that when you create and sell a product, even with a 3D printer in your garage, you are considered the manufacturer. You are liable for its performance and any damage it causes.
I spent 5 years selling refurbished electronics online. Here’s what I learned about insuring them.
The Phone That Got Too Hot
My online store specialized in selling expertly refurbished smartphones. I tested every device for weeks. One phone I sold had a latent battery defect that I couldn’t possibly have detected. A month later, it overheated while charging, damaging a customer’s antique nightstand and causing a minor burn. I learned that “refurbished” doesn’t remove liability; it can increase it. As the final person to certify the product’s safety, I was on the hook. Selling used electronics requires a specific product liability policy that understands the unique risks of second-hand goods.
Unpopular opinion: Your online terms of service are not a substitute for real product liability insurance.
The Clause the Court Tossed Out
I thought I was protected. My e-commerce site had a mandatory “Terms of Service” checkbox that every customer had to agree to before purchase. It included a beautifully written clause limiting my liability to the cost of the product. Then, a customer was injured by my product and sued me for $100,000. In court, the judge declared my liability-limiting clause “unenforceable” and threw it out. My flimsy ToS was no defense. I learned that day that terms of service are a wish, but a product liability policy is what actually pays for a lawyer.
90% of online sellers don’t understand this about insuring for international shipping.
The Package That Vanished Over the Atlantic
I was so excited to get my first order from a customer in Italy. I carefully packed the item and bought shipping insurance through my postal carrier, assuming I was covered. The tracking number followed the package to the airport, and then it simply vanished. I was horrified to learn that the “insurance” I bought only covered the package while it was in the domestic system. The moment it was transferred to the international carrier, my coverage ended. To be truly protected, I needed a proper business policy with worldwide shipping coverage.
This simple change to my product’s warning label transformed my insurability.
The Warning That Became Unmissable
I sell a powerful, all-natural cleaning concentrate. To maintain my brand’s minimalist aesthetic, the warning label on the bottle was small and discreet. When I applied for product liability insurance, I was quoted sky-high premiums, with brokers citing my “inadequate warnings.” On their advice, I redesigned my label. I made the warnings large and bold, with clear “DANGER” pictograms. It wasn’t as pretty, but when I sent the new design to the underwriters, my premium was cut in half. I learned that insurance companies value clear, obvious safety warnings far more than beautiful packaging.
You’re not struggling to get wholesale accounts because of your product. It’s because you can’t provide a certificate of insurance.
The Retailer’s Rejection
I spent months perfecting my line of handmade soaps. I finally landed a meeting with a buyer from a large, regional retail chain. They loved the product, the packaging, everything. The deal was practically done. Then the buyer said, “Great, just have your insurer send us a certificate of insurance showing you have a $2 million product liability policy.” I didn’t have one. The buyer apologized and explained they couldn’t possibly put an uninsured product on their shelves. My lack of insurance, not my product, was the reason I couldn’t grow.
Stop buying a generic business policy. Buy one that specifically covers your products for their intended use.
The Chair That Wasn’t a Stepladder
My e-commerce store sold stylish, minimalist home goods, including a popular three-legged stool. I had a generic business owner’s policy. A customer bought the stool and, a month later, used it as a stepladder to change a lightbulb. A leg broke, and he fell and was injured. He sued my company. My insurance company denied the claim, arguing the product was misused. However, a proper product liability policy would have likely covered it under the doctrine of “foreseeable misuse.” A good policy anticipates how real people might misuse a product, not just its intended purpose.
The uncomfortable truth about insuring handmade cosmetics and skincare products.
The “Natural” Ingredient, The Unnatural Reaction
You create a wonderful, all-natural facial serum using high-quality botanical ingredients in your clean workspace. A customer buys your serum, but they have a severe, undiagnosed allergy to one of the “natural” plant extracts. They suffer a terrible reaction that leads to scarring and a massive lawsuit. The uncomfortable truth is that “natural” is not a synonym for “hypoallergenic.” Insuring handmade cosmetics is incredibly difficult and expensive because the risk of allergic reactions, bacterial contamination, and making unproven health claims is a nightmare for underwriters.
Why everything you know about insuring your dropshipping business is backwards.
The Seller of Record, The Bag Holder of Liability
Most people start dropshipping because they think it’s risk-free: no inventory, no problem. This is completely backwards. You find a product on an overseas platform and create a cool Shopify store to sell it. A customer buys it from you. The product turns out to be faulty and causes a fire. The customer can’t sue the anonymous factory overseas. They sue the only entity they know: your store. As the “seller of record,” you are in the chain of liability. You can be held responsible for a product you’ve never even seen.
I tried to run a gourmet food business from my home without a commercial policy. It was a disaster.
The Homeowner’s Policy That Hates Cookies
I started selling my famous gourmet cookies online, baking them in my own kitchen. I figured my homeowner’s insurance policy covered my house, so I was safe. Then I got a bad batch of eggs, and a dozen customers got salmonella. The claims for medical bills and lost work started rolling in. My homeowner’s insurance company sent me a letter denying all the claims and cancelling my policy. They pointed to the “business pursuits” exclusion, making it clear that the moment I sold a cookie, my home kitchen became an uninsured commercial food operation.
Hot take: Your “5-star rating” is overrated if one product recall bankrupts you.
From 5 Stars to Total Recall
My product, a children’s toy, had over 2,000 five-star reviews on Amazon. My sales were amazing. I felt invincible. Then a consumer safety group discovered that a small component could break off, posing a choking hazard. The government ordered a mandatory recall. Suddenly, I was responsible for the cost of return shipping, refunds, and public notifications for thousands of units. The costs exceeded $200,000. My 5-star rating meant nothing. Without specific product recall insurance, my once-thriving business was completely wiped out in a matter of weeks.
Most e-commerce owners waste hours on SEO. Spend an hour reviewing your product liability exposure instead.
The Ranking That Didn’t Matter
I was obsessed with my store’s SEO. I spent all day tweaking keywords, building backlinks, and trying to rank #1 on Google for my product. My traffic was great. I never spent a single minute thinking about product liability. Then a customer was injured by my product, and a lawsuit landed on my doorstep. I suddenly realized that my Google ranking was utterly irrelevant. All the traffic in the world is worthless if your business can be destroyed by one single claim you weren’t prepared for. That one hour spent on a risk review is infinitely more valuable.
The 5-minute habit that replaced my fear of a lawsuit from a customer injury.
The Batch Sample Stash
Every time I shipped an order of my handmade lotions, a small knot of fear would tighten in my stomach. What if someone has a reaction? What if they claim my product was contaminated? I started a simple 5-minute habit that erased that fear. For every single batch I make, I put one sealed and dated sample aside in a cool, dark box. Now, if a customer ever files a claim, I have a pristine, preserved sample from the exact same batch that I can send for independent testing. This simple habit is my ultimate defense.
