Product liability insurance for handmade sellers
Do I need insurance to sell handmade products?
Insurance, not an LLC, covers harm your products cause
For a maker, the most likely serious claim is that a product hurt someone. Product liability insurance pays for that claim; an LLC mostly does not stop it reaching you.
An LLC separates the shop's debts from your personal assets. But when you personally designed and made the item, an injured buyer can pursue you as the maker, not only the company that sold it. In a one-person shop there is nobody else to point to.
That is why this site treats insurance as the first protection to arrange and the LLC as a later one. A candle maker with a solid policy and no LLC is often better protected against the realistic risk than one with an LLC and no policy.
The SBA describes product liability insurance as coverage that protects against financial loss from a defective product that causes injury or bodily harm. — U.S. Small Business Administration, retrieved 2026-09-27
The policy types a small handmade shop runs into
Three kinds of cover come up for makers: product liability, general liability, and a homeowners rider for a home studio. Many small-business policies bundle the first two.
Product liability addresses injuries or damage caused by what you sell. General liability addresses the wider set of claims against a business, such as a customer tripping over a display at your craft fair booth. Fair organizers who ask for proof of insurance are usually asking for general liability, often with the organizer named on the certificate.
Ask any insurer to confirm, in writing, that the policy covers products you make yourself and sell online. Some policies are written for resellers of finished goods and treat manufacturing differently.
| Coverage | What it is for | Typical handmade trigger |
|---|---|---|
| Product liability | Injury or harm from a defective product | Candles, soap, toys, anything worn or used on skin |
| General liability | Injury, property damage and related claims | Craft fair booths and in-person sales |
| Homeowners business rider | Small amounts of business equipment and some liability | Making and storing stock at home |
The SBA says general liability insurance protects against financial loss from bodily injury, property damage, medical expenses, libel, slander, defending lawsuits, and settlements or judgments. — U.S. Small Business Administration, retrieved 2026-09-27
A homeowners policy is not built for a home studio
A standard homeowners policy is written for a household, not a business. The SBA points home-based businesses toward a rider that adds limited cover for equipment and third-party injuries.
This matters most for makers with valuable equipment or stock at home: a kiln, a loom, a laser cutter, or a garage full of finished inventory before the holiday rush. A fire or a theft that touches business property may not be covered the way you expect.
Ask your home insurer directly what happens if a claim involves the business. A rider is often inexpensive. A separate business property policy may make sense once the equipment and stock are worth more than the rider covers.
The SBA says homeowners insurance can be supplemented with a rider giving protection for a small amount of business equipment and liability coverage for third-party injuries. — U.S. Small Business Administration, retrieved 2026-09-27
Some handmade products carry more risk than others
Risk tracks the product. Items for children, items applied to skin, and items that burn or heat carry more claim potential than prints, stickers or wall art, and insurers price them accordingly.
For children's products, there is also a federal compliance layer. A product designed mainly for children 12 or younger needs a Children's Product Certificate based on third-party laboratory testing. Selling without one is a regulatory problem as well as an insurance one, and an insurer may ask whether you comply.
Soap and cosmetics carry their own labeling and classification rules, which decide whether FDA or CPSC oversees a product. Both are covered on the children's products and cosmetics page.
12 or youngerCPSC defines a children's product as a consumer product designed or intended primarily for children 12 years of age or younger, and requires a certificate based on third-party testing. — U.S. Consumer Product Safety Commission, retrieved 2026-09-27
What an LLC adds on top of insurance, and when
An LLC adds protection against the business's contracts and debts, and against claims that exceed or fall outside the policy. That becomes valuable as the shop takes on wholesale accounts, a lease or staff.
Insurance has limits and exclusions. A claim larger than the policy limit, or one the policy excludes, falls back on whoever is liable. With an LLC in place, the business's own debts stay with the business in most instances. Without one, everything falls on you.
So the two work together. Insurance first, sized to your product risk. An LLC when the shop's contracts, staff or scale mean the leftover exposure is worth the annual cost, as whether you need an LLC yet explains.
The SBA says LLCs protect owners from personal liability in most instances, keeping assets like a vehicle, house and savings out of reach if the LLC faces bankruptcy or lawsuits. — U.S. Small Business Administration, retrieved 2026-09-27
Get a quote before your next product launch or market
Price insurance before you add a riskier product line or book a craft fair season. The premium is part of what that product or fair actually costs.
Tell the insurer what you make, where you sell it and roughly how much you sell. List your channels, including marketplaces, your own website and events. Ask for general and product liability together, and ask whether the policy names additional insureds for fair organizers.
Then add the premium to your budget alongside the registrations on the cost breakdown, and note the renewal date with the rest in the setup guide. A policy is a business expense, deductible on Schedule C for a shop run as a business.
The IRS directs sole proprietors to report business income and expenses on Schedule C (Profit or Loss from Business). — Internal Revenue Service, retrieved 2026-09-27
Questions
Does my marketplace's seller protection cover product injury claims?
Do not assume so. Marketplace seller programs typically deal with disputes over orders and payments, not injury claims about your products. Read your marketplace's terms, and rely on your own policy for product liability.
Do craft fairs require vendors to carry insurance?
Many do, and they set the requirement themselves. Organizers commonly ask for a certificate of general liability insurance, sometimes naming the organizer as an additional insured. Check each fair's vendor terms before you book.
Is product liability insurance deductible for a handmade shop?
Yes, for a shop run as a business. Insurance premiums are a business expense reported with the shop's other costs on Schedule C, which lowers the profit that income tax and self-employment tax are figured on.