You've turned your hobby of making candles or pet toys for friends, family and the occasional craft fair into a small business. You're selling your products through an online marketplace like Amazon or Etsy. You've probably never considered that anyone might sue you, but you can never be sure.
What if the squeaker in one of those pet toys is torn out by someone's determined Chihuahua and swallowed by a child? If the product packaging didn't include a warning that it contained a choking hazard, you could find yourself on the wrong end of a lawsuit that could put you out of business and leave you personally bankrupt.
That's why you should have insurance. If someone is injured or sickened by a product or it causes damage to property, a customer could well prevail in a hefty product liability suit against you. Even if the flaw was in a part of the product that you didn't make yourself, you could still be liable.
So what kind of insurance do you need? There are several types of policies that might be appropriate. One insurance analyst says, "If you sell products online, it's a good idea to have a commercial general liability (CGL) policy. This basic coverage gives small businesses a broad range of protection, including premises and products liability."
She also recommends a commercial umbrella policy for greater protection and possibly a business owner's policy (BOP). She says, "A BOP includes coverage for other types of perils, such as loss of income, business interruptions and cyber-theft."
You might also want to consider a product liability policy. Another insurance professional says, "A typical product liability insurance policy covers product injury lawsuits, illnesses caused by toxins in products and property damage caused by defective products."
The appropriate insurance can help you if you are faced with a lawsuit. However, you can also help prevent product liability lawsuits by having thorough safety protocols and only using materials from vendors you've researched to make sure that their products are safe. Proper labeling regarding age recommendations and potential dangers is also essential.
An experienced attorney can provide guidance that can help you reduce your risk of liability. They can also help you fight or at least reduce the financial damage of a lawsuit.