Your store’s biggest risk isn’t a competitor. It’s an uninsured product causing an allergic reaction.
The Peanut in the “Nut-Free” Promise
You sell artisanal snack bars and your top competitor just lowered their prices. You’re stressed, trying to figure out how to compete. You’re focused on the wrong risk. Your biggest risk is the one you aren’t thinking about: cross-contamination in your supplier’s facility. One day, a customer with a severe peanut allergy goes into anaphylactic shock because a batch of your “nut-free” bars was contaminated with a trace amount of peanut dust. The resulting lawsuit is the real threat to your survival, not your competitor’s 10% discount.
If you’re selling anything for children, and you’re not carrying high-limit product liability insurance, you’re already out of business.
The Toy That Wasn’t a Toy
You design and sell adorable wooden toys for children. You test them yourself, and they seem safe. But you decide against buying expensive product liability insurance. A child plays with your toy, a small piece breaks off, and the child chokes and suffers permanent injury. The lawsuit that follows will not be for thousands of dollars; it will be for millions. When it comes to products for children, the legal and emotional stakes are astronomical. Juries are sympathetic to injured kids, and settlements are huge. Without multi-million dollar coverage, you’re just waiting for the event that will end everything.
Stop glorifying the “solopreneur” e-commerce guru. Start building a professionally insured retail business.
The Guru’s Untenable Lifestyle
The internet is full of “solopreneur” gurus selling the dream of running a million-dollar e-commerce store from a laptop on the beach. They glorify the hustle and the freedom. What they never show you is the crushing, unmanaged risk. They are operating a global retail business with no supply chain controls, no quality testing, and no insurance. The first time a customer is injured by one of their dropshipped products, their “laptop lifestyle” will be replaced by a legal nightmare. Stop chasing the guru fantasy. Build a real, protected, and sustainable business instead.
The real cost of a “simple” ingredient swap that nobody calculates until the product liability claim arrives.
The Cheaper Flour, The Costlier Claim
To save a little money on my organic dog treats, I switched to a new, cheaper supplier for my oat flour. The new flour seemed identical. But a few weeks later, reports started coming in: dogs were getting sick. I discovered my new, cheaper flour had a microscopic mold that was toxic to dogs. The “simple” swap to save 20 cents per bag ended up costing me tens of thousands in vet bills and refunds, and it destroyed my brand’s reputation. The real cost of an ingredient is not its price, but the risk it carries.
What professional e-commerce brands do with their insurance that new sellers don’t.
The Vendor Endorsement Key
A new seller gets a basic product liability policy and thinks they’re done. A professional brand does something more. When they want to get their product into a big box retailer like Target or Walmart, they know the retailer will demand to be named as a “vendor’s additional insured” on their policy. This means the seller’s insurance will also protect the retailer if the product causes harm. Professional brands have this endorsement ready to go. They understand that insurance isn’t just a shield; for wholesale, it’s the key that unlocks the door.
The myth that you’re “just a reseller” and not liable is destroying online businesses.
The Importer of Record
I started a business reselling cool kitchen gadgets I found from a factory in another country. I thought that since I didn’t manufacture them, I couldn’t be held liable if something went wrong. I was dangerously wrong. A pressure cooker I sold had a faulty valve and exploded, causing severe burns. Because I was the one who imported the product into the country—the “importer of record”—I was considered part of the manufacturing chain. The law treated me as if I had made it myself. The myth of the “safe reseller” is a fantasy that leads to bankruptcy.
I quit dropshipping from unknown suppliers and started holding and inspecting my own inventory. My risk profile plummeted.
From Blind Trust to Quality Control
My dropshipping business was easy, but it was built on blind trust. I was selling products I had never seen from suppliers I didn’t know. After a few close calls with angry customers receiving junk, I had a revelation. I quit dropshipping. I found one reliable supplier, started ordering in bulk, and began inspecting every single item myself before shipping it to a customer. My profit margins got tighter, but my problems vanished. My customer satisfaction soared, and when I applied for insurance, the fact that I had quality control made me insurable.
Controversial: Your beautiful, minimalist packaging is holding you back from having adequate warning labels.
The Design That Hurt
Your product’s packaging is a work of art. It’s clean, beautiful, and minimalist. You’ve won design awards. But to achieve that look, you’ve made the legally required warning labels tiny, light grey, and hidden on the bottom of the box. An insurance underwriter sees this not as beautiful, but as negligent. They see a deliberate choice to prioritize aesthetics over consumer safety. That beautiful design is the reason your insurance quotes are sky-high. A bigger, uglier, more prominent warning label might hurt your designer’s feelings, but it will protect your company and make you insurable.
95% of online advice for starting an e-commerce business ignores the most critical part: insurance. Here’s why.
The Unsexy Truth
Googling “how to start an e-commerce business” will give you thousands of articles about choosing a niche, building a Shopify store, and marketing on TikTok. Almost none of them will mention product liability insurance. Why? Because insurance is complicated, expensive, and scary. It’s the unsexy, un-fun part of business. It doesn’t fit the exciting narrative of “make millions from your bedroom.” So the gurus and bloggers just ignore it, leaving millions of new sellers dangerously exposed to the one thing that can destroy their business overnight.
One small endorsement for “worldwide coverage” on my policy allowed me to sell internationally with confidence.
The Lawsuit from London
My Shopify store was based in Ohio, but I was thrilled to be shipping my products all over the world. I had a standard US-based product liability policy. A customer in the United Kingdom was injured by my product and sued me… in a London court. My domestic policy provided no coverage. It only covered suits brought within the United States. I learned I needed a specific, and surprisingly inexpensive, endorsement for “worldwide coverage.” It protected me from claims regardless of where the injury occurred and where the lawsuit was filed, giving me true confidence to be a global brand.
The truth about insuring against counterfeit claims that online marketplaces profit from hiding.
The Infringement Notice
You’re selling a popular generic electronic accessory on Amazon. You’re one of a hundred sellers with the same item. One day, you get an intellectual property infringement notice. A large brand claims your product is a counterfeit of theirs. Amazon immediately freezes your funds and delists your product. The truth is that marketplaces are incentivized to side with the big brands to protect themselves. To defend yourself, you need insurance that includes coverage for advertising injury, which can help pay the legal fees to fight a wrongful claim of patent or trademark infringement.
Stop selling products without a clear, documented quality control process. It’s killing your defense.
