What are the consequences of not having Product Liability Business Insurance?

[Elene]

It seems impossible to get relevant and specific business insurance for the things that really matter - particularly product liability. I have an internet business selling a very wide variety of products/gifts online. My business evidenly does not conform to the criteria that insurers feel are a "nice safe money making bet" for themselves. I work from home until the business is bigger, it sells more than one type of product (not just gadgets/electrical items or clothing etc). A lot of the products are handmade or exlusive. I sell to NAmerica as well as Europe and UK. All of this means I can't get proper prod liablty insrnce cover. So if I can't get insurance, what happens it I continue without it? I have tried so hard over the past year and it just seems impossible, I am not prepared to totally change the business to suite some insurance company, or spend thousands buying a useless policy that covers irrelevant bits when product liability isn't being covered. What can I do?
Possibility of being sued for everything ++++

[matticus finch]

Here's the problem: handmade goods. No insurance company in the world is going to want to insure your product liability unless you have a safe Quality Assurance company like Six Sigma. All of the other products should be covered by their manufacturers. Anyway, there's no way you can afford an in-depth QA program. The reason companies have product liability insurance (and nearly 99% don't) is to cover themselves in case of that big lawsuit. A lawsuit from a different country can be avoided. If all of your sales are made online, then make the buyer agree to the terms and conditions, which should read "All grievances will be settled by arbitration within the courts of the state of Arkansas (or wherever you live). Because somebody can't serve you and force you to leave your home for arbitration, they must come to you. This filters out all of the nobodies looking for a quick buck (like that woman that found the finger in chili at Wendy's).

Next. The worst that can happen if your business is a sole proprietorship is you lose everything you own. This will only happen if your product is a hazard and you had good reason to know about it. If you set up your company as a corporation, you can only lose the assets of the corporation and then claim bankruptcy once the company is broke. Honestly, I think your safest bet is to create two separate corporations. One is an Internet business that sells merchandise. The other is a small assembling, craft, or manufacturing company that makes handmade goods. If it ever comes to a head, the craft company loses in arbitration, but your core business doesn't. You should keep any computers under the Internet company, and any tools under the craft company.

Having two companies can be a hassle. You will have to have two separate accounting ledgers, have different tax IDs, pay two separate business fees at all applicable levels. But all of these are relatively cheap compared to what you'd be paying to an insurance company if they accepted you.