Being a retailer is kind of like being a celebrity. You’ve got the household name people recognize, a loyal fan base of frequent shoppers, and maybe even a group of online haters. I couldn’t tell you the brand name of my bedsheets, but I can tell you I bought them from Target. That’s the power of retailer magic!
Your storefront is at the forefront of the supply chain (whether you’re a brick-and-mortar or click-and-order store). This direct consumer relationship puts your business in a unique position to be hit with a variety of lawsuits, regardless if an accident was your fault.
Even if a product you sell wasn’t made by you, it can often still be linked to your store since that’s where someone made a purchase. This is where the power of retail product liability insurance starts to shine.
1. Product-related Accidents
Consumer products sent 12.7 million people to the emergency room to be treated for injuries in 2022. Most of the injuries were caused by everyday household items you would assume to be safe, like chairs, pillows, and cleaning products.
If a customer buys a product from you, and that product causes bodily injuries or property damage, you’re likely to have customers hold you responsible because you sold the defective item (whether you were aware of it or not). Regardless of who made the product or who caused the defect, you may still be on the hook to pay for the accident.
Product liability insurance may reduce or eliminate the cost of a claim, helping you pay for:
- Medical care
- Legal fees
- Repair costs
- Lost wages
- Replacement parts
- Funeral expenses
For example, if my dishwasher safe plates turned out to be not-so-dishwasher safe, broken shards from the plate could ruin the inside of the dishwasher and other dishware inside the machine. I also run the risk of getting a deep cut on my hand from a broken plate, needing stitches, and missing work for recovery time.
If you were the retail store I bought the plates from, you’re likely the person I am contacting about the situation. Product insurance could allow you to pay for the incident without the financial strain on your business. It could also cover the cost of an attorney to defend your business against the claims.
Product liability insurance policies are usually found paired with general liability coverage. Insurance Canopy offers this combined policy that can be customized to fit your business’s needs.
2. Slips, Trips, & Falls
A customer is shopping in your store when they trip over water a previous customer spilled. They break their wrist and are holding you accountable for the injury. Would you be financially prepared to handle this accident?
General liability insurance is similar to product liability; it helps to cover you for customer injuries or damages. The difference is it covers accidents caused by your business and its operations, not the products.
You can also be covered for more than a slip-and-fall accident. General liability could additionally cover you for:
- Client property damage
- Damage to rented property
- Libel and slander
- Negligence claims
- Advertising injuries
For example, online retailers can still face general liability claims if a visitor trips over a cord in your office or a delivery driver gets a flat tire from debris in your driveway. If you publish false information about another retailer in a blog, general liability may help you cover the cost of a libel lawsuit.
You’ll typically find general and product liability insurance bundled on one policy. This makes it easier for you to reduce the risk of product-related and business-related claims financially crippling your company.
3. Inventory Theft & Damages
Your products are the foundation of your business, so it only makes sense to insure them. Inland marine insurance is one of the best coverages you can have as a retailer. This helps to insure your products for claims of theft or damages. It can also insure the items you use to operate your business, like computers, a cash register, and displays.
The “inland” part of inland marine means this protection applies to insured items that are in transit across land (by rail or road) or at your place you’re doing business. This could apply to inventory being shipped to your store from a warehouse and a crash causing damage to the products. It also may apply to someone breaking into your store and stealing valuables from inside.
The two most common inland marine claims involve collisions and cargo theft. If your insured items are damaged or stolen in one of these scenarios, this coverage could help you pay to repair or replace the affected items.
Inland marine insurance is typically a coverage you can add on to your product liability plan.
4. Product Recalls
“Product Recall” are two words you really don’t want to hear. Sending products back to a manufacturer and notifying customers can be a lot of work. Product recall insurance is designed to help you remove a product from the market so you can avoid product liability incidents. It may cover the cost of:
- Shipping affected inventory
- Disposing recalled products
- Informing buyers
Recent years have seen a significant increase in the number of product recalls. The number of consumer products recalled in 2022 increased by 31.2%, while the FDA saw a 700.6% increase in the number of units recalled.
Having to deal with even one recall a year could put a financial burden on your business, so it’s important to have the right insurance coverage.
Most insurance companies have product recall insurance as an optional coverage on a product liability policy.
5. Cyber Attacks
Someone spoofs your payment system, stealing customer’s credit card information in the process. Now your customers are blaming you for their frozen bank accounts and fraud charges.
Cyber attacks are a growing threat to retail businesses across the country. Ransomware attacks grew by nearly 93% in 2021 alone. If you use any online platforms, digital databases, or e-payments, your business is at risk of being targeted by cybercrime.
A flower shop owner in Georgia heard about the threat of cyber attacks and found a third-party company to protect her business. Unfortunately, online criminals found gaps in the two-factor authentication system and seized control of her business with ransomware.
The thieves were demanding she pay them in exchange for her business and clients’ data. She did not have the hundreds of thousands of dollars they were asking for, so she paid another company $20,000 to retrieve the stolen information. The store owner had to then rebuild her business online and go through the painstaking process of notifying customers.
Cyber liability insurance is specifically made to help you pay for the effects of a cyber attack. This may include:
- Repaying stolen funds
- Recovering data
- Informing customers
- Retrieving stolen information
It may also help you pay for a lawsuit brought on by customers or meet ransom demands in order to regain access to your systems. With the digital world we live in, cyber liability is a vital coverage to have — especially for online retailers.
Cyber liability insurance is a popular coverage you can add to most product insurance plans.
6. Employee Accidents
Retailers with employees have a duty to provide safe and healthy work conditions. Sadly, things can go wrong while we are trying to do our jobs, putting employees at risk of injuries, illnesses, and even death caused by work-related accidents.
According to Forbes, the top six workplace injuries and deaths in 2021 were caused by:
- Transportation and vehicle crashes
- Slips and falls
- Exposure to harmful substances or environments
- Intentional injuries by another person
- Objects and equipment in the workplace
- Fires and explosions
We understand the last thing you want to do is have an employee get hurt while on the job. That’s why workers’ compensation is a key coverage to have. It could help you cover the cost of an employee’s work-related incident, including:
- Medical care
- Disability pay
- Lost wages
- Physical therapy
- Injury rehabilitation
- Funeral expenses
- Survivor benefits
Workers’ comp is made to help you care for your employees in a time of need, so you can focus on their wellbeing without the added stress of bills and legal fees.
Workers’ compensation is required in most states for businesses that have employees. You can find this coverage as a stand-alone policy, or as an add-on to a product liability policy.
Finding the Right Coverage for You
Now that you know what product insurance is and how it works, you might be wondering, “how much product liability insurance do I need?”. The amount of insurance your retail business need depends on a few factors, some of the most important ones being:
- Business operations: The way you operate your business could require more or less insurance coverage, such as running an online business vs a retail storefront.
- Product type: A retailer selling shoes might not have as much risk as a retailer selling sporting equipment, so the type of products you insure can increase how much coverage you need.
- Annual revenue: The more products you sell, the higher your risk of an accident occurring, so you will likely need more coverage.
One of the fastest ways to know how much insurance you need is to apply for a free quote with Insurance Canopy. We connect you with an agent who can assess your business risks and recommend the right amount of coverage for you. It only takes a few minutes to apply online, and you’ll hear back from us in as quick as 24 hours.
Our team is dedicated to helping retailers find the insurance they need at a price they can afford. Each policy is entirely customized to your business, and you’ll only pay for the coverage on your plan. There are no hidden agent fees, group rates, or mandatory premiums.
We offer all the policies we talked about today and more — so what are you waiting for? Let’s start reducing your risks with a personalized product insurance policy today!