Dropshipping Insurance: Do You Need It?

When most people start a dropshipping business, they focus on finding products, building their store, and driving traffic. But few think about something equally important, business insurance.

While dropshipping insurance isn’t required by law in most cases, it can protect your store, your assets, and your future profits from unexpected risks.

In this guide, I’ll explain what dropshipping insurance is, when you actually need it, what types to consider, and how to choose the right coverage for your business.

What Is Dropshipping Insurance?

Dropshipping insurance is a type of business protection plan that covers you against potential losses or legal issues related to your eCommerce operations.

Even though you don’t handle inventory or ship products yourself, your business can still be held liable for product issues, shipping problems, or customer claims.

For example:

• If a product you sell causes injury or damage, you could face a product liability claim.
• If a customer’s package gets lost or delayed, you might be responsible for refunds or replacements.
• If someone sues your business, you’ll need legal protection and coverage for legal fees.

That’s where dropshipping insurance comes in. It helps minimize these risks and keep your business safe.

Do You Need Insurance for Dropshipping?

The short answer is yes, you should have it, especially if you plan to build a real, long-term business.

Here’s why:

1. Some suppliers require it. Many brand-authorized or U.S.-based suppliers will only approve retailers that carry general liability insurance. It’s a sign that you’re running a legitimate business.
2. It protects against unexpected claims. Even if you never touch the products, you’re still the seller of record. That means you can be held legally responsible for what you sell.
3. It adds credibility. When you have business insurance, suppliers and customers see you as a professional operation rather than a side project.

Types of Insurance for Dropshipping Businesses

Here are the most common types of insurance to consider for your dropshipping business:

1. General Liability Insurance

This is the most important type of coverage for eCommerce owners. It protects your business from claims of property damage, personal injury, or advertising-related issues.

For example, if a product you sell causes an accident or damage, this insurance can help cover legal costs or settlements.

2. Product Liability Insurance

This covers damages caused by the products you sell. Even though you don’t manufacture or ship them, you’re still responsible as the retailer.

Product liability insurance protects you if a product turns out to be defective, mislabeled, or dangerous to use.

3. Professional Liability Insurance

Also known as “errors and omissions” insurance, this helps if a customer claims that your business gave incorrect advice, misleading information, or failed to deliver as promised.

This is less common in dropshipping but can be useful if your store includes consulting, custom services, or personalized recommendations.

4. Cyber Liability Insurance

Since all dropshipping stores handle online transactions, this coverage protects you from data breaches, hacking, and cyber attacks.

It can help cover the costs of notifying customers, restoring systems, and legal expenses related to compromised data.

5. Business Property Insurance

If you work from home or use office equipment, business property insurance protects against theft, fire, or other damage. It’s often available as part of a small business policy.

How Much Does Dropshipping Insurance Cost?

The cost of dropshipping insurance depends on factors like your revenue, product types, and coverage limits.

On average, most small eCommerce stores pay between $300 and $1,000 per year for general liability insurance.

If you sell higher-risk products, such as electronics or outdoor gear, you might pay more. On the other hand, if you’re selling furniture, decor, or other low-risk items, your cost will likely be lower.

How to Get Dropshipping Insurance

Here’s how to get insured as a dropshipper:

1. Form an LLC. Most insurers require your business to be a registered entity. If you haven’t yet, read my guide on Do You Need an LLC for Dropshipping?
2. Identify your products and risks. Make a list of what you sell, how suppliers fulfill orders, and where your customers are located.
3. Request quotes. Contact business insurance providers like Hiscox, Next Insurance, or The Hartford.
4. Compare policies. Review each plan’s coverage limits, exclusions, and annual costs.
5. Keep your documents ready. Suppliers may ask for proof of insurance when you apply for an account.

When to Get Dropshipping Insurance

You don’t need insurance before your store launches, but you should get it once you start generating consistent sales.

That’s typically when:

Waiting until you grow ensures you’re not paying for coverage you don’t need yet, but also that you’re protected when the stakes are higher.

Final Thoughts

While insurance might not be the most exciting part of building a dropshipping business, it’s one of the smartest long-term decisions you can make.

It protects your profits, adds credibility with suppliers, and gives you peace of mind knowing your business is covered.

Here’s the bottom line:

If you want to learn how to build a legitimate, high-ticket dropshipping business from the ground up, join my free training at DropShipLifestyle.com/webinar.