The Process You Couldn’t Prove
A customer claimed the product they received from my online store was defective and caused them damage. I knew we had a good quality control (QC) process and that the item couldn’t have left our shop in that condition. But when their lawyer asked me to “provide documentation for your QC process,” I had nothing. It was all informal, just something we “did.” We had no checklists, no sign-offs, no records. In the absence of proof, it was my word against theirs. A simple, documented process would have been our most powerful piece of evidence.
Replace your hope that customers use your product correctly with iron-clad instructions and warnings. Thank me later.
Hope Is Not an Instruction Manual
I sold a DIY furniture kit online. I hoped customers would have the common sense to use the right tools and follow the pictures. That hope evaporated when a customer used a power drill when the instructions called for a screwdriver, splitting the wood and injuring their hand. They sued me, claiming my instructions were unclear. I learned that you cannot rely on hope or a customer’s common sense. You must provide crystal-clear, step-by-step instructions and explicit warnings about potential misuses. Assume your customer has never seen a screwdriver before, and write your manual for them.
The rare plant and seed selling industry secret that could save you from a massive crop failure claim.
The Seeds of Discontent
You specialize in selling rare and exotic plant seeds online. A commercial grower buys $500 worth of your special tomato seeds and plants an entire acre. A few months later, you get a letter from their lawyer. The seeds failed to germinate properly, and they are suing you for the loss of their entire season’s crop, a claim for $80,000. The industry secret to survival is having a product liability policy with a clear, enforceable “limitation of liability” clause. This states that if the seeds fail, your liability is limited to refunding the purchase price of the seeds, not the value of the lost crop.
Why your traditional BOP fails for a business that has no physical storefront.
The Policy for a Place That Doesn’t Exist
When I started my e-commerce business, my local agent sold me a standard Business Owner’s Policy (BOP). It bundled property and liability insurance and was designed for a main street shop. But my business had no physical storefront. My risks weren’t a customer slipping in my aisle. My risks were product liability from a sale in California, a data breach on my website, and inventory stored in a warehouse 1,000 miles away. A standard BOP is built around a physical location, making it completely inadequate for the borderless, digital-first risks of a modern e-commerce brand.
I ignored my lawyer’s advice to get product liability insurance for years. It cost me my house after a customer’s child was injured.
The Premium I Didn’t Pay, The Price I Did
My lawyer always told me my small online business selling craft kits needed product liability insurance. I always ignored him. It felt like an unnecessary expense, money I could use for advertising. I was profitable and happy. Then, a child swallowed a small bead from one of my kits and required emergency surgery. The parents sued me personally. Because my business was a sole proprietorship, there was no separation. The lawsuit exceeded my business’s value, and they came after my personal assets. I lost my house to pay the settlement. That “unnecessary” premium would have saved everything.
Let’s be honest: You’re selling a product with a global reach and you have no idea what your true liability is.
The Worldwide Storefront, The Local Mindset
You set up your Shopify store in an afternoon. With a few clicks, you can now sell your product to someone in your town, or someone in Germany, or someone in Japan. Your storefront is global. But your mindset is probably still local. You haven’t considered the different consumer protection laws in California, the product safety standards in the European Union, or the labeling requirements in Canada. Let’s be honest: you are operating a global retail company, and you likely have no idea of the complex web of international liability you are exposed to with every “add to cart” click.
87% of online vintage sellers get their product liability for non-compliant products wrong.
The Vintage Lamp with Modern Problems
You love selling unique vintage finds in your online shop. You find a beautiful old lamp from the 1960s, re-wire it, and sell it to a customer. A month later, that lamp’s old wiring shorts out and starts a fire. You think, “it’s vintage, the buyer knows the risk.” You’re wrong. By selling it, you are making an implied warranty that it is safe for use. Because that 1960s lamp doesn’t meet modern electrical safety standards (like UL certification), it is considered a defective product from the moment you sell it. You are liable.
This weird habit of documenting my entire supply chain outperforms everything in a claim.
The Paper Trail to a “Not Guilty” Verdict
I sell a popular food product online. I have a weird habit: for every single supplier, from the farmer who grows the oats to the company that makes my packaging, I keep a detailed file. It contains their business registration, their own certificate of insurance, and any safety certifications they have. When a customer filed a lawsuit claiming my product made them sick, my lawyer was overjoyed. We could produce a clear, documented paper trail showing that every component came from a reputable, insured, and certified source. The claim against me was dropped.
The real reason you can’t get affordable insurance for your supplement brand (hint: it’s the unsubstantiated claims you’re making).
The Claim That Costs You
You’re trying to get product liability insurance for your new line of dietary supplements, but the quotes are insane. It’s not because the ingredients are dangerous. It’s because of the claims you’re making on your website. Phrases like “boosts immunity,” “improves memory,” or “promotes fat loss” are seen by insurers as high-risk, unsubstantiated medical claims. The FDA hasn’t approved them, and they create a massive risk of class-action lawsuits for false advertising. Your marketing copy is the reason you can’t get affordable insurance.
Ditch your basic property policy. Get an ocean marine policy for your overseas shipments.
The Container That Fell Overboard
To grow my e-commerce brand, I started importing my products by the container-load from a factory overseas. I had a standard business property policy that I thought covered my inventory. On its way to the US, the container ship carrying my goods hit a massive storm, and several containers—including mine, with $100,000 of inventory—were lost at sea. I was devastated to learn my property policy only covered goods on land. For shipments crossing the ocean, I needed a completely different type of insurance called an ocean marine policy.
Stop pretending your homeowner’s policy covers the thousands of dollars of inventory in your garage.
The Garage Fire That Burned a Business
I ran my entire e-commerce business out of my garage. It was stacked to the ceiling with thousands of dollars of inventory for my online store. I figured if anything happened, my homeowner’s insurance policy would cover it. Then, a faulty electrical outlet started a fire that destroyed the garage and everything in it. The insurance adjuster took one look at my organized shelves and shipping station and denied the claim for the contents. The policy had a tiny limit, around $2,500, for any “business property” kept at the home. My business was uninsured.
The 9-word phrase that changed how I think about e-commerce risk.
You are responsible for everything you sell.
I used to think that if I bought a product from a big, reputable supplier, they were the ones who were ultimately responsible for its safety. My broker told me something that changed my entire business philosophy. He said, “As the retailer, you are responsible for everything you sell.” That 9-word phrase hit me like a ton of bricks. It doesn’t matter who made it. If I sell it, I am implicitly telling my customer that it is safe. It forced me to take ownership of my supply chain, my quality control, and my insurance coverage.
What Amazon doesn’t want you to know about their insurance requirements and how they subrogate.
