Distributors and wholesalers play a key role in getting products from manufacturers to stores and customers. These businesses move, store, and sometimes repackage goods. They rely on fast shipping, strong systems, and reliable staff. But with so many moving parts, there’s also a lot that can go wrong.
If you own or run a distribution or wholesale company, you probably already have insurance. But basic business policies don’t always cover the unique risks you face. That’s why many businesses in this space need wholesaler insurance policies—plans built for their specific work.
In this article, you’ll learn about the biggest risks for distributors and wholesalers, where standard insurance may fall short, and how Kelstar Insurance can help protect your business.
Key Takeaways
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Standard Business Insurance Often Falls Short
General commercial policies typically lack the coverage needed for goods in transit, product liability, cyber risks, and contractual obligations—areas that are critical for wholesalers and distributors.
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Distribution and Wholesale Involve Complex Risks
From property damage and worker injuries to delivery issues and legal claims, businesses in this sector operate with more exposure than many others.
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Specialized Wholesaler Insurance Fills the Gaps
Tailored policies can include inland marine (for transit), business income protection, product liability, cyber coverage, equipment breakdown, and umbrella liability—all designed to match real operational needs.
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Contractual Liability Can Be Costly Without Proper Coverage
Vendor or client contracts may hold your business responsible for delays, damage, or losses. The right insurance ensures you're not left covering those costs alone.
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Cyber Threats Are a Growing Concern
With more digital operations, wholesalers are at risk for data breaches and ransomware. Cyber liability coverage is no longer optional—it's essential.
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A Strong Policy Can Save Thousands
Comprehensive insurance may cost more upfront but prevents massive out-of-pocket expenses during claims, such as recalls, lawsuits, or business interruptions.
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Kelstar Insurance Builds Custom Solutions
With access to 50+ carriers, Kelstar evaluates your operations, risk profile, and coverage needs to develop a policy that fits your business—across multiple states if needed.
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Regular Policy Reviews Are Critical
As your business grows or changes, so should your insurance. If you don’t know whether your goods are covered in transit or your contracts are fully insured, it’s time for a review.
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Taking Action Now Reduces Long-Term Risk
Proactive insurance planning helps protect your inventory, reputation, revenue, and relationships—so your business can keep moving forward with confidence.
What Makes Wholesale and Distribution Different
Wholesale and distribution businesses deal with high volumes of products. These items are often stored in warehouses and shipped across cities, states, or even nationwide. Some companies also repackage or label products, which creates even more responsibility.
Because of this, they face more risks than many other businesses. A fire in a warehouse, a shipment lost during transport, or a mistake in labeling can cost thousands—or more.
Example:
A parts distributor in Colorado sends auto parts to stores in five states. One winter, a heavy snowstorm causes the roof of their warehouse to collapse. Water ruins a large section of their inventory. If their insurance doesn’t cover weather damage or lost inventory, they may lose hundreds of thousands of dollars.
Risks That Wholesale and Distribution Companies Face
1. Property Damage
Your buildings, equipment, and inventory are the foundation of your business. Fires, storms, leaks, or theft can cause major losses. Many standard property policies don’t cover the full value of inventory or repairs, especially for large operations.
2. Product Issues
If a product you sell—or even just repackage—hurts someone, your business can be held responsible. Legal costs and payouts can be very high. Even if you didn’t make the product, you could be named in a lawsuit.
3. Damage During Shipping
Once products leave your warehouse, they’re at risk. Accidents, theft, or rough handling can damage goods in transit. Many insurance policies only protect items inside your building. Without proper coverage for goods on the move, you might be left paying the price.
4. Contract Problems
Contracts with retailers or vendors often include rules about who is responsible when something goes wrong. If your business is held accountable under a contract and your insurance doesn’t cover it, you could be stuck paying a large claim or fine.
5. Business Disruption
Fires, equipment failures, or supply chain delays can stop your business from operating. During that time, you may still owe bills, rent, and wages—even if you aren’t making sales. Not all insurance policies include protection for this kind of loss.
6. Cyber Attacks
Most wholesale businesses rely on computers to track orders, manage inventory, and communicate with customers. If hackers steal data or shut down your systems, it can lead to lost money and even legal trouble.
7. Employee Injuries
Warehouse work often involves heavy lifting, machinery, and fast-paced tasks. Workers can get hurt. While workers’ compensation is required in most states, not all policies are set up for the kinds of injuries that happen in warehouses.
Why Standard Business Insurance Isn’t Enough
Basic insurance policies can be helpful, but they aren’t always enough for distribution or wholesale companies. Many general plans cover property and general liability but leave out important areas.
Common Coverage Gaps:
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Goods in transit
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Product recalls or legal claims
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Income lost during business shutdowns
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Cybersecurity threats
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Contract-related liability
Example:
A food distributor sends several pallets of products to a grocery chain. During delivery, the truck crashes and everything is destroyed. The store also fines the distributor for a late delivery. If the distributor’s insurance doesn’t include transit coverage or protection for contract penalties, they’ll have to cover those losses on their own.
What a Good Wholesaler Insurance Policy Should Include
At Kelstar Insurance, we help businesses build the right insurance package for their operations. These policies include specific coverage for your risks—not just general protection.
1. Property Insurance
Covers your warehouse, shelves, inventory, and equipment. You can also add options for things like refrigeration or higher-value items.
2. Product Liability
Covers legal fees and claims if a product you sold causes harm—even if you didn’t make it. This is important for any business that repackages or modifies items.
