Insurance for California e-commerce and online sellers

Short answer: If you sell physical products online from California, whether on your own website, a marketplace or social media, your biggest risks are a product that injures someone, inventory lost to fire, theft or a shipping problem, and a cyber or payment fraud incident. A typical program combines general liability with products coverage, business property or inland marine for inventory (including stock at a warehouse or in transit), and cyber. Many marketplaces require liability insurance once your sales reach a certain level. California also has product warning rules under Proposition 65 that can lead to claims, and those claims are often not covered by a standard policy. Workers' comp becomes required the day you hire an employee.

This guide is general information for California e-commerce businesses, from home-based shops to brands using third-party logistics (3PL) warehouses. It's not legal advice. Your policy wording, platform agreements and contracts control.

Step 1: Map your business model

Underwriters ask the same questions every time. Write the answers down first:

• What you sell: categories, price points and whether products are used by children, ingested, applied to skin or electrical.
• Where products come from: you make them, you private-label them, or you resell other brands. Products imported from overseas manufacturers can raise underwriting questions, since injured customers may look to the U.S. seller.
• Where you sell: your own site, marketplaces, social commerce, wholesale to retailers.
• Where inventory sits: home, storage unit, your own warehouse, a 3PL, or a marketplace's fulfillment center.
• Annual sales and growth plans.
• Employees and contractors.

Step 2: Product liability is the core coverage

If a product you sell injures someone or damages property, you can be sued, even if you didn't make it. California courts apply strict products liability to manufacturers and to others in the chain of distribution who place a defective product on the market; the rule dates back to Greenman v. Yuba Power Products (1963) 59 Cal.2d 57. That makes products and completed operations coverage, usually part of a general liability policy, the most important line for most online sellers.

Check:

• The products aggregate limit.
• Whether the policy excludes your product category (for example, supplements, vapes, e-bikes, firearms accessories or children's products are often excluded or need specialty coverage).
• Whether it covers products sold worldwide or only in the U.S. and Canada.
• Whether vendors (retailers that carry your products) can be added as additional insureds.

For a detailed look at product liability for Shopify, Etsy and dropshipping sellers, see Product liability insurance for online sellers.

Step 3: Read your marketplace and wholesale agreements

Some marketplaces require sellers above certain sales levels to carry commercial general liability insurance with set limits, name the marketplace as an additional insured and provide a certificate. Wholesale buyers and big-box retailers often require higher limits and vendor endorsements. Read the insurance section of each agreement, give it to your agent and set a reminder to send updated certificates every year.

Step 4: Understand Proposition 65 basics

California's Proposition 65 requires businesses to give clear and reasonable warnings before knowingly exposing people in California to chemicals on the state's list that are known to cause cancer or reproductive harm (Health and Safety Code §25249.6). The law applies to businesses with 10 or more employees (§25249.11), and enforcement often starts with a notice of violation from a private party. State guidance is at p65warnings.ca.gov and OEHHA.

Insurance point: Prop 65 claims usually seek penalties and injunctions rather than bodily injury damages, and general liability policies commonly exclude or don't respond to them. Ask your agent whether any coverage is available for defense, and talk to counsel about compliance. Your suppliers' contracts should address who is responsible for warnings.

Step 5: Protect your inventory wherever it sits

• At home: homeowners and renters policies usually limit business property. You'll likely need a business policy or endorsement. See Does homeowners insurance cover a home business?
• At your own warehouse: business personal property coverage, with limits that match your peak season inventory.
• At a 3PL or fulfillment center: your stock is in someone else's care. Their contract may limit their liability to a small amount per pound or per unit. Buy coverage for your property at other locations.
• In transit: carriers' liability is limited. Inland marine / transit coverage can cover goods while shipping, including inbound containers from suppliers. See What is inland marine insurance?
• Seasonal increases: ask for a peak season endorsement if inventory spikes in Q4.

Step 6: Business income for a sales interruption

If a fire destroys your inventory or your workspace, business income coverage can replace lost profit while you restock. Ask whether it covers losses when a key supplier or your 3PL has a covered loss (dependent property). Note that most policies won't cover lost sales from a marketplace suspending your account; that's a contract and compliance issue, not usually an insured loss.

Step 7: Cyber, payment fraud and chargebacks

Online sellers collect customer names, addresses and payment data. A breach can trigger California's breach notice law, Civil Code §1798.82, which since January 1, 2026 generally requires notice to affected California residents within 30 calendar days of discovery. Cyber insurance can pay for forensics, notification, data restoration, business interruption from a site outage and liability. Ask about:

• Funds transfer and social engineering fraud, like a fake supplier invoice.
• Account takeover of your marketplace or ad accounts.
• PCI fines and assessments if you handle card data directly.

Chargebacks and ordinary payment disputes are generally a business cost, not insured. See the cyber insurance guide for California small businesses.

Step 8: Advertising, influencers and intellectual property

General liability usually includes limited personal and advertising injury coverage for some claims arising from your ads, such as certain defamation or copyright-in-your-advertisement claims. It typically excludes trademark infringement (beyond limited exceptions), patent claims and claims from your product design. If you use influencers, user-generated content or celebrity likenesses, ask about media liability or an IP policy, and get written licenses.

Step 9: Workers' comp and your team

If you hire even one employee, including part-time packers, California requires workers' compensation (Labor Code §3700). Lifting, box cutters and repetitive motion are common warehouse injuries. If you use contractors, check California's ABC test for classification. See the workers' comp guide for California small employers and the freelancer insurance guide.

Step 10: Build your program

Many small sellers start with a business owner's policy (BOP), which combines liability and property. See Business owner's policy and BOP vs. general liability.

Example: a growing home-based brand (hypothetical)

Consider a hypothetical Los Angeles skincare brand that started on a marketplace from a spare bedroom. As sales grew, the owner moved stock to a 3PL in the Inland Empire, signed a wholesale deal with a regional retailer and hired two part-time packers. Each change created an insurance task: the marketplace asked for a liability certificate naming it as additional insured; the retailer required a vendor endorsement and a higher products limit; the 3PL contract capped its liability, so the owner added coverage for property at other locations and transit; and hiring triggered workers' comp. Because the products are applied to skin, the agent also checked for category exclusions and reviewed Prop 65 warning responsibilities with the supplier. This example is illustrative only; your needs depend on your products, contracts and policy wording.

Questions to ask your agent

• Is my product category covered or excluded?
• What's the products aggregate, and does it meet my marketplace's requirements?
• Is my inventory covered at the 3PL and in transit?
• Is there a peak season increase?
• Does cyber include funds transfer fraud and account takeover?
• Is any Prop 65 defense coverage available?
• What does a product recall policy cost for my products?

Key terms

• Products and completed operations: Liability coverage for injuries caused by products you sell.
• 3PL: A third-party logistics warehouse that stores and ships your goods.
• Inland marine: Coverage for property in transit or away from your premises.
• Vendor endorsement: Adds a retailer that sells your products as an insured.
• Proposition 65: California's chemical warning law.

Common mistakes

• Assuming the manufacturer's insurance protects you as the seller.
• Leaving inventory at a 3PL uninsured because "the warehouse has insurance."
• Not checking product category exclusions.
• Ignoring Prop 65 warnings for products sold into California.
• Hiring packers without workers' comp.

Frequently asked questions

Alishahi Insurance · 439 N Canon Dr, Penthouse, Beverly Hills, CA 90210 · (877) 711-4545 · CA License #4348151. General information only. Not legal, tax or financial advice, and not a coverage determination. Coverage depends on policy language and underwriting.