A thrift store, consignment shop, second-hand store, etc., sells various home items from furniture to clothing to bikes, books, and everything in between. Customers can find lightly used items at an affordable price, making the shopping experience a rewarding adventure.
A thrift store has many people that come onsite to shop, donate, or work—meaning the store has a risk of injury or harm happening onsite. Accordingly, the store should carry insurance to cover any liability claims resulting from the store’s operations.
Related: How to start a thrift store
A thrift store is exposed to some of the following risks:
- Damaged inventory
- Re-selling faulty merchandise
- Customer injury
- Employee injury
The store’s liability threats vary depending on the size and services offered. But, whether the threat exposure is great or small, insurance is essential to protect the business. In general, a lawsuit puts an extensive financial burden on a small business. However, the business is financially protected and prepared for accidents with insurance.
Evaluating the cash value of a thrift store’s second-hand merchandise is a complicated task. For instance, if a fire, theft, or water damage were to harm the inventory, the store might find it difficult to qualify how much the lost items were worth. Additionally, most thrift stores accumulate items based on donations, so finding similar replacements is a challenging task.
Re-selling Faulty Merchandise
A thrift store may sell second-hand items that are damaged or recalled. Unfortunately, this presents a risk of injury to customers, for which the store would be responsible. The thrift store could be held liable for bodily injuries or property damage claims resulting from such sales. In addition, stores are prohibited from selling children’s items with hazardous materials. Therefore, the store needs to ensure that every item sold is safe and meets legal standards for resale.
Customers will be onsite regularly to donate and shop. The customer can be injured from trips or a falling object inside the store. Any racks, shelves, and large furniture should be soundly fastened to avoid tip-overs and falls. Additionally, thrift stores have an increased risk of injuries if the walkways are narrow from an oversupply. Plus, customers who test electronic merchandise can be injured from electrical shock or malfunction.
In addition to customers sustaining injuries onsite, an employee may also be injured from slips, trips, and falls. Unsecured objects and faulty electrical merchandise are the main culprits that cause harm to an employee.
Since donated items are often tested before being placed in the store, an employee is at risk of injury by interacting with a faulty item. In addition, an employee sorting donations is at risk of cuts and scrapes if they encounter potentially broken or sharp materials.
Often these injuries are minor, but they happen frequently. But, a store with good housekeeping and safety regulations can help reduce the number of injury claims.
Theft of cash or embezzlement is a concern for thrift stores dealing with large cash sums. Stolen or vandalized items are covered under a different policy than stolen money or employee dishonesty—both are important to protect the store from a financial loss.
Given the numerous insurance policies available, it can be challenging for small businesses to narrow down which ones they need. Ultimately, a thrift store should consider the following types of insurance coverage:
- General liability – products
- General liability – premises
- Workers’ compensation
- Crime insurance
Business Property Damage Insurance
Property damage insurance offers coverage for repairs to the building and items lost to a covered peril. Covered disasters include fire, theft, vandalism, and water damage from leaking pipes. A thrift store will need to be thorough in documenting its inventory so that if a loss occurs, the store will be sufficiently reimbursed for the lost items.
The greatest threat to a thrift store is fire damage. A fire can start in many ways, but the store has an increased risk of fire igniting from old, faulty equipment tested in the store.
Protecting the store from fire includes:
- Keeping aisles wide and clear for accessible exits.
- Keeping the sprinkler system clear of blockages from racks and shelves.
- Checking old electrical equipment before allowing a customer to try it out in the store.
Even with prevention methods, a fire can still damage the store and its inventory. However, insurance covering the property is a great way to protect the business from the financial loss of losing inventory or needing repairs on a damaged building.
General Liability Insurance – Products
General liability coverage for products protects the store from claims of bodily injury and property damage from the items it sells. Coverage for these claims is especially significant if the store sells recalled or damaged items that cause an injury to a customer.
In the event of a claim, the general liability policy will cover the following expenses:
- Medical bills for the injured party
- Property damage repairs
- Legal fees
Coverage for product liability is significant when selling children’s items. Many laws dictate what is safe and acceptable to sell regarding children’s furniture, toys, and clothing. The store should vet every item as certain substances, materials, and clothing designs are unsafe. The store could be named a defendant in a lawsuit if the hazardous item sold causes injury or death. As a result, it is essential to carry insurance to protect the store from these claims.
General Liability Insurance – Premises
Liability coverage for the premises protects the store from injury or personal property damage claims while onsite. For example, should a patron fall or be injured in the store, this policy will cover the expenses of such claims. Often, the same policy that covers premises liability will also cover product liability and property damage.
The risk of injury to patrons rises for stores with second-hand clothing racks, old furniture, and overcrowded walkways. These variables increase the chances of trips and injuries from wobbly racks or non-sturdy furniture.
Because of these additional risks, the store should take care to inspect and dispose of potentially harmful furniture, secure the clothing racks, and keep walkways clear. However, if an injury or damage occurs, the property insurance policy will protect the store from bearing the cost of the claim.
Workers’ Compensation Insurance
A workers’ compensation policy is insurance that protects an employee who is injured on the job. Many states require businesses with employees to carry a workers’ compensation policy. Even so, if it’s not needed and your store has employees, then this policy is important to consider.
The reason it’s a worthwhile policy is because it pays for the medical care, lost wages, disability costs, and funeral expenses resulting from an on-the-job accident. Without this coverage, the store may be responsible for paying these expenses on its own. So, in effect, a workers’ compensation policy not only offers coverage for an injured employee but also protects the business from lawsuit exposures.
Crime insurance is especially significant for stores with large amounts of cash. Inventory loss through shoplifting is covered under the property damage policy; whereas, a crime insurance policy covers employee dishonesty (i.e., embezzlement), theft of cash, forgery, and fraud.
Carefully vetting employees and having multiple people check the accounting can help reduce theft, but unfortunately, it still happens. Crime insurance is an excellent way to bolster the business’s insurance coverage because it aids in protecting the business from losing sizable amounts of money.
Thrift store insurance costs will vary depending on the amount of coverage needed and the store’s level of risk exposure. For example, a small store with a few employees and a slim inventory needs less coverage than a large store with multiple locations and dozens of employees.
For example, some factors that will influence the cost of a business owner’s policy includes the following:
- The building’s square footage
- A fire suppression system
- Up-to-date electrical and plumbing
- The number of employees
- Hours of operations
- The amount and value of the merchandise
- Are items sold without the original tags, instructions, or packaging?
Insurance is an efficient way to protect your business from experiencing financial hardships from accidents. All things considered, you can ensure that your business is getting good coverage and a fair price by calling multiple insurance companies for insurance quotes.