What Insurance Policies Do Wholesale Hobby Distributors Need?

The term “hobby” may sound casual, but business is anything but for wholesale distributors in the hobby industry. The industry has a projected revenue of $45 billion, which means your inventory is very valuable—and so are the potential liabilities that come with it.

Hobby distribution covers a wide range of items, from antiques and art supplies to toys and crafting materials, each with its risks and challenges. In the article below, Deidra Hoschak, senior small business underwriter at Central Insurance, explains some of the key insurance policies you may need to ensure your wholesale hobby distribution business is fully protected.

Wholesale Hobby Distributor Risks Vary by Your Specialty

“Hobby distribution is risky business as far as insurance goes,” Hoschak says. “It all depends on what you’re distributing.”

Wholesale hobby distributors often store high volumes of inventory, whether it’s delicate antiques or flammable craft supplies. That makes commercial property insurance a must. It can cover your building(s), contents, and inventory against risks like fire, theft, and many types of weather-related damage.

To help manage these risks, make sure your insurance coverage accurately reflects any materials on premises that contribute to a high fire load.

According to Hoschak, antiques present another unique challenge. You’re not going to be able to easily replace a vase from the 1800s, which is why insurers often require appraisals and an actual-cash-value (ACV) valuation for these items. Insurance carriers assess risk based on various factors, including the likelihood of a claim, the potential severity of a claim, and the safety measures a business has in place.

Product Liability Insurance for Wholesale Hobby Distributors

Product liability is one of the most significant risks toy distributors face. While this coverage is often included in general liability policies, it is a critical form of insurance, especially for businesses handling children’s products. 

For example, even as the distributor rather than the manufacturer, your business could still face a lawsuit if a product you sold causes injury. “Even though they’re not manufacturing, they’re most definitely going to be brought into the lawsuit if something goes wrong,” Hoschak emphasizes.

Additional Insurance Policies Your Wholesale Hobby Distributor Business Needs

For wholesale hobby distributors, a comprehensive insurance portfolio may also include:

General Liability Insurance

A cornerstone of your business protection, covering third-party claims for bodily injury or property damage. These claims might include a delivery driver damaging property at a retail store or a visitor slipping in your warehouse. It’s also often required by vendors. “One vendor might want a $1 million umbrella policy, while another asks for $5 million,” Hoschak explains. Be sure your policy aligns with your contractual obligations.

Inland Marine Coverage

Wholesale means moving a lot of products, which introduces risks during transportation. Inland marine insurance—sometimes called a “floater”— can provide financial protection for goods while in motion between warehouses or to retailers. This policy can also cover mobile equipment, like forklifts, particularly if they leave the premises. “If you take the forklift across the street or farther than 100 feet from the building or premises, standard property insurance may not apply,” Hoschak shares.

Commercial Auto Coverage

Whether you use your fleet or hire delivery services, commercial auto insurance can protect your business in case of vehicle-related accidents or property damage. If your employees drive for business occasionally, you may also need hired and non-owned auto coverage.

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Umbrella Insurance

For most hobby distributors who carry higher liability risks due to valuable or risky products, like toys or collectibles, umbrella coverage adds an extra layer of protection over your existing liability policies.

Cyber Liability Coverage

If your business takes online payments or stores customer or vendor data, you need cyber liability insurance. “Any business with computers or electronic devices connected to the internet should consider it,” Hoschak adds. It can provide financial protection against ransomware and data breaches. Central is proud to partner with CyberScout, a leader in comprehensive cyber protection, to provide comprehensive coverage with multiple layers of insurance defense against the complex, ever-evolving cyber risks businesses face.

Workers’ Compensation Insurance

If your wholesale hobby business has employees, Workers’ Compensation is essential. It provides coverage for medical expenses and lost wages if an employee is injured on the job. From lifting heavy boxes to operating warehouse equipment, daily operations have real risks. Most states require Workers’ Comp—even for a single employee—so be sure your policy complies with state laws and is tailored to your warehouse environment.

Custom Packaging and Assembly Demand Extra Insurance Consideration

Distributors that offer value-added services like product labeling, packaging, or light assembly should be especially cautious of potential risks. 

“Any manipulation of the product might make them look like a manufacturer,” Hoschak warns. That means increased liability and a potential change in how insurance classifies your business.

Did You Know? The rise of the Industrial Revolution, increased leisure time, and a desire to combat potential negative uses of free time contributed to a growing acceptance of hobbies as worthwhile activities.

Work With the Right Partner for Wholesale Hobby Distributor Insurance

Hoschak’s final advice for wholesale hobby distributors? Choose your agent and insurance partner carefully, as you want to ensure they can effectively handle your exposures.

With nearly 150 years of industry experience, Central Insurance understands the unique risks wholesale hobby distributors face. Our carefully selected network of independent agents provides personalized guidance, while our nationally recognized claims and loss control teams deliver responsive, knowledgeable support when it matters most. 

From evaluating high fire-load exposures to navigating product liability and cyber threats, Central offers comprehensive protection and peace of mind, designed for growing businesses like yours.