3. Inland Marine Insurance
Protects your goods when they’re being transported. This is especially important if you use third-party shipping companies or cross state lines.
4. Contractual Liability Coverage
Some contracts make you responsible for accidents, delays, or damages. This coverage helps protect you when your contracts require higher limits or special terms.
5. Business Income Insurance
Pays for lost income and fixed costs if your business has to close due to a covered event like a fire or flood.
6. Cyber Insurance
Covers losses from hacks, data theft, or email scams. It can also help pay for legal costs and system recovery.
7. Workers’ Compensation
Protects your employees and your business when someone is hurt on the job. It also helps cover lost wages and medical care.
8. Commercial Auto Insurance
Covers company trucks or vans used for deliveries. It protects you from costs related to crashes, injuries, or vehicle damage.
9. Equipment Breakdown
Covers repairs or replacements for machines that suddenly stop working—like forklifts, conveyors, or refrigeration units.
10. Umbrella Liability
Adds extra protection on top of your regular policies. This is helpful when claims go beyond your standard limits.
How Kelstar Insurance Builds the Right Coverage for You
We know that every business is different. That’s why we take the time to learn how your business works. We look at your property, vehicles, contracts, and staff to understand your risks.
Then, we match you with insurance companies that offer strong coverage at fair prices. With access to more than 50 carriers, we help find the best fit for your situation.
Example:
A beverage distributor with refrigerated trucks operates across Wyoming, Colorado, and Illinois. Kelstar helped them create a policy that includes coverage for spoilage, refrigeration breakdown, and income lost during delays. They now have full protection across all areas of their business.
We also help with the paperwork—like Certificates of Insurance—that your partners or vendors may ask for.
Do You Have the Right Insurance?
Here are a few simple questions to help you check:
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Are your products protected while they’re being shipped?
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Do your policies match what your contracts require?
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Is your business protected from cyber threats?
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Would your insurance help if your warehouse had to close for a week or more?
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Do you have extra coverage for large lawsuits or big losses?
If you’re unsure about any of these, it may be time to review your insurance plan.
What Does It Cost?
Insurance costs depend on many things, like:
While a strong insurance policy may cost more upfront, it can save you much more in the long run. Being unprotected can lead to lawsuits, lost contracts, and business closure.
Example:
One wholesaler without the right coverage paid $150,000 out of pocket after a product caused an injury. A similar business with a full wholesaler policy only paid a small deductible—everything else was covered by insurance.
Conclusion
Distributors and wholesalers face more risks than many businesses. Between moving products, managing workers, and dealing with contracts, a lot can go wrong. Having the right insurance makes all the difference.
At Kelstar Insurance, we help you build the right plan to protect your business. We serve companies in Wyoming, Illinois, Colorado, and many other states—and we understand the challenges your industry faces.
Visit https://www.kelstarinsurance.com/contact or call 307-316-8240 to schedule a call with one of our insurance advisors.
We’ll help you feel confident that your business is covered—so you can focus on growing and serving your customers.
Frequently Asked Questions (FAQs)
1. What is wholesaler insurance?
Wholesaler insurance is a group of commercial insurance coverages designed specifically for the risks faced by wholesale and distribution businesses. These policies typically include protection for property, goods in transit, liability, cyber threats, and business interruptions.
2. How is wholesaler insurance different from general business insurance?
While general business insurance may include basic property and liability coverage, it often leaves out critical areas for wholesalers—like product liability, cargo protection, contractual liability, and cyber risks. Wholesaler insurance addresses these specific exposures.
3. What types of businesses need wholesaler insurance?
Any business involved in storing, repackaging, or distributing products—whether locally or across multiple states—should consider wholesaler insurance. This includes distributors of food, beverages, auto parts, industrial goods, electronics, and more.
4. Are my goods covered while in transit?
Not always. Standard property insurance usually covers items only while they’re at your facility. To protect products in transit—especially with third-party shippers—you need inland marine insurance, a key component of wholesaler policies.
5. What if a product I distribute causes harm or injury?
Even if you didn’t manufacture the product, you could still be held liable if you repackage, relabel, or handle the product in any way. Product liability insurance helps cover legal costs and settlements in these cases.
6. Do wholesaler policies include cyber liability protection?
Yes—Kelstar can include cyber insurance as part of your wholesaler policy. This covers costs related to data breaches, ransomware, system outages, and legal claims due to compromised customer or vendor data.
7. Will my insurance help if my business shuts down temporarily?
Yes, with business income insurance, your policy can cover lost income and fixed expenses if your operations are interrupted due to a covered event—like fire, equipment breakdown, or supply chain disruptions.
8. What documents do I need to show vendors or clients?
Many vendors or partners may ask for a Certificate of Insurance (COI) or proof of specific coverage. Kelstar Insurance helps clients provide the required documentation and ensures policies meet contract requirements.
9. How much does wholesaler insurance cost?
Premiums vary based on your business size, type of goods, warehouse value, vehicle fleet, location, and claims history. While customized coverage may cost more than basic plans, it can save significantly in the event of a large claim.
10. How can I get started with Kelstar Insurance?
Visit https://www.kelstarinsurance.com/contact or call 307-316-8240 to speak with a Kelstar advisor. We’ll review your current policies, identify any gaps, and build a plan tailored to your business.
This article has been a collaboration between Kelstar Insurance and OpenAI’s ChatGPT. Created on May 19, 2025, it combines AI-generated draft material with Kelstar Insurance's expert revision and oversight, ensuring accuracy and relevance while addressing any AI limitations.