Shopify questionAnswer4 min read
Do I Need Product Liability Insurance to Sell Online?
Usually no law forces a small online store to buy product liability insurance. But if a product you sell hurts someone, the claim can still land on you.
Key takeaways
- No US federal law requires an online store to carry product liability insurance. The insurance the SBA lists as required applies to businesses with employees.
- You can still be named in a claim if a product you sell causes injury or damage, even when someone else made it.
- Marketplaces, retailers and wholesale buyers often require proof of liability cover before they will sell your products.
- In the EU, new product liability rules apply to products placed on the market after 9 December 2026, and they reach importers and fulfillment providers of goods made outside the EU.
- Who it is for
- Stores selling physical products
- Time needed
- 4 minutes to read
- What you need
- A list of your products
In most cases, no: US federal law does not require an online store to carry product liability insurance, and the same is true in the UK, the EU and Australia. The insurance that is required usually depends on having employees, not on selling products. Most stores selling physical goods should still get it, because a claim over an injury can cost far more than years of premiums, and many sales channels will ask for proof of cover anyway.
I build Shopify stores, not insurance policies, so treat this as a map of the rules, not advice on which policy to buy. This is general information, not legal advice. For cover and prices, speak to a licensed insurance broker.
What product liability insurance covers
The SBA describes product liability insurance as cover for businesses that manufacture, wholesale, distribute or retail a product. It protects against financial loss when a defective product causes injury or bodily harm. Policies usually pay for legal defense and any settlement or damages, up to the policy limit.
It is different from general liability insurance, which covers things like injury or property damage from your business operations. Many insurers bundle both into a business owner's policy, which the SBA notes can simplify buying and cost less than separate policies.
What the law requires in the US
The SBA lists workers' compensation, unemployment and disability insurance as required for businesses with employees, and notes that some states require more. Product liability insurance is not on that list. A solo founder running a Shopify store from home has no federal insurance requirement at all.
The absence of a legal requirement is not the same as low risk. Product liability is decided under state law, and a person injured by a product can bring a claim against businesses in the chain that brought it to them, including the seller.
Who is most exposed
How exposed is your store
- Low-risk product, known US makerLower exposureBooks, prints, simple accessories. Cover is still sensible once sales grow.
- Low-risk product, overseas makerHidden exposureIf the maker is hard to reach, you may be the easiest party to sue.
- Higher-risk product, known makerCheck their coverAsk to be added to the maker's policy and get your own as well.
- Higher-risk product, your own brandGet cover firstSupplements, skincare, kids' items and electricals. Insure before launch.
Private label and dropshipping sit in the riskiest corner more often than people think. If your brand name is on the box and the factory is overseas, a customer sees you as the maker.
When partners will ask for it
- Marketplaces: Amazon's seller agreement requires commercial liability insurance once your sales pass a set monthly level. Check the current terms in Seller Central.
- Retailers and wholesale buyers: stores that stock your products commonly ask for a certificate of insurance before the first order.
- Markets and pop-ups: event organizers often require liability cover to book a stall.
- Dropshipping suppliers: their own policy may not cover you. Ask whether they can add your business as an additional insured and send you the certificate.
What it costs
Insurers don't publish one standard price, because premiums depend on your product category, sales volume, where you sell, the limits you choose and your claims history. A store selling phone cases and a store selling supplements will get very different quotes. Ask two or three brokers for quotes using the same limits so you can compare them fairly.
Rules in the UK, EU and Australia
| Market | Product liability cover | What is compulsory |
|---|---|---|
| US | Optional | Workers' comp and more, with employees |
| UK | Optional | Employers' liability, at least £5 million, with staff |
| EU and Netherlands | Optional | New liability rules from 9 December 2026 |
| Australia | Optional | Workers' comp with employees |
In the UK, an employer without proper employers' liability cover can be fined £2,500 for every day it is uninsured. In the EU, Directive (EU) 2024/2853 applies to products placed on the market after 9 December 2026. A non-EU manufacturer stays liable, and an injured person can also claim against the EU importer, the authorized representative, or the fulfillment service provider when neither of those exists. That matters for UK, US and Australian brands that ship into the EU from a third-party warehouse there. In Australia, business.gov.au says you may need product liability insurance if you make, sell or supply goods.
What to do next
- List your products by risk. Anything ingested, applied to skin, used by children or plugged in goes to the top.
- Get your labels and warnings right. My guide to product safety and labelling rules covers the basics by market.
- Ask a broker for quotes with the same limits, and ask each supplier for their certificate of insurance.
- Make your store match. Accurate descriptions, ingredients and age guidance reduce claims and returns. See how I write product descriptions, or get a free store review.
Free tools
Check your own store
Free, no sign-up. Each one runs a part of this guide for you.
Frequently asked questions
Is product liability insurance required by law to sell online?
Generally no. In the US, UK, EU and Australia, small online sellers aren't required by law to carry it. Required insurance usually depends on having employees. This is general information, not legal advice.
What is product liability insurance?
It covers the cost of claims when a product you make, distribute or sell causes injury or damage. Policies usually pay legal defense costs and settlements up to the policy limit.
Do I need product liability insurance for dropshipping?
No law usually requires it, but dropshippers are often exposed because the maker is overseas and hard to reach. Ask your supplier about their cover and consider your own policy.
Do Amazon sellers need product liability insurance?
Amazon's seller agreement requires commercial liability insurance once your sales pass a set monthly level. Check the current requirement and limits in Seller Central before you reach it.
How much does product liability insurance cost for a small business?
There is no standard published price. Premiums depend on your products, sales, markets, limits and claims history, so compare broker quotes for the same cover.
Does Shopify include product liability insurance?
No. A Shopify plan covers the platform, not claims about the products you sell. Cover comes from an insurer, often through a broker or a business owner's policy.
Sources
- Get business insurance, U.S. Small Business Administration
- Employers' liability insurance, GOV.UK
- Liability for defective products, European Commission
- Types of business insurance, business.gov.au
Related services and work
I'm a Shopify developer and CRO specialist. I have built and improved Shopify stores since 2018, completed more than 1,000 projects, and hold a 4.96 average rating across 719 client reviews.
More guides
-
Do I Need a Licence to Sell Alcohol Online in the UK?
Selling alcohol online is licensed the same way as selling it in a shop. The key is where your orders are picked, not where your website is.
-
Can I Use My Supplier's Product Photos on My Website?
Supplier photos are protected by copyright, so you need permission to use them. Here is how to get it, when a dropshipping supplier can't give it and what Shopify does about copied images.
-
What Size Should Shopify Product Images Be?
Shopify accepts big files, but the right size is about consistency and zoom, not maximum pixels. Here are the limits and the setup I use.
-
Do I Need an EORI Number to Sell to Europe?
If you ship goods from Great Britain to EU customers, you need a GB EORI number. Here is what it is, how to get one, and when you need an EU number too.