The Amazon Lawsuit Boomerang
You’re an Amazon seller, and you diligently purchase the $1 million liability policy they require. A customer is injured by your product and sues Amazon. Amazon’s high-priced lawyers settle the case for $100,000. You think you’re in the clear. Then, you get a letter. Amazon’s insurance company is now suing you to get that $100,000 back, a process called subrogation. What Amazon doesn’t advertise is that their insurance requirement is there to protect them, and their insurers will absolutely come after you to recover any money they have to pay out on your behalf.
I was today years old when I learned about product recall expense insurance.
The Recall You Can’t Afford
My company sold a popular kitchen gadget. We discovered a flaw in a small plastic component that could cause it to break. We weren’t legally required to, but for the safety of our customers and the good of our brand, we decided to do a voluntary recall. I was shocked by the costs. We had to pay for a press release, emails to thousands of customers, and the shipping costs for thousands of replacement parts. I was today years old when I learned that a separate “product recall expense” policy exists to cover these exact costs, which are not covered by standard liability insurance.
Normalize asking your suppliers for their certificate of insurance.
The Proof in the Paper
When you’re sourcing a new product or ingredient, you ask your potential supplier about their quality, their price, and their lead times. But you need to normalize asking one more question: “Can you please provide me with your current certificate of insurance?” This should be a non-negotiable part of your vetting process. If the supplier can’t or won’t provide proof that they have their own product liability insurance, it’s a massive red flag. It means if something goes wrong with their product, all the liability will flow down to you, the seller.
Plot twist: Your biggest enemy isn’t a bad review. It’s a lawsuit from a third party injured by your customer using your product.
The Innocent Bystander
You sell a skincare product and you’re terrified of getting a 1-star review from a customer who doesn’t like the smell. The real plot twist is the risk you aren’t thinking about. A customer is wearing your lotion, which contains a fragrant essential oil. They hug their friend, who has a severe allergy to that oil, causing the friend to have a major reaction. The injured friend, a third party, is the one who sues you. You learn your biggest risk isn’t an unhappy customer, but an innocent bystander harmed by your product.
The policy endorsement for “vendors” as additional insureds everyone ignores that gets you into big retail.
The Golden Ticket for Wholesale
You’ve been trying to get your product onto the shelves of a major retail chain for years. You finally get the meeting, and they love your brand. Then their legal department sends over the vendor requirements. The one that stops most small brands cold is the requirement to add the retailer as a “vendor’s additional insured” on their product liability policy. This is a specific endorsement that many small business policies don’t include. Having it ready, or knowing how to get it, is the golden ticket that separates the amateurs from the brands ready for the big leagues.
Stop optimizing for lower shipping costs. Optimize for insured, trackable shipping.
The “Saved” Dollar That Cost a Hundred
To increase my profit margins, I started offering a cheaper, uninsured, non-tracked shipping option. I thought I was being smart, saving a few dollars on each order. The first time a customer claimed their package never arrived, I was stuck. I had no proof of delivery, and I had to refund the entire order out of my own pocket. After this happened a few times, I realized I wasn’t saving money at all. I was losing it. I switched back to only offering insured, fully trackable shipping. The slightly higher cost is a small price to pay for security.
The brutal truth about why your great product photography means nothing in a product liability case.
The Picture vs. The Reality
You invested thousands in beautiful, professional product photography for your website. Your products look amazing, and sales are strong. Then, a customer is injured by your product, and you find yourself in a legal dispute. The brutal truth is that in a courtroom, those beautiful photos mean nothing. The only images that matter are the plaintiff’s photos of their injury, the expert’s photos of the failed product, and the warning labels you used. Your marketing assets are irrelevant when faced with the harsh reality of a product liability claim.
Throw away your informal product descriptions. A detailed spec sheet with warnings is what you need.
The Description That Became a Lawsuit
My product descriptions were filled with fun, emotional, and persuasive marketing copy. I talked about how my product would make the customer feel. Then a customer was injured and their lawyer used my own marketing copy against me. They argued I had created an unrealistic expectation of performance and safety. I learned to throw away the fluffy descriptions. Now, every product page has a clear, boring, technical spec sheet. It lists materials, dimensions, weight limits, and clear, concise warnings. It’s not as fun, but it’s a much stronger legal defense.
The 60-second test that reveals if your online business is covered for what you actually sell.
Ask the Killer Question
When you’re on the phone with an insurance agent, perform this 60-second test. Tell them exactly what your best-selling product is. Then, ask them this killer question: “If a customer in California is injured by that specific product and sues me, can you please confirm in writing that this policy has no exclusions for this type of product and will provide coverage for a lawsuit filed in California?” The directness of the question, demanding a specific, written confirmation for your exact product and a high-risk state, will instantly reveal if the policy is real or full of holes.
Why everyone is wrong about how much product liability insurance a “small” online store needs.
The Small Store and the Giant Lawsuit
People think that because they run a “small” online store out of their spare bedroom, they only need a “small” amount of product liability insurance. This is completely wrong. Your risk isn’t determined by the size of your office; it’s determined by the product you sell. If you sell a single unit of a faulty product that causes a catastrophic injury, the resulting lawsuit can be for millions of dollars. A “small” store can easily create a giant lawsuit. Your liability limit should be based on the worst-case scenario your product could cause, not your annual sales.
Stop asking “how much to insure my Shopify store?”. Ask “does this policy cover me for sales into California and New York?” instead.
The Question of Jurisdiction
When I first sought insurance, I asked agents for a quote to insure my Shopify store. I was focused on the price. I should have been focused on the geography. Some of the most populous states, like California and New York, are also the most litigious and have the strongest consumer protection laws. Many insurance policies have exclusions for claims arising from these high-risk states. The right question to ask is, “Does this policy fully cover me for sales into all 50 states, especially California and New York, and is the duty to defend me based there?”
The habit of keeping a sample from every single batch I produce that I wish I’d started sooner.
The Control Sample That Saved Me
I make and sell small-batch hot sauce. A customer claimed a bottle they bought had made them violently ill. They were threatening a lawsuit and a complaint to the health department. I was terrified. But then I remembered my process. For every batch I cook, I keep one sealed and labeled “control sample.” I was able to send my sample from that exact batch to an independent lab for testing. The results came back perfectly clean. The customer’s claim was dropped. That simple habit of keeping a control sample is a scientific defense I wish I had started on day one.
Here’s why generic business advice is terrible for a seller of refurbished power tools.
