For any small business owner or retailer that sells baby products, including toys, finding a liability insurance policy can be difficult. That’s because this class of products – from toys to baby carriers and slings – are considered high-risk products.

Most small business owners and startups recognize that they need a liability policy for any product they manufacture, sell, or distribute online or offline. But the potential risks children’s toys and products create raises the stakes considerably.

Moreover, children’s toys and related products manufactured, imported, advertised, or sold in our country are subject to the Canada Consumer Product Safety Act (CCPSA) and the Toys Regulations. The CCPSA addresses a range of mechanical, flammability, toxicological, electrical, thermal, and other hazards associated with children’s toys. Additionally, Health Canada warns consumers to check its Recalls and Safety Alerts Database for children’s second-hand toys or products, including cribs, playpens, and strollers.

A child playing with a toy

As noted by one Halifax-based entrepreneur who started her juvenile retail products company, Nurtured, as an online business out of her home in 2006, getting an affordable liability policy is a real challenge.

In addition to regarding children’s toys, baby carriers, strollers, and prams as extremely high risk, insurers are also hesitant to cover companies that sell baby products to consumers in the U.S. or if a particular product is not CPSIA-compliant. Plus, if the toys and baby products you’re selling or shipping are manufactured in another country, you can expect to face additional questions from an insurer, such as what the raw materials are, who made them, and what the third party did the safety testing for them and more.

Claims-Made Versus Occurrence-Based Liability Insurance

Claims-made business insurance policies tend to cost less than an occurrence-based policy, making them appealing to startups and home-based businesses that want to sell or distribute kids’ toys and related products.

But there’s a problem with taking that route. Most large retail chains or third-party marketplaces will not accept your products if you have a claims-made policy. Why? Any incident or accident that happens with the products you sell, manufacture, or distribute and any claim filed because of it must occur while your existing policy is in force.

On the other hand, an insurer will cover the claim even if it is filed after the policy has expired with an occurrence-based liability policy. Though it may cost more, the occurrence-based liability policy might be your best option. Considering the statute of limitations on a third-party bodily injury lawsuit brought against you for injuries to a child is significantly longer than what it is for an adult also highlights the value of an occurrence-based policy since it offers more comprehensive coverage. 

Managing Your Risk Is the Top Priority

There’s little doubt finding product liability coverage for your business can be tough and often pricey. But taking a chance and operating without insurance is not a wise move. One lawsuit or claim of bodily injury or property damage against you could bankrupt you if you don’t have a suitable insurance policy.

Fill out an online application for your business needs to get a free quote and let our licensed broker team help you find the coverage you need at the lowest premium available. Through Zensurance’s partner network of more than 50 leading Canadian insurers, our brokers will find the best policy they can for your company and advise you on the coverages and limits you require to be adequately protected.

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About the Author: Liam Lahey

Liam is the Content Marketing Manager at Zensurance. A writer and editor for more than 20 years, he has been published in several newspapers and magazines, including Yahoo! Canada Finance, Metroland Media, IT World Canada and others.