A day in the life of a wholesaler: boxes in, boxes out, retailers happy. Business is good — until one of those products ends up hurting someone. Suddenly, everyone’s looking for who to blame, and your business name might be on that box, invoice, or shipping label…
“Who’s actually at fault here?”
“Will someone try to sue me?”
“How do I prove it wasn’t my fault?”
These questions are normal in a moment like this, but you can quickly silence them with wholesaler product liability insurance. It’s like your legal and financial backup plan when something you sold causes harm or damage.
TL;DR: Wholesale Distributor Insurance
- You can be sued for injuries or damages caused by products you sell, even if you didn’t manufacture them
- Product liability insurance pays for medical costs, damages, or legal expenses if a product-related claim hits
- Retailers, online marketplaces, and distribution contracts often require you to have and show proof of product insurance
- Coverage is designed for wholesalers, distributors, and other supply chain businesses
- You can apply for a free quote online in minutes and receive a custom quote within 24 hours from a licensed agent
Where Wholesalers Carry Risk in the Supply Chain
Picture your product’s journey:
Manufacturer → Wholesaler → Retailer → Consumer
Even though you don’t make the product, you’re still a crucial link in that chain. If something goes wrong, lawyers often name every party involved in getting the item to customers.
A single claim could lead to costs and fallout like:
- Third-party medical expenses
- Property damage costs
- Legal defense and settlement costs (even if you’re not at fault)
- Lost contracts or retailer delistings
- Reputational damage if your name appears in a lawsuit
Three Real-World Claim Examples
Even if you did nothing “wrong,” you can still get sued. Product liability insurance keeps claims from ruining your business, because your business is your dream, your livelihood, and your passion!
Claim 1: Vitamin Reaction
A customer had a severe allergic reaction to a supplement you distributed. The lawsuit named the manufacturer, retailer, and your company.
✅ What’s covered: Legal defense, settlement costs
Claim 2: Electrical Fire
You imported chargers for electric bicycles under your brand. One overheated and damaged a customer’s home.
✅ What’s covered: Property damage, legal fees
Claim 3: Sample Injury
A consumer is hurt when sampling a product in-store that you delivered. The retailer blames you for the faulty product sample.
✅ What’s covered: Medical bills, legal defense
General Liability vs. Product Liability (Yes, They’re Different)
A lot of wholesalers assume their general liability policy covers product-related issues. Sometimes it does, but not in the way you would think (or need it to).
| Coverage Type | What It Covers | Example |
|---|---|---|
|
General Liability |
Accidents on your premises or where you do business |
A delivery driver trips in your warehouse, breaks a leg, and misses work for days |
|
Product Liability |
Injuries or damages from a product you handled |
A face wash causes an allergic reaction, and dozens of customers sue |
|
Products-Completed Operations |
Product-related accidents |
A defect appears months after removing a product from your distribution list |
You might see “Products-Completed Operations” listed under general liability, but this is typically a small, shared slice of coverage that pulls from the same limits as your general liability insurance.
That setup can work fine for businesses that occasionally sell products, like a hairstylist who sells a few products at a salon. But if your main business revolves around products, you’ll want a separate product liability coverage dedicated solely to that exposure.
Let me put it this way: if you file and are paid out for a general liability claim, your policy limits drop for the rest of the year. If a big product claim hits next month, your remaining limit might not be enough to cover it. That could leave you footing the bill yourself.
Shared or split limits can also cause problems with contracts. Most retailers and marketplaces require distinct limits for general liability and product liability. Without that separation, you could end up non-compliant.
Key Takeaways
- General Liability is not the same as Product Liability
- Product Liability can be called Products-Completed Operations
- Products-Completed Operations may fall under General Liability on some policies
- This type of shared coverage is not ideal for supply chain businesses
- Using General Liability to cover product claims can lead to exclusions, rejected claims, insufficient coverage, or non-compliant COIs
- Always look for separate coverage and limits listed for Product Liability
Secure The Core Retail and Marketplace Insurance Requirements
Retailers and online platforms, like Amazon, Target, and Walmart, usually require you to show a Certificate of Insurance (COI) before they’ll stock your products.
A COI proves you have product liability coverage, and that they’re protected too. It’s essentially a one-page document that serves as a summary of your coverage, including a quick overview of your insurer’s info, coverage details, and anyone listed as an additional insured.
Be sure to check any contracts to know what exactly you need and that your COI matches up with those asks. You don’t want to lose a deal because your insurance doesn’t meet requirements!