The Risk of a Second Life
Generic e-commerce advice tells you to focus on marketing and SEO. For a business that sells refurbished power tools, that advice is dangerously incomplete. When you refurbish a used chainsaw or a power drill, you are taking on immense liability. Has the internal wiring degraded? Is a safety guard missing? Did the previous owner make an unsafe modification? You are the last person to touch it before it gets to the customer. You need highly specialized product liability insurance that understands the unique risks of giving a dangerous product a second life. Generic advice doesn’t even consider this.
I’ll say what everyone’s thinking: You have no idea if your overseas supplier is meeting safety standards.
The Certificate That Might Be Fake
You found a great supplier on a global sourcing platform. They have great prices and good reviews. They even sent you a PDF of a safety certificate that looks official. But let’s be honest with ourselves. You have no real way of knowing if that certificate is genuine. You haven’t visited the factory. You haven’t audited their process. You are placing your entire business, brand, and personal assets in the hands of a supplier thousands of miles away, and you are trusting that they are telling the truth about safety. It’s a shocking leap of faith that underlies most of e-commerce.
The skill of technical writing for instructions that matters more than your marketing copy.
The Words That Prevent a Lawsuit
You might be a genius at writing marketing copy that persuades customers to buy. But for protecting your business, the skill of clear, concise technical writing for your instruction manual is far more important. A customer isn’t going to sue you because your marketing copy was boring. They are going to sue you because your instructions were ambiguous, leading them to assemble or use the product incorrectly and get injured. Investing in a professional technical writer to create your instructions can be one of the smartest defensive moves you ever make.
This counterintuitive action of making my warning labels bigger and uglier fixed my insurability problem.
The Ugly Label and the Beautiful Premium
My product packaging was my pride and joy—sleek, elegant, and minimalist. To preserve the look, the warning labels were tiny. When I tried to get product liability insurance, I was either rejected or quoted astronomical rates. An underwriter finally told me my warnings were “insufficient.” So I did something that hurt my soul: I made the warning section big, bold, and ugly, with thick borders and stark icons. It ruined my beautiful design. But when I sent the new packaging back to the underwriters, I was approved with a premium I could actually afford.
Why your good intention of using “all-natural” ingredients is actually a nightmare of uninsured allergy and contamination risks.
The “Natural” Contamination
I built my brand around using “all-natural” and “organic” ingredients. I thought this made my products safer. I was wrong. “Natural” ingredients are often harder to preserve, making them more susceptible to bacterial and mold contamination. A simple “all-natural” herb can be a potent allergen for a small percentage of the population. My good intentions created a product that was actually a higher risk in the eyes of an insurance underwriter. I learned that “lab-tested and stable” is a much more insurable quality than “all-natural.”
Quit commingling your business and personal inventory. It’s not worth the claims headache.
The Messy Garage, The Messy Claim
I stored the inventory for my online store in the same garage where I kept my personal tools and camping gear. It seemed efficient. Then a pipe burst and damaged everything. When the insurance adjuster came, it was a total nightmare. I had no way to clearly prove which items were business inventory and which were personal property. The claims process dragged on for months, and I ended up losing thousands because of the messy, commingled storage. Keeping your business inventory physically separate, even if it’s just in a different corner with a clear line, is critical.
The metric everyone tracks (conversion rate) that means absolutely nothing if your insurance is cancelled.
The Conversion to Zero
As an e-commerce owner, I was obsessed with my conversion rate. I tracked it daily, celebrating every small increase. I saw it as the ultimate measure of my success. Then I got a letter from my insurance company. Due to a series of small claims related to my product, they were cancelling my liability policy at the end of the term. I suddenly realized that my beautiful conversion rate meant nothing. Without insurance, major marketplaces would drop me and I couldn’t operate. Your business’s true health isn’t your conversion rate; it’s your insurability.
Stop calling it an “online store.” Call it “a non-admitted global retail and logistics operation.”
The Words of a Real Business
When I told people I ran an “online store,” it felt small and fun. It also allowed me to not take the risks seriously. My lawyer suggested I change my language. He told me to call it what it is: “a non-admitted global retail and logistics operation.” “Global” reminded me of international liability. “Retail” reminded me of product liability. “Logistics” reminded me of supply chain risk. “Non-admitted” reminded me I’m not a licensed retailer. This shift in language forced me to see my “little store” as a serious, complex, and risky business.
The decision I made to hire a broker who specialized in e-commerce that everyone said was a waste of money (but found coverage).
The Specialist Who Spoke Shopify
My local insurance agent was a great guy, but when I talked about Shopify, dropshipping, and international sales, his eyes glazed over. He came back with a quote for a policy that didn’t fit my business at all. Everyone told me hiring a specialist broker was a waste of money. But I found one who focused exclusively on e-commerce. He knew exactly what questions to ask and had access to insurance programs I had never heard of. He found me a comprehensive policy that was cheaper than the one my local agent quoted. The specialist wasn’t a waste; he was a bargain.
What I learned from my first “your product burned down my house” claim that changed everything.
The Worst-Case Scenario Call
I sold a small electronic device online. I had a basic liability policy. One morning, I got a call from a customer’s lawyer. They claimed my product had malfunctioned, started a fire, and burned their client’s house to the ground. They were suing for $1.5 million. In that single moment, my entire life’s work flashed before my eyes. I learned that you don’t insure for a small injury. You insure for the catastrophic, life-altering, worst-case scenario. My $500,000 policy limit was a joke in the face of that fire. It changed my entire understanding of risk.
The common mistake of thinking compliance with one country’s regulations protects you everywhere.
The Sticker That Wasn’t Enough
My product was fully compliant with all US consumer safety regulations. I had the testing and the certificates to prove it. I was proud of my diligence. Then I started selling into the European Union. I was shocked when a shipment was held at customs because I didn’t have the specific “CE” mark, a declaration that the product meets EU standards. I learned a hard lesson: compliance is not global. Every country and region has its own unique set of rules, and being compliant in your home country means nothing when you start selling across borders.
PSA: Most “cheap e-commerce insurance” policies are a scam. Here’s proof of the exclusions.
The Policy That Excludes Selling
I found a website offering “cheap insurance for e-commerce stores.” The price was fantastic. I almost bought it, but decided to read the full policy document first. I was horrified. Buried on page 27 was an exclusion for any claims arising from “products manufactured or sold by the insured.” The policy was a complete scam. It covered me if someone slipped and fell in my home office, but it excluded the one and only thing my business actually did: sell products. The cheap price was for a policy that provided zero real protection.
The skill of supply chain risk management that e-commerce gurus should teach but don’t.
The Chain Is Only as Strong as Its Weakest Link
The e-commerce gurus teach you about marketing funnels and conversion rates. They never teach you the most critical skill for a business that sells physical goods: supply chain risk management. They don’t teach you how to vet a supplier, how to spot a fake safety certificate, or what to do when your key component supplier suddenly goes out of business. Your business is not a website; it’s a chain of suppliers, manufacturers, and shippers. The ability to understand and manage the risks in that chain is what separates the temporary stores from the lasting brands.
