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Do Online Retailers Need Product Liability Insurance?

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Do online retailers need Product Liability insurance?

If you’re an online retailer (or someone selling through a platform like Amazon or Etsy) then it’s highly advisable to hold a form of product liability insurance. Product liability will take care of any legal costs associated with one of your customers suing you believing that what you sold them caused them injury or illness.

There are a wide variety of sellers who might benefit from product liability cover. While you might have faith in the quality and design of your product, you never know when things can go wrong, and when they do the potential costs of having caused damages can be severe. While by no means an exhaustive list, here are a few examples of online sellers who might benefit from product liability:

  • Building equipment (ladders, harnesses)
  • Building materials (timber, bricks)
  • Carpentry/joinery/woodwork
  • Children’s toys
  • Cleaning products
  • Cutlery
  • Electronics
  • Food/baked goods
  • Metalwork
  • Tools

If you are selling through a marketplace, keep in mind that it's uncommon for them to provide you with any form of coverage—the likes of Amazon, Etsy, and eBay don’t provide any cover for your products, for example, which means you’ll need to sort out by yourself.

Technically speaking, you aren’t required to hold product liability to operate on any of these platforms (unless you meet a certain threshold on Amazon, discussed here), but that doesn’t make it advisable to do so. Cover can start from less than £100 per year (and may even come with public liability insurance, which is useful to have if you’re ever meeting customers/suppliers in person). This is considerably less than the potential costs in the event something unfortunate does happen, so make sure you’ve evaluated your potential risk.

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Product Liability Insurance Etsy

Product liability insurance for Etsy can help protect you and your business in the event that a customer becomes unwell or is hurt as a result of a fault with your product. This could range from a part small enough for a child to choke on if it came loose, through to someone becoming unwell due to the delivery of a food item that was out of date or mislabeled.

The possibilities to what you can sell on Etsy are almost endless, so it's especially important to make sure to properly evaluate the chances of something going wrong with your product. Mistakes and issues can happen from time to time, sometimes through no fault of your own, but as a seller you are ultimately in charge of ensuring the quality of the product you sell. If it were to cause injury or illness, responsibility lies with you.

You’re not required by Etsy to hold product liability, so you can operate on the platform without a policy should you choose to do so. Just be sure to properly assess everything beforehand, and triple check any product before you send it off for issues that could cause you a headache down the road.

Don’t be afraid to talk to other similar Etsy sellers too—it could be a useful tool to see what others are/aren’t covered for.

Do Etsy shops need Product Liability insurance?

There’s nothing in Etsy’s terms & conditions requiring Etsy shops to hold product liability insurance. This doesn’t make it advisable to operate without a policy, but you don’t need to worry about losing your right to sell on the platform just because you aren’t properly insured.

You may run into issues if a customer is hurt or becomes unwell as a result of your product, as you may need to pay for a lawyer (and any compensation awarded against you if the court finds that your customer is within their rights to believe you’re at fault), so not taking out product liability does expose you to a decent amount of easily avoidable risk.

Etsy does not offer product liability insurance to any of its customers, nor can it act as a legal advisor to anyone selling on the platform, so if an issue does come about you’ll be on your own when it comes to any legal discussions.

Amazon Product Liability Insurance

Product liability insurance for Amazon sellers can protect your business in the event that an item you sell causes injury or illness to one of your customers.

While no good seller would ever intentionally sell a faulty product, mistakes can happen, especially if your product is "FBA" (fulfilled by Amazon), meaning it’s stored in their warehouse and deliveries are taken care of by Amazon’s world class delivery service. This is a great option for a lot of sellers, saving them money on potentially expensive storage facilities and delivery solutions.

As a result, many FBA sellers are required to hold product liability. While it’s recommended for anyone selling through Amazon, you’ll be formally required to provide proof of insurance (min. £400,000 limit) if you're FBA and sales exceed £4,000 per month over 3 consecutive months.

While the product is being stored and delivered by Amazon, product faults are still considered to be your responsibility. Their terms & conditions state very clearly that you take on 100% of the responsibility (and subsequent risk) when selling through their marketplace. This means that even if you’re below the threshold (or aren’t having your sales fulfilled by Amazon) it’s still well worth holding a policy.

Do you need Product Liability insurance to sell on Amazon?

When it comes to selling on Amazon, some sellers will need product liability insurance and some won’t. Even if you aren’t technically required by Amazon to hold a policy though, it’s still well worth considering.

If your sales are fulfilled by Amazon, and you’ve earned over £4,000 a month for three consecutive months, Amazon will require you to hold a product liability insurance policy. You’ll need at least £400,000 in cover, and must include Amazon and assignees as additionally insured. This generally isn’t expensive to do, and just means Amazon doesn’t take on any risk while allowing you to sell.

Even if your sales are under £4,000, if Amazon is fulfilling your deliveries, they may still require you to hold a policy. Make sure to check with them beforehand, as it’ll be your problem to clean up afterwards if something does go wrong and you’ve failed to insure yourself correctly.

If you don’t meet these criteria, you aren’t technically required to hold product liability. This doesn’t mean you shouldn’t hold a policy, as if something does go wrong you’ll be the one responsible for dealing with the customer (and any subsequent legal fees/compensation awarded). Considering policies can cost under £100 per year, it’s well worth being on the safe side.

Product Liability insurance for eBay sellers

Finding product and public liability insurance for eBay sellers shouldn’t be too difficult. There are a number of insurers who would be happy to cover you and can sort out a policy very quickly.

eBay doesn’t require you to hold any forms of insurance before selling on the platform, but that doesn’t make it worth not being properly covered. Product liability can often cost under £100 per year, especially if the product you’re selling isn’t especially ‘risky’, and just to avoid the chances of something going wrong most sellers feel it’s well worth the small annual investment.

If you’re selling from your home or own business premises, it’s worth looking into a dual public/product liability policy. It’ll protect both your customers when they receive your product (via product liability) and any third parties (customers, delivery people, etc.) if they come on your premises for something (purchase, delivery item) they’ve come to collect (via public liability).

Do you need Product Liability insurance to sell on eBay?

You’re not required to hold Product Liability insurance to be able to sell through eBay—this doesn’t mean it isn’t worth having, though.

Many sellers enjoy the benefits of quality product liability cover. It’ll give you peace of mind that if something does go wrong you’ll be protected, and if it does (it always can) then you won’t have to worry about suddenly coughing up money to cover a potentially expensive legal case and any compensation your customer is entitled to.

Ultimately, it’s your decision to decide whether or not you want product liability cover. While by no means a perfect guide, there are some interesting discussions on the topic on the eBay community forums, where different sellers chime in with their experience and reasoning for/against holding a policy.

How much is Product Liability insurance?

A combined public and product liability insurance policy is likely to cost you around £75-£150 per year, depending on a number of factors an insurer will assess, such as the type of product you’re selling and the size of your business. Your eventual cost will be a reflection of the chances of something going wrong and the potential costs for you/your insurer if they do.

To save money, be sure to shop around and don’t just take the first deal you see. Our partners at QuoteZone can take care of this for you, just fill out their short quote form and they’ll take care of connecting you with some of the UK’s leading product and public liability insurers.

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The guidance on this site is based on our own analysis and is meant to help you identify options and narrow down your choices. We do not advise or tell you which product to buy; undertake your own due diligence before entering into any agreement. Read our full disclosure here.