Know Your Contract
When looking over insurance requirements in a contract, you’ll often see language about:
- Additional insureds (AI): This means your retailer wants to be listed on your policy, so if a claim involves your product, their business is also protected
- Coverage limits: It’s common to see requirements like $1M per occurrence / $2M aggregate, or more (especially for big-box retailers or high-risk products)
- Indemnity or hold-harmless clause: This is legal-speak for “If something goes wrong, who’s responsible?” Many retailer contracts shift that responsibility to the wholesaler, but your coverage helps back you up, so you’re not exposed personally
- Waiver of subrogation: This one sounds fancy, but basically means your insurer won’t try to “get their money back” from your retail partner after paying a claim
- Primary non-contributory: This ensures your policy pays first in the event of a claim, instead of splitting responsibility with the retailer’s insurance
If any of that sounds confusing, that’s normal. Insurance is often very wordy! Most wholesalers typically start with general and product liability insurance and add coverage, additional insureds, or endorsements from there.
Did You Know?
When you apply for a quote with Insurance Canopy, you’re assigned to an agent who personally reviews your information and recommends the best policy for you (even if it’s not from us). Our team can help you check every box and be contract-ready in as little as 24 hours!
Calculating Your Costs
How much does product liability insurance for wholesalers cost? It depends on a few things:
- Revenue: More sales = higher exposure in the market
- Product type: For instance, supplements would be seen as a higher risk than clothing
Claims history: A history of claims could mean higher premiums - Coverage limits: Coverage starts at $1M per occurrence / $2M aggregate, but can increase from there
- Retail requirements: You may need to increase limits or add coverage to fulfil contractual obligations
- Employees: Hiring a team = additional coverage for them
- Business operations: Some of the work you may do carries additional risks, like importing
- Location: Where you do business and sell your products may increase your risks and coverage
You can usually start with affordable base limits and scale up as your contracts or retail partners grow.
Pro-Tip: Anytime your business hits a major milestone, you should review your coverage to ensure it still has your back. It’s best to review things once a year, adjusting your policy to reflect your current business needs.
Risk Check: Do You Import or Private Label?
If you import products or private-label them (sell under your own brand), you’re seen as the manufacturer in the eyes of the law. That means you carry the primary liability for product defects and claims.
Insurance just became a whole lot more important for your business! It can be the difference between closing up shop and keeping business running smoothly.
To protect your business:
- List all products you import or private-label on your product liability policy
- Collect and store proof of insurance for your suppliers
- Ask for testing and compliance certificates from overseas manufacturers
- Verify all labels and warnings meet U.S. standards
- Keep detailed records of quality checks and shipment dates
Doing your due diligence now can save you time, money, and stress if a claim is filed in the future.
Quickly “Ship” a COI to Your Inbox
You supply the products, we supply the protection. Our team of licensed agents works one-on-one with you to ensure you’ll get the coverage your business needs:
- Apply for a quote online
- Share details about your business and products
- An agent will review and reach out if any additional info is needed
- Your custom quote will be ready in as little as 24 hours
- Complete the fast and easy online purchase
- Get a copy of your Certificate of Insurance (COI) right to your inbox
Most businesses have a COI in hand and ready to send to partners within a day!
FAQs About Wholesale Business Insurance
Do Wholesalers Need Product Liability If the Manufacturer Has It?
Yes, wholesalers need product liability if the manufacturer has it. The manufacturer’s policy doesn’t automatically cover you, so if a claim arises, you’d be left to cover costs on your own.
You can still be named in claims just for selling a defective product, even if you didn’t make the item or cause the defect. That’s why having your own wholesale business insurance policy is so crucial!
Isn’t This Already In General Liability Insurance?
No, product liability insurance isn’t included in general liability insurance. While some policies may have “Products-Completed Operations” coverage listed, the limits can be low, come with heavier exclusions, or share limits with your general liability.
It’s important to know the difference between product liability and general liability insurance so you can ensure you have the right coverage.
How Much Coverage Do I Need?
The amount of coverage you need depends on:
- The type of products sold
- Where the products are sold
- Annual revenue
- Number of employees
- Where your business operates
- Contract requirements
Most wholesalers carry at least $1 million per occurrence / $2 million aggregate, but many retailers require higher limits.
Are Product Recalls Covered?
No, product recalls are not covered automatically. To cover recalls, you’ll need to add a product recall endorsement to your policy. Our team of agents can help you do this when you apply for a free quote.
Can I Add a Retailer as an Additional Insured?
Yes, you can add a retailer as an additional insured. It’s common to name another party like this on your policy, especially for contracts with big-box or marketplace partners. It does not alter your coverage limits or impact how your policy protects you.
For example, you get your product into Costco, and a customer claims your display caused them to trip and break their ankle. They sue both you and Costco for the injury, but your policy could cover you both for the claim since you added Costco as an additional insured.
