Insurance specialist Chris DeCarolis, of Coverage Axis, is urging small business owners selling on TikTok and Etsy to check whether their policies include product liability insurance, warning that a single claim could wipe out everything a side hustle has earned.
Why product liability insurance matters
TikTok and Etsy rank among the largest marketplaces for small businesses, with a combined total exceeding 20 million merchants using these platforms, typically as side ventures to generate additional income. However, sellers who manufacture or import goods themselves are particularly vulnerable if they neglect this coverage.
DeCarolis said: "Product liability insurance is important because the financial risk does not end with refunding the price of an item. If somebody claims that a product injured them or damaged their home, the seller could also face compensation demands and legal costs."
He added: "A business may earn only a few pounds from one sale, but one serious claim could wipe out everything a small side hustle has earned."
Who is most at risk
The caution is particularly relevant for those selling candles, cosmetics, toys and electrical accessories, where a defective product could potentially result in injury or property damage. The UK Government's business guidance confirms that product liability insurance can safeguard businesses against claims that a product they manufactured, sold or supplied caused illness or injury.
It also states that manufacturers, and occasionally others within the supply chain, can be held liable where an unsafe product causes personal injury, death or damage to private property.
Home-based sellers and legal duties
This distinction may prove especially significant for those operating modest enterprises from home, as a standard household insurance policy ought not to be automatically assumed to offer cover for commercial product liability claims. UK Government-backed business guidance recommends verifying precisely what a policy includes, such as exclusions, limits and conditions.
There is a further consideration sellers must address before presenting products to customers: insurance cannot substitute for their legal obligations regarding product safety. The Office for Product Safety and Standards states that businesses which manufacture, import, distribute or sell consumer products in the UK bear responsibility for ensuring they are safe and meet relevant labelling requirements.
For businesses trading in Great Britain, the General Product Safety Regulations 2005 stipulate that consumer products must be safe under normal or reasonably foreseeable use. Government guidance indicates that serious breaches can lead to a fine of up to £20,000, imprisonment for up to 12 months, or both.
Next steps for sellers
DeCarolis is consequently urging sellers to search specifically for the term "product liability" within their policy and determine whether their particular products, imported goods and online sales platforms are protected. For anyone transforming TikTok or Etsy sales into a business venture, verifying this before the next order could prove a sensible safeguard.
