Running a wholesale or distribution business means juggling inventory, managing suppliers, coordinating deliveries, and keeping customers happy. With all those moving parts, insurance probably isn't at the top of your to-do list. But here's the reality: one product liability claim, one warehouse fire, or one delivery truck accident can put everything you've built at risk. That's why having the right insurance coverage isn't optional—it's essential to protecting your business.
This checklist breaks down exactly what coverage you need, what's optional but smart to have, and when to add new policies as your business grows. Whether you're just starting out or reviewing your existing coverage, use this guide to make sure you're protected.
Essential Coverage: What You Must Have
Let's start with the non-negotiables. These are coverages that either the law requires or that your business simply can't operate safely without.
Workers' Compensation Insurance is legally required in most states if you have employees. It covers medical expenses and lost wages if an employee gets injured on the job. In a warehouse environment where workers are lifting boxes, operating forklifts, and moving inventory all day, injuries can happen. If your workers load or unload ships or vessels, you'll also need Longshore and Harbor Workers' Compensation Act coverage—that's a federal requirement.
General Liability Insurance protects you when someone gets hurt at your facility or when you accidentally damage someone else's property. Imagine a customer visits your warehouse to inspect a shipment and trips over a pallet, breaking their arm. General liability covers their medical bills and legal costs if they sue. It also covers property damage—like if your employee accidentally damages a client's loading dock during a delivery.
Commercial Property Insurance covers your physical assets: your building, inventory, equipment, furniture, and fixtures. Whether you own or lease your warehouse, this coverage protects against fire, theft, vandalism, and certain natural disasters. For wholesalers carrying hundreds of thousands or millions of dollars in inventory, this protection is critical. Without it, a warehouse fire could bankrupt your business overnight.
Product Liability Insurance is absolutely essential for wholesalers and distributors. Here's what many business owners don't realize: even if you didn't manufacture a product, you can still be held liable if it injures someone or causes property damage. If you distribute children's toys and one causes a choking hazard, or if you wholesale electronics that spark a fire, you could face a lawsuit. Product liability insurance covers your legal defense and any damages awarded.
Inland Marine Insurance (also called cargo insurance) covers your inventory while it's in transit and when stored off-site. Standard property insurance only covers items at your business location. But if you're shipping goods to customers or storing inventory at multiple warehouses, inland marine fills that gap. It protects against theft, damage, or loss while products are on trucks, trains, or ships.
Many wholesalers bundle their general liability and commercial property coverage into a Business Owner's Policy (BOP). This package deal is usually more cost-effective than buying separate policies and provides solid baseline protection for most wholesale operations.
Optional But Smart: Coverage to Consider
Beyond the essentials, these coverages aren't legally required, but they address real risks that wholesale and distribution businesses face.
Commercial Auto Insurance is essential if you use vehicles for deliveries or business purposes. Your personal auto policy won't cover accidents that happen while using your vehicle for work. Commercial auto covers vehicle damage, liability for injuries to others, and medical expenses for you and your passengers. If you operate delivery trucks or vans, this coverage is a must.
Business Interruption Insurance replaces lost income if a covered event forces you to temporarily close. Say a fire damages your warehouse and you can't operate for three months while repairs are made. Business interruption coverage pays for lost profits and ongoing expenses like rent, utilities, and payroll during that downtime. Without it, you're hemorrhaging money with no revenue coming in.
Cyber Liability Insurance helps you recover from data breaches and cyberattacks. If you store customer credit card information, supplier contracts, or employee data electronically, you're a target for hackers. A data breach can result in notification costs, legal fees, regulatory fines, and reputation damage. Cyber insurance covers these expenses and provides access to IT forensics experts who can help you respond quickly.
Umbrella Insurance provides extra liability protection that kicks in when your other policies reach their limits. If you face a massive lawsuit that exceeds your general liability or auto insurance limits, umbrella coverage takes over. It's relatively inexpensive for the amount of protection it provides, making it a smart addition for businesses with significant assets to protect.