This 5-minute action of checking your supplier’s own liability insurance beats trusting their word every time.
Show Me the Certificate
A potential new supplier swore up and down that they had a great product and stood behind it 100%. They seemed very trustworthy. I asked them to do one thing before I would sign a contract: “Please have your insurance broker email me a current certificate of your product liability insurance.” They started making excuses. I never heard from them again. I learned a valuable lesson. Talk is cheap. A company that has invested in its own liability insurance is one that takes its responsibilities seriously. That 5-minute check is the best due diligence you can ever do.
Why that cheap online insurer is actually doing it wrong for businesses with a product liability tail.
The Claim from Three Years Ago
You get a cheap insurance policy from a slick online provider. You run your business for a year, then decide to switch to a different insurer for a better price. Two years later, you get sued. The injury was from a product you sold three years ago, when you were with the first company. You file a claim, and they deny it. Why? The cheap policy was a “claims-made” policy, which means it only covers claims that are made during the policy period. Because you were no longer a customer, you weren’t covered. You learn about the long “tail” of product liability the hard way.
Stop waiting for a lawsuit from a customer. Start with a comprehensive product risk assessment today.
The Pre-Mortem for Your Product
Most sellers wait for a problem—a bad review, an injury, a lawsuit—before they seriously think about their product’s risks. This is a reactive and dangerous way to operate. A much better approach is to be proactive. Sit down today and conduct a “product risk assessment.” Imagine all the ways your product could fail or cause harm. What are the hazards? Who could be hurt? How could it be misused? This “pre-mortem” will allow you to identify your biggest risks and fix them before they become a real-world problem.
The specialty insurance program for Amazon sellers I use that most entrepreneurs have never heard of.
The Policy That Speaks FBA
When I first tried to get insurance for my Amazon FBA business, my local agent was lost. He didn’t understand the unique risks. Then I found a specialty insurance program designed exclusively for Amazon sellers. It was created by a broker who understood things like FBA inventory risk, international liability, and Amazon’s specific insurance requirements. The policy was tailor-made for my business, the price was competitive, and the broker could provide a perfect certificate of insurance in an hour. It’s a secret weapon that most sellers have never heard of.
Your claims problem exists because you believe that selling online is less risky than a physical store. It’s more risky.
The Myth of Digital Safety
Many people think selling online is safer than running a brick-and-mortar store. There’s no physical location for someone to slip and fall. This is a dangerous myth. In reality, e-commerce is far riskier. You give up control over the customer experience. You can’t observe how they use your product. You are shipping goods globally into a dozen different legal jurisdictions. And the entire record of your marketing claims and customer interactions is documented forever online. Your claims problem exists because you are operating with a false sense of security in a high-risk environment.
Delete that inventory management app without batch tracking. Your recall capability will improve.
The Needle in a Haystack Recall
We discovered a defect in a single batch of raw materials that went into one week’s production of our product. We needed to recall about 500 units. The problem was, our simple inventory management app didn’t use batch tracking. We had no way of knowing which specific customers received the products from that one bad week. We were forced to issue a massive, public recall for thousands of units, costing us a fortune and causing unnecessary panic. An app with batch tracking would have allowed us to do a precise, surgical recall, saving us time, money, and our reputation.
The advice on liability limits I give that makes new online sellers uncomfortable ($2M is the new minimum).
Insuring for a Digital World
When I advise new e-commerce sellers on product liability limits, I tell them that $2 million is the absolute minimum they should consider, and $5 million is better. They often look at me like I’m crazy. “I’m just a small store!” they say. I tell them that in the digital world, there’s no such thing as a small store. You can be sued by anyone, anywhere. With the high cost of medical care and legal defense, a $1 million limit—the old standard—can be wiped out by a single serious injury claim. Your limit needs to reflect the borderless risk of your business.
Why the common fear of high shipping costs is irrational and the real fear of an uninsured product liability suit from another country is ignored.
Focusing on the Centimeter, Ignoring the Kilometer
E-commerce forums are filled with sellers agonizing over how to save 50 cents on their shipping costs. They see it as their biggest expense. This is focusing on the wrong fear. What they should be terrified of is a product liability lawsuit from a customer in a country with strong consumer protection laws, like Germany or Australia. That lawsuit won’t cost 50 cents; it could cost a million dollars. The fear of shipping costs is irrational when compared to the very real, business-ending fear of a global liability claim that you are completely unprepared for.
I tried to use a standard BOP for my online pet treat business so you don’t have to. Here’s what happened with the product recall exclusion.
The Treats They Couldn’t Eat
I started an online business selling homemade dog treats. My agent sold me a standard Business Owner’s Policy (BOP). I discovered that a batch of treats was potentially contaminated, and I needed to recall them to protect my customers’ dogs. I was relieved I had insurance. Then I read the policy. My BOP specifically excluded any costs associated with a product recall. It would cover me if a dog got sick, but it wouldn’t pay a dime for the cost of notifying customers or refunding the tainted products. I learned that a standard BOP is not enough for a food business.
The question about “worldwide jurisdiction” that instantly reveals if a broker understands e-commerce.
The Courtroom Across the Ocean
When I interview a potential insurance broker, I ask one simple question: “Does this policy provide worldwide jurisdiction, or is it limited to suits brought in the US and Canada?” A broker who doesn’t understand e-commerce will stumble over this question. A true e-commerce specialist knows that “worldwide coverage” (for where the injury occurs) is useless without “worldwide jurisdiction” (for where the lawsuit is filed). If a German customer sues you in a German court, you need your policy to respond there. This question instantly separates the experts from the amateurs.
This old-school method of using a physical file for every supplier beats every digital folder.
The Paper Trail That Holds Up
I have a digital folder for every supplier, filled with PDFs of their contracts and certificates. But I also do something old-school: I keep a single physical file folder for each one. In it, I put the signed original contract, the printed certificate of insurance they sent, and notes from our calls. When we had a major supply chain dispute, our lawyer was thrilled. A physical file with original signatures and dated notes felt more substantial and harder to dispute than a folder of digital files that could be easily altered. It’s a tangible record of our relationship.
Stop romanticizing the “laptop lifestyle” of e-commerce. It’s a 24/7 global risk management job.
The Beach and the Lawsuit
The internet sells a fantasy: an e-commerce entrepreneur on a beach, working an hour a day from their laptop. This romantic image is a lie. When you run an online store, you are never off the clock. You are managing a 24/7 global operation. While you sleep, a customer in Australia could be injured by your product, a supplier in China could have a factory fire, and a hacker in Eastern Europe could be trying to breach your website. It’s not a “laptop lifestyle”; it’s a constant, global risk management job that you happen to do on a laptop.
