The Shifting Trend of Direct Sales Consultants
In recent years, American households have increasingly become a blend between homes and offices. It’s believed that more people are working out of their homes now than ever before. For some, it’s a way to supplement their income. For others, it brings in enough funds to make a successful living.
Direct sales consultants, also known as direct sellers, are among this group of “home-based businesses” that have been skyrocketing in growth and popularity in recent years. “Direct sales” is the process in which a direct sales consultant sells products face-to-face, away from retail store locations.
According to the Direct Selling Association, more than 20 million people were involved in direct selling in the U.S. in 2015, with estimated retail sales reaching $36.12 billion. This number has continued to grow into 2017, with more revenue generated each year than the previous. The Direct Selling Association also notes that one in six U.S. households have someone involved in direct selling.
With these growing statistics, it’s safe to say that direct sales consultants are here to stay. AVON, Mary Kay and Tupperware brands have been around for years, but new businesses are breaking into this home-based economy constantly. The trend is shifting to include direct consultant businesses such as:
|AdvoCare||Jamberry||Rodan + Fields|
|Amway||Lip Ink International||Silpada|
|Chloe + Isabel||LuLaRoe||Stella & Dot|
|Creative Memories||Nefful USA Inc.||Tastefully Simple Inc.|
|DōTerra||Premier Designs Inc.||The Pampered Chef|
|EVER Skincare||Pure Romance||Thirty-One Gifts|
|Herbalife||Purse Party||Young Living|
These consultants sell a wide range of products, using social media, craft fairs and pop-up parties as platforms; some sell jewelry, makeup, accessories and even energy drinks. Regardless of the type of product being sold, direct sales consultants typically enter their industry for the same universal reasons: start-up costs are fairly low, hours are flexible, experience isn’t required and discounted products are available.
Many direct sales consultants see their business as a low-risk and high-reward operation; however, do they understand how much they really have at risk? If they are held liable for something that happens in the course of their business, do they have the proper coverage?
According to an article posted by Insurance Journal, out of 1.5 million home-based businesses in the Northeast, 900,000 of them are uninsured. Of those uninsured, nearly 70 percent said they lacked coverage because of a mistaken belief their homeowners or another policy protected their business assets or provided liability protection. However, in reality, most homeowners policies may exclude coverage for certain business operations.
Consider the following claim example: Linda is a LuLaRoe consultant attending a local craft fair to sell some of her items, which include patterned leggings and women’s dresses. At these events, she typically gets the crowd excited by playing a trivia game where the correct answer wins a prize. While playing this game at the craft fair, one of the winners was a few feet away, so Linda tossed the prize to the winner. Unfortunately, the winner was distracted and the prize hit her in the face, causing a fractured nose. Linda was sued. Her homeowners coverage appropriately disclaimed coverage for Linda’s business pursuit, which would not typically be covered by a personal homeowners policy. Luckily, Linda had the USLI Home Based Business policy which paid for the full defense and settlement of this unfortunate claim.
A Home Based Business policy would also protect insureds in the following common situations, whereas most homeowners policies may not:
- Someone steals some of your insured’s inventory at a trade show
- A fire at your insured’s home damages their inventory
- A customer slips and falls, injuring themselves, at a pop-up party in your insured’s home
- A friend of your insured was drinking wine at a pop-up party and got in a car accident on their way home; your insured is held liable
A USLI Home Based Business insurance policy, with an average premium of $233, is designed to cover the unique exposures of a direct sales consultant. This product provides up to $1 million in liability coverage, up to $100,000 business personal property on-premises and up to $15,000 off-premises.
Please contact your Personal Lines underwriter for more information or a quote.
Contact Brian Hogan,
Vice President, Product Team Leader | 888-523-5545 Ext. 2388
Written by Lisa Spitko
March 16, 2017