Wholesale merchants buy and sell merchandise on their own account, that is, they take title to the goods they sell. They generally operate from warehouse or office locations and they may ship from their own inventory or arrange for the shipment of goods directly from the supplier to the client.
In addition to the sale of goods, wholesalers may provide, or arrange for the provision of, logistics, marketing and support services. This could be packaging, labelling, inventory management, shipping, handling of warranty claims, in-store or co-op promotions, and product training.
So now that we generally understand what operations are involved in wholesale trade, let's discuss some risks and how we can mitigate them.
What types of insurance do wholesalers and distributors need?
As a wholesale merchant or distributor, you face many risks inherent in your business. While you may be comfortable retaining some risk, generally speaking you will want to transfer the majority of your financial risk to an insurance company to avoid business interruption in the event of a claim.
Almost all wholesale businesses will need to purchase general liability insurance, which provides protection against third-party claims of bodily injury or property damage arising out of your business operations.
Product liability insurance is also very important for distributors, and is designed to protect your business from third party claims of bodily injury or property damage arising out of the products you distribute. For example, if you are a distributor of HVAC equipment, you may be liable for not properly labelling a piece of equipment that ultimately resulted in damages. An example could be properly labelling where the equipment should be safely stored, or how it should be maintained.
Business insurance for wholesale distributors also typically includes protection for:
- Business property, including your inventory, equipment, and premises.
- Business interruption, which will cover lost business income as a result of a claim until your revenue returns back to normal
You may also want to consider other types of wholesale business insurance, such as product recall insurance, which can help cover the cost of recalling and replacing defective products.
What are some common claims examples for Wholesalers and Distributors?
Some common claims examples for wholesalers are:
- A customer claims that the products you distributed caused property damage.
- A customer alleges that they were injured by one of the products you distributed.
- A visitor is injured while working at your warehouse or office.
General and product liability insurance for wholesale distributors can help protect your business from these and other risks.
Some trends in the wholesaler and distribution industry right now are:
- The rise of e-commerce and the need for wholesale distributors to have an online presence
- An increase in the number of small businesses and the need for wholesale distributors to cater to this market
With these trends come new risks that wholesale distributors need to be aware of and insure against. E-commerce has made it easier for customers to purchase products from wholesale distributors without ever having to visit their premises. This has led to an increase in the number of product liability claims against wholesale distributors.
As the number of small businesses grow, so does the competition among wholesale distributors. Many wholesale distributors are now catering to the needs of small businesses by offering products and services specifically for them. Whether you're a wholesale merchant or distributor, it's important to have specialized insurance in place to protect your business from potential risks.
At Summit Commercial Solutions, we can help you find the right wholesale business insurance for your needs. Give us a call today to get started understand the unique risks faced by wholesale businesses and distributors. We can help you find the right insurance solutions to protect your business from potential liabilities. We are happy to share more about our wholesale business insurance solutions.
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