First, it is important to know that keeping your business safe takes multiple layers, like a cake (or an onion if you are an ogre and a parfait if you are a donkey)!
For many, product liability is difficult to find given the types of products they are making and the size/volume of their business. I won't sugar coat that. HandmadeInsurance.com is one place that offers insurance for small businesses but they do NOT cover toys or anything that is intended to go into the mouth. If you have Homeowner's Insurance or Car Insurance, check through your agent to see if they have any direction. It is also very important to note that basic Homeowner's Insurance will NOT cover your home business or the items and inventory for your home business. You MUST contact your agent to add that into your policy appropriately. Also keep in mind that insurance is not protection, it is a payout of money should you be required to pay.
A Limited Liability Entity (LLC) will offer your personal assets some protection as long as your business funds are maintained 100% separately from your personal funds. Let's say you are involved in an issue and you are held responsible to pay for that issue, the insurance will cover up to your limit in that policy. If anything else is owed and you have maintained your LLC appropriately, the business will be liable for the remaining amount. If you have not maintained the LLC appropriately, your personal assets will be at risk to account for the remaining amount owed. If you have an aversion to risk, if your product or business is high risk, or you have personal assets that you'd like to protect, I highly recommend contacting a layer like Dana Bucy Miller at DM Law, LLC or Brittany Angel and her team at Sublime Law, PLLC for a consultation on what the best plan would be for you.
Contracts are so important and not just because we live in a litigious society. Contract are there to make clear all expectations of each side of the table. A very basic contract that everyone partakes in is the simple 'I buy this, you send me this' transaction. The expectation is that I see this product that you offer, I press 'buy now', and you send that product offered. Simple, right? Contracts are the same basic thing, but for some instances, they need to be significantly more in-depth. Collaborations, Non-Competes for seamstresses, Non-Disclosures for seamstresses, designers, and consultants, Service Contracts, Media Releases, I mean, the list goes on! Christina Scalera offers amazing templates for various businesses and I cannot recommend her enough. In fact, I recommend her because during her Black Friday Sale, I had a cart with over $1000 worth of templates. Before I purchased it all though, I took a moment to use their website chat feature to ask about the differences in templates. Not only did Christina show me a template that I hadn't had in my cart yet, she also helped me eliminate many templates from my cart to best match my business. I went from over $1000 to $500 and that $500 will last me the rest of my business because they also offer lifetime updates as needed and Hold My Hand™ assistance. You can find all of her products at The Contract Shop (affiliate link, I do receive compensation for purchases made through this link)
Consultants and Attorneys are an amazing resource to have in your back pocket. You don't necessarily have to hire anyone as long as you know where to find them, but hiring them to have "on retainer" can mean faster and more effective assistance since they will know more about your situation, your goals, and what to expect from you and your business.