Warehouse Legal Liability Insurance covers goods stored at your facility that belong to other businesses or clients. If you provide warehousing services for third parties and their inventory gets damaged or stolen while in your care, this coverage protects you. It's especially important if your contracts specify that you're responsible for stored goods.
Crime Insurance protects against employee theft, forgery, and fraud. If you discover that an employee has been stealing inventory or an accountant has embezzled funds, crime insurance reimburses your losses. Given that wholesale businesses often handle high-value inventory, this coverage provides important protection against internal theft.
When to Add or Update Coverage
Your insurance needs aren't static. As your business grows and changes, your coverage should keep pace. Here are key moments when you should add or update your policies.
Add coverage when you expand into new product lines, especially if they carry different liability risks. Distributing hazardous materials, perishable goods, or high-value electronics each presents unique exposures that may require specialized coverage or higher limits.
Update your property insurance when you acquire new equipment or significantly increase inventory levels. That new $200,000 forklift or automated conveyor system needs to be covered. Similarly, if your inventory value doubles, your property coverage limits should reflect that increase.
Review coverage when you sign new contracts with suppliers or customers. Many contracts require specific insurance types and minimum coverage limits. If a major retailer requires $2 million in general liability coverage and you only carry $1 million, you'll need to increase your limits before they'll do business with you. If you directly import products or do any repackaging, suppliers often require even higher limits.
Consider additional coverage if you open a second warehouse location or expand your delivery radius. Operating in multiple states may require additional workers' compensation policies, and expanding delivery routes increases your auto insurance needs.
Add cyber liability insurance when you start accepting credit card payments online or storing customer data electronically. Once you're handling sensitive information, you're exposed to cyber risks that didn't exist when you were operating with paper invoices and cash payments.
Annual Review Checklist: Don't Set It and Forget It
Insurance isn't something you can purchase once and ignore. Business conditions change, market values shift, and your coverage needs to keep up. Schedule an annual insurance review every January before renewal pressure builds later in the year. Here's what to examine.
Inventory and Equipment Values: Review your property coverage limits to ensure they match current inventory levels and equipment values. Inflation drives up replacement costs, so coverage limits that were adequate two years ago may be insufficient today. Calculate your current inventory value at replacement cost, not what you originally paid for it.
Revenue and Payroll Changes: If your revenue has grown significantly, you may need higher liability limits. Many liability policies are based on your annual revenue or payroll, so inform your insurer of increases to ensure adequate coverage and avoid issues during claims.
New Equipment or Vehicles: Add any new forklifts, delivery trucks, or warehouse equipment to your policies. Don't assume new purchases are automatically covered—equipment set up off-premises may require special coverage limits.
Contract Requirements: Review your existing supplier and customer contracts for insurance requirements. As you add new clients, ensure your coverage meets their minimums. You don't want to lose a major account because your insurance limits are too low.
Workforce Changes: If you've hired more employees or changed job classifications, update your workers' compensation policy. Premiums are based on payroll and job classifications, so changes affect your coverage and cost. If you now have remote workers, verify that your policies adequately cover them.
Claims History: Review any claims filed in the past year and discuss loss prevention strategies with your insurer. Implementing safety improvements may qualify you for premium discounts.
Coverage Gaps: Identify any new exposures that have emerged. Did you start storing goods for third parties? Are you now accepting online orders? Have you begun importing directly? Each of these changes may require additional coverage.
Get the Right Coverage in Place
Insurance might feel like just another business expense, but it's actually one of the smartest investments you can make. The right coverage protects everything you've worked to build and gives you the security to focus on growing your business instead of worrying about what could go wrong.
Work with an insurance broker who specializes in wholesale and distribution businesses. They understand the unique risks you face and can help you build a comprehensive protection strategy that fits your budget. Don't wait until after a loss to discover you're underinsured—use this checklist to review your coverage today and make sure you're protected for whatever comes next.