The principle of “product stewardship” that guides every sourcing and selling decision I make.
From Seller to Steward
I used to see myself as just a seller. My job was to move units. My perspective changed when I learned about the principle of “product stewardship.” It’s the idea that as a seller, you have a responsibility for the entire lifecycle of your product, from ensuring it’s sourced ethically and made safely, to providing clear instructions for its use and disposal. This shifted my identity from a simple merchant to a steward of the products I sell. It guides every decision I make and forces me to prioritize safety and responsibility over a quick profit.
Why your monthly recurring revenue is vanity and your product liability coverage is sanity.
The MRR Trap
In the e-commerce world, everyone is obsessed with Monthly Recurring Revenue (MRR). It’s the ultimate vanity metric. Founders brag about their MRR at conferences. But that number is an illusion of health if the business is built on a foundation of risk. Who cares if your MRR is $50,000 if a single product liability lawsuit for $1 million can wipe you out? The number that represents sanity is the limit on your product liability policy. That’s the number that ensures you will survive to earn revenue next month.
Forget being the biggest store. Aim to be the most responsible and insurable store.
The Race to the Top, Not the Bottom
My main competitor was obsessed with being the biggest Shopify store in our niche. They used cheap overseas suppliers, offered constant discounts, and grew rapidly. I decided to take a different path. I aimed to be the most responsible store. I invested in higher-quality, compliant suppliers and bought robust insurance. For a while, they were bigger. Then they were hit with a massive product liability claim they weren’t prepared for and folded. I learned that being the biggest is a race to the bottom; being the most insurable is how you build a brand that lasts.
The realization that made me fire my local agent and hire a broker who understood my supply chain.
He Insured My Office, Not My Business
My local insurance agent was great for insuring my home office. He understood property and desks. But when I started talking about my supply chain—my factory in Vietnam, my 3PL warehouse in Nevada, and my customers in Europe—he was completely lost. He didn’t understand my actual business model. I realized he was insuring my office, not my operation. I fired him and found a specialist e-commerce broker. The first thing she asked for was a diagram of my supply chain. I knew then that she understood my real risks.
What amateur online sellers do with their terms of service that professional brands never do.
The Copied and Pasted Contract
Amateur e-commerce sellers almost always do the same thing: they find a bigger store’s Terms of Service page and copy and paste it onto their own site. A professional brand would never do this. Professionals understand that their ToS is a legal contract. They hire a lawyer to draft one that is specific to their products, their business model, and the jurisdictions they sell into. They know that a copied contract that doesn’t reflect their actual practices is not only unenforceable but can also create legal problems of its own.
The investment in a legal review of your product claims and warnings that everyone avoids that has the highest ROI.
The Cheapest Lawyer You’ll Ever Hire
Most e-commerce sellers would never dream of paying a lawyer a few hundred dollars to review the marketing claims and warning labels on their website. It feels like an unnecessary expense. This is a massive mistake. That lawyer is the cheapest one you will ever hire. Paying for a legal review to prevent a problem is infinitely cheaper than paying a lawyer thousands of dollars an hour to defend you in a lawsuit later. That proactive investment in legal compliance has the highest possible return on investment because it helps you avoid the fight altogether.
Stop saying “I sell things online.” Say “I operate a business that designs, sources,markets, and distributes consumer goods.”
The Language of a Real CEO
When you tell people, “I sell things online,” it sounds like a small hobby. It allows you to think small and act small. Start using the language of a real CEO. Say, “I operate a business that designs, sources, markets, and distributes consumer goods.” Each of those words—design, source, market, distribute—carries its own set of professional responsibilities and risks. This simple change in language will shift your mindset from that of a hobbyist to that of a serious business owner who understands the complexity and gravity of their operation.
The truth about e-commerce underwriting I couldn’t say as a standard lines underwriter.
The Computer Always Said No
I used to be an underwriter for a huge, standard insurance company. When an application came in from a small Shopify store selling, say, handmade cosmetics, our system would almost always automatically decline it. The truth is, our models were built for bakeries and bookstores, not for modern e-commerce risks. We had no good data on a business that sold products made by an unknown supplier to customers in 50 states and 10 countries. The risk was too complex and weird for our system. E-commerce sellers need specialty insurers who actually understand their business model.
This tiny detail in the “your work vs. your product” definition is critical for sellers who modify products.
The Tweak That Changed the Policy
My business involved importing generic products and then modifying or customizing them before selling them online. I thought my product liability policy covered me. But a tiny detail in the definitions was critical. My policy covered claims from “your product” but excluded claims from “your work.” The insurance company argued that any modification I made was “work,” not “product,” and therefore any failure related to my modification was not covered. I learned I needed a policy that clearly defined my finished, modified item as the final “product.”
Why a low premium is a trap for anyone selling products that can be ingested, applied to skin, or used by children.
The Exclusions Are the Feature
You get an insurance quote for your online store selling baby clothes that seems too good to be true. It is. A low premium on a high-risk product category—anything ingested, applied to the skin, or used by children—is a trap. The low price is possible because the policy is filled with exclusions. It will likely exclude claims from choking hazards, allergic reactions, or toxic materials. For these products, the exclusions are not a bug; they are the main feature of the policy. The policy is cheap because it covers almost nothing that could actually happen.
Replace your complicated product line with a simple, well-tested, and insurable one. You’re welcome.
The Curated, Insurable Collection
My e-commerce store was a mess. I sold a little bit of everything, chasing every trend. I had 100 different products from 20 different suppliers. Getting insurance was a nightmare; the underwriters couldn’t make sense of my risks. I made a hard decision: I cut 90% of my products. I focused on a simple, curated line of ten high-quality items from three trusted suppliers. My sales dipped, but my business became focused and professional. When I went back to the insurers, they saw a clear, manageable risk. My new, simpler business was finally insurable.
The skill of supplier auditing that’s 10x more valuable than your social media marketing.
The Real Due Diligence
You can spend all day learning how to run Facebook ads. But a far more valuable skill for an e-commerce owner is learning how to properly audit a potential supplier. This means more than just looking at their online reviews. It means asking for business registrations, safety certifications, and certificates of insurance. It means ordering samples and having them independently tested. It means understanding their quality control process. Your social media marketing brings in the customers, but your skill at supplier auditing is what protects your business from selling them a dangerous product.
Stop treating your insurance like a checkbox. Treat it as a non-negotiable cost of goods sold.
