You have spent your time researching products that sell and wholesale, liquidation or drop-ship sources to obtain them. Whatever business you have decided upon, you cannot forget that it is a business. Home based businesses often neglect the value of small business insurance to protect them from both property losses and liability lawsuits. You shouldn’t neglect this very important aspect of your business.
Notify your current insurance company
Your first step is to notify your personal insurance carrier whether under a homeowner’s or renter’s policy. It might be possible to add a Home Business endorsement to the policy. If they say, “No”, don’t despair. Several companies are able to write home based business policies for less than $1,000 per year, often as low as $500.
Valuing your inventory
Wholesale items are easily valued at invoice, but when liquidation merchandise is being sold, it can be more complicated because the amount you purchased the items for can change drastically every month depending on supply. As a rule of thumb, you should use the same methods for valuing your inventory for insurance purposes as you do for your bookkeeping.
Bodily Injury Liability: If you rent a warehouse or storage unit for your inventory, you should have General Liability insurance to cover any accidents that may happen to third parties on your premises. This could include the warehouse staff, cleaning crews, your landlord, or delivery people. Even if you are running your business out of your house, you should carry this insurance.
Products Liability: If you are buying overstock merchandise, you most certainly need Products Liability – you could be held liable for defective merchandise. Don’t think that the original manufacturer will offer you any assistance. If you are buying wholesale or drop shipping, request to be added as additional insured to their Products Liability policy. They should be willing to do so. If not, consider a different source
Media and Advertiser’s Liability: A common exposure faced by eBay sellers is copyright or trademark infringement, unauthorized use of images or logos, and, heaven forbid, claims of counterfeit merchandise trading. These exposures do require special coverage that extends beyond even a standard business insurance policy. To have coverage for these types of claims, you need Media and Advertiser’s Liability insurance. Yes, even one person selling stuff out of their basement can be sued as a publisher, because when you create a page on eBay, which is what you are doing.
Starting an eBay business on a shoestring is hard enough without having to consider yet another expense. The best course of action in the beginning is prevention: don’t use trademarks, images or logos without permission, be careful what you say about the competition, restrict public access to your premises, and publish solid descriptions and disclaimers of liability on your listings. As your business grows, you should consider your small business insurance as one of the many expenses of a successful business.