Consignment stores are exposed to a variety of business risks. Not only could property be lost or destroyed through theft or natural disasters, but lawsuits could arise if someone is injured on your premises or by a product you sold. Securing comprehensive business insurance coverage can help protect your business from these common hazards.

What insurance coverage do I need for my consignment store?

There are many types of insurance coverage to consider, but these policies are particularly relevant to consignment stores:

Commercial Property Insurance

Since consignment shops typically rely on owned or rented commercial space, commercial property insurance is a key coverage and will likely be required in any lease agreement. If a disaster such as a fire, explosion, or storm damages your location, recovering from the loss can be financially taxing. 

Commercial property insurance can cover your building, merchandise, furniture, and other business property in the event that a covered risk causes damage.

Example:

• A faulty fan starts a fire in your consignment store, damaging the building and destroying merchandise. Commercial property insurance would provide funds to cover repairs to the building and losses in merchandise. 

General Liability Insurance

General liability insurance will protect your business from claims of third-party bodily injury, property damage, personal injury, and advertising injury. Since customers regularly visit your location to purchase or consign items, you must be prepared for the possibility that someone could be injured or their property could be damaged while they are on the premises. Although keeping a clean environment can reduce the risks, an accident could still occur and your business could be held liable. 

In addition, your business could be held liable if your clients suffer property damage or bodily injury caused by the products you sell. While typically this risk is low, if your business sells children’s or baby products, you may be at greater risk. General liability insurance can address this exposure through its products and completed operations coverage.

General liability insurance also provides coverage for personal injury, which can cover lawsuits claiming invasion of privacy, false arrest, discrimination, wrongful ejection from the premises, and more. This is particularly relevant when dealing with suspected shoplifters, as your business may be open to lawsuits if someone is falsely accused of a crime.

Examples:

• Bodily injury: A potted plant falls onto a customer’s head while she is pulling another item off a high shelf. She suffers a head wound and concussion. General liability insurance would cover her medical fees and any legal costs if the customer sues. 
• Product liability: A lamp sold by your store starts a fire in a customer’s home. The customer sues you for selling an unsafe product. General liability insurance would cover the lawsuit and any settlement that results. 
• Personal injury: You suspect a group of teenagers of shoplifting. You grab one of the teenagers and lock him in your back office while you call the police. The police arrive and review security footage, which shows no evidence of shoplifting. The teenager’s family later sues your business for false arrest. General liability insurance would cover the lawsuit.

Business Interruption Insurance

A disaster that damages your property may have the potential to prevent your business from operating. While consignment stores may be able to operate from a different location, the nature of their business means that it may be difficult to obtain replacement inventory quickly and it may take time to move existing inventory and equipment to another location. 

Business interruption insurance can step in to provide financial coverage in these situations. Also called business income insurance, this type of insurance covers your business for lost income and operating expenses if you are forced to temporarily close due to property damage from a covered peril. Commonly covered perils include fire, lightning, windstorm, hail, explosion, and vandalism.

Example:

• A fire destroys your consignment store’s retail location and you must close for three months while the location is repaired. Business interruption insurance will cover your lost profits during this time. 

Commercial Crime Insurance

Commercial crime insurance provides protection from financial losses related to crimes such as theft, burglary, robbery, forgery, and fraud. This coverage applies both to crimes committed by outside parties and internal employees. 

Consignment stores may have high exposure to crime as they handle large numbers of cash payments and may sell expensive, valuable items. Commercial crime insurance can reimburse your company for any crime-related losses. 

Example:

• You discover that one of your employees has been fraudulently paying consignments out to himself. Commercial crime insurance would cover the loss. 

Bailee’s Coverage

Consignment stores typically do not take ownership of the items that consignors place with them. Although commercial property insurance provides some coverage for items you do not own that are left in your care, custody, or control, this coverage typically has fairly low limits. 

To ensure that you have full coverage of the items you sell, it’s a good idea to purchase bailee’s coverage. This type of policy will provide funds for any damage that occurs to consigned items while they are in your possession. 

Example:

• Your roof develops a leak during a heavy storm and your stock of expensive designer clothing sustains water damage. Bailee’s coverage would reimburse you for the damaged merchandise.

Business Owner’s Policy

A business owner’s policy (BOP) can be a good choice for qualified small and midsize consignment businesses. It combines general liability, property, business income, and extra expense coverage into a single package. BOPs are typically more cost-effective for small businesses than buying each insurance policy separately, and they can help you ensure that you have a wide range of coverage.

Additional Coverages

• Workers’ compensation insurance is an important coverage for any business, providing coverage for employees who are injured on the job. Workers’ comp can pay for an injured employee’s medical expenses, in addition to partial income if they are unable to work while recovering.
• Employment practices liability insurance (EPLI) protects your business against lawsuits by prospective, current, or former employees accusing your business of wrongful treatment such as discrimination, harassment, or other employment-related issues.
• Commercial auto insurance is necessary for any business that owns one or more vehicles titled under the business’s name. It covers bodily injury and property damage if the driver of the vehicle is at fault in an accident, as well as the value of the vehicle itself if it’s damaged by a collision or another peril. 

Pricing and Quotes

Pricing for business insurance will vary based on the type of insurance coverage and the risk profile of your business. Insurers consider factors such as:

• Business size
• Industry
• Location
• Number of employees
• Claims history

Businesses with higher risks will have higher premiums than those deemed lower risk. For example, a consignment store with a history of frequent claims will face higher premiums. Premiums also rise as you increase the limits of insurance. Different insurance companies have different models for rating risks, so it is worth comparing pricing across different insurers.

In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer coverage for consignment and thrift stores:

Provider	General Liability	Professional Liability	Business Owner's Policy
Embroker	??	??	??
CoverageSmith	??	??	??
CoverWallet	??	??	??
Hiscox	??	??	??
Thimble	??	??	??

Final Word 

When you run a consignment shop, it’s critical that you prepare your business for adverse events. Although you can take steps to reduce the risk of lawsuits or property damage, it’s impossible to control every factor that could lead to a loss. With the right commercial insurance coverage, you can feel confident in the knowledge that if a catastrophe does occur, you will have the financial support you need to survive it.