The Price of Doing Business
Many online sellers see insurance as the last, annoying checkbox to tick after their store is built. They look for the cheapest option just to say they have it. This is the wrong approach. Product liability insurance is not an administrative expense. It is a core, non-negotiable Cost of Goods Sold (COGS). Just as you factor the cost of the raw materials and shipping into your product’s price, you must factor in the cost of protecting your business from the risks that product creates. It’s a fundamental cost of doing business safely and sustainably.
The experiment I ran of getting my product independently lab tested that proved its safety and lowered my premium.
The Lab Report That Spoke Volumes
I was selling a children’s teether and my insurance quotes were high. The underwriters were nervous about the materials. I decided to run an experiment. I found an independent consumer product testing lab and paid them to run a full panel of safety tests on my product for things like lead, phthalates, and choking hazards. The product passed with flying colors. I submitted the official lab report along with my insurance application. The underwriters saw me as a serious, responsible seller. My premium was cut by 40%. That lab test paid for itself almost immediately.
Why your old “home business” policy worked before but is useless now that you ship to all 50 states.
The Policy That Didn’t Cross State Lines
When I first started my online store, I was only shipping to a handful of customers in my own state. My cheap, basic “home business” insurance policy was fine. But as my business grew, I was suddenly shipping to all 50 states. My old policy was dangerously inadequate. It didn’t contemplate the high-risk legal environments of states like California or New York. It wasn’t designed to handle the liability of having my product in thousands of homes across the country. My business had become a national retailer, and I needed a real, national product liability policy to match.
The choice to manufacture in the USA instead of overseas that everyone judges that actually simplified our insurance immensely.
The Domestic Advantage
Everyone in my industry told me I was crazy for manufacturing my product in the USA. They said I was sacrificing my profit margins by not using a cheaper factory overseas. But my choice had a hidden, powerful benefit. When I applied for product liability insurance, the process was simple and affordable. The underwriters could easily verify my domestic supplier’s safety standards and their own insurance. They saw a transparent, low-risk supply chain. My competitors, who were all sourcing from anonymous overseas factories, struggled to get coverage at all. My “expensive” choice actually made my business more resilient.
I stopped dropshipping and my business became 1000% more insurable.
The Control That Changed Everything
I ran a successful dropshipping store for two years. It was profitable, but I lived in constant fear of a product issue from a supplier I didn’t know. Getting insurance was nearly impossible. The underwriters saw me as a “middleman with no control.” I made a radical change: I stopped dropshipping. I chose my single best product, found a high-quality supplier, and started holding and inspecting my own inventory. The day I could tell an insurance company, “I personally see every unit before it ships to a customer,” my business became a real, insurable operation. Control is everything.
The concept of “seller’s liability” that nobody on eBay or Etsy understands but changes everything.
The Marketplace Myth
Millions of people sell on platforms like Etsy and eBay with the belief that they are just casual sellers, immune from serious risk. They don’t understand the legal concept of “seller’s liability.” The law, in most places, states that anyone who sells a product is part of the “chain of distribution” and can be held liable for any harm that product causes. It doesn’t matter if you’re a multi-billion dollar corporation or a hobbyist selling from your kitchen table. If you sell it, you have a responsibility for its safety. It’s a concept that turns a “side hustle” into a serious legal risk.
This unpopular opinion on free shipping will trigger e-commerce gurus but it’s true from a risk and insurance perspective.
The “Free” Shipping That Costs You
E-commerce gurus preach that offering free shipping is non-negotiable; you have to do it to compete. But from a risk perspective, this is terrible advice. “Free” shipping encourages sellers to use the absolute cheapest, untracked, and uninsured shipping methods to protect their margins. This leads to a higher rate of lost packages, customer disputes, and financial losses. A better strategy is to charge a fair price for reliable, tracked, and insured shipping. It might feel less competitive, but it creates a more secure and professional operation, and your customers will appreciate the reliability.
Stop copying the privacy policy from another website. Yours needs to reflect your actual data practices.
The Policy That Was a Lie
When I built my Shopify store, I copied the privacy policy from a major retailer’s website. It looked professional and I figured it would cover me. Then my site had a minor data breach. A lawyer pointed out that the policy I had copied promised a level of data encryption and security that I, a small store owner, was not actually providing. The policy wasn’t just a document; it was a promise to my customers. Because my actual practices didn’t match the policy, I was now at risk for not just the breach, but for misrepresentation.
The mistake of ignoring the CPSC and FDA regulations I see everywhere among small sellers.
The Alphabet Soup of Compliance
Many small e-commerce sellers, especially those making things at home, are completely unaware of the “alphabet soup” of federal regulations. They’ve never heard of the CPSC (Consumer Product Safety Commission) for toys and general goods, or the FDA (Food and Drug Administration) for food and cosmetics. They operate under the mistaken belief that these rules only apply to big companies. This is a critical error. The regulations apply to anyone who sells a product in the US. Ignoring them doesn’t just create a risk of fines; it makes your product legally defective and your business virtually uninsurable.
Why this new “pay-as-you-sell” insurance isn’t innovative. It’s just a complex and expensive way to buy coverage.
The Per-Transaction Trap
A new startup offered my e-commerce store “pay-as-you-sell” insurance. I would pay a small fee on every single transaction, and they would cover the liability. It sounded innovative. But when I did the math, I realized it was a trap. The effective annual premium was almost double what a traditional, annual policy would cost. Furthermore, it created complex questions about when coverage begins and ends. It wasn’t an innovation in risk management; it was just a clever way to repackage a standard policy and charge a massive premium for the convenience.
The rule I break consistently (I carry more insurance than Amazon requires) and why you should too.
Insuring for Reality, Not for the Minimum
Amazon requires its sellers to carry a $1 million product liability policy. Most sellers see this as a finish line; they buy the $1 million policy and stop there. I consistently break this rule. I carry a $2 million policy with a $5 million umbrella on top. Why? Because Amazon’s requirement is the bare minimum designed to protect Amazon. It has no bearing on the reality of a modern lawsuit. A serious injury claim can easily exceed $1 million. I insure for the reality of the legal world, not for Amazon’s checkbox.
Stop believing your great product will protect you. Believe in a great product and a comprehensive product liability policy.
The Two Pillars of a Real Brand
You’ve spent years perfecting your product. It’s beautiful, functional, and your customers love it. You believe this quality is your shield, that a great product will protect you from any problems. This is a dangerous, one-sided belief. A great product is only the first pillar of a sustainable brand. The second, equally important pillar is a comprehensive product liability policy. The product is what you build; the insurance is what guarantees you won’t lose it all overnight. A real brand stands securely on both pillars, not just one.