Although e-commerce businesses only operate online, it doesn’t mean they are risk-free. In fact, according to Shred-it’s Data Protection Report from 2019, over three in ten business owners suffered a data breach where human error or an external vendor/source was the cause of the accident. This situation costs over $8.64 million/year to businesses.
There are various legal challenges they can face that range from trademark infringements to breaches of contracts with customers, competitors, their employees, and even business budgeting – which according to Gates Little, President/CEO of altLINE Sobanco, are “necessary when trying to optimize your business.”
That’s why it’s so important to purchase e-commerce insurance that allows businesses to be prepared for any moment.
These are designed to provide advanced protection to the business’ website and various operations, equipment, or products, as well as liability to customers and suppliers.
Whatever the situation, a solid insurance policy will secure the future of any e-commerce business and demonstrate to investors and customers that your platform is fully legitimate.
What Is An e-commerce Business Insurance?
Like any policy, online retail insurance is designed to cover any incident that may affect the development of business activities, from the customer to the staff working in the company.
Its coverage is usually flexible and tailored to any online business and is an ideal tool to ensure the safe development of the business in the future.
Why Does Your Business Need Insurance?
Insurance is the best way to minimize risk in any e-business, yet some owners assume they don’t need insurance because they don’t have a physical store or employees beyond themselves. But, the truth is, they face their own set of risks.
For example, if an e-commerce store that runs WooCommerce chooses not to invest in product liability insurance or cybersecurity insurance, they run the risk of being sued by their customers in the event of a mistake or failure, just like a traditional business.
So, operating an e-business without any insurance coverage could put you at risk of being financially liable for any legal fees and lawsuits incurred in the event a customer takes you to court.
Other reasons why an e-business needs insurance coverage include:
- Recovering costs for damages.
- Defending your employees and customers in case a product damages them.
- Safeguard against lawsuits for breach of contract with customers or suppliers.
- Protect against cyber-attacks and data breaches that could expose significant customer data.
- Safeguard against inventory theft in your warehouse or transportation.
- Protection against supply chain problems.
How To Get Business Insurance For Your e-commerce?
To obtain insurance for your e-commerce business, just follow the steps below:
Evaluate the risks
The first step is to assess the different risks specific to your business to get a better idea of the type of protection you will need.
These may include:
- Accidents.
- Natural disasters.
- The number of employees.
- Or lawsuits the company may face.
Choosing the right type of insurance
Commercial insurance comes in many forms, and not all e-businesses need the same coverage.
Start with a basic policy, such as general liability, or you might also consider bundling several types of insurance for your online store with a business owner’s policy.
Shop around for quotes
Once you have determined the type of insurance to use, it is time to seek quotes from different insurance companies, so you can compare and choose the best deals.
To find the best ones, look for recommendations from other small business owners in your industry.
Compare policies
The next step is to choose the policy and provider that best suits your business.
Once the purchase is made, it is important to review the policy and decide if it needs to be adjusted or modified periodically.
Have in mind that sometimes your insurance agent will try to convince you to acquire a better policy, but this depends entirely on your needs and if you see if it’s the right time to do it.
5 types of e-commerce Business Insurance
There are several types of e-commerce insurance plans. This may seem confusing at first, but having so much variety is helpful.
Here are 5 types of insurance for e-commerce businesses that you should consider. Although if you need others, your broker can help you determine which ones are the best fit for you.
Cybersecurity Insurance
Cybersecurity insurance is intended to safeguard important business and customer data from malicious attacks by hackers who engage in the theft of credit card and customer information.
e-commerce businesses must take this aspect seriously, even more seriously than others. Any website that provides a product or a service has to have a way to encrypt its customers’ information so it doesn’t get hacked.
This type of insurance covers you from any lawsuits, legal penalties, customer settlements, and fines related to a cyber-attack.
It also covers the cost of investigation and restoration of data and funds lost during the attack.
Business Property Insurance
Business property insurance is designed to cover any loss, theft, or partial or total damage to inventory and any business property.
In this case, it would also cover the damaged equipment and the total cost of replacing it.
When taking out this type of insurance, the broker will work with you to calculate the total value of the property he is insuring.
Product Liability For e-commerce
Product liability insurance helps protect online retailers from claims for bodily injury or property damage caused by a product that has been manufactured or sold.
In other words, it protects online sellers if a product fails and causes illness or injury to consumers.
This type of policy protects against damages caused by:
- Manufacturing defects.
- Design defects.
- Lack of instructions, warnings, or labels.
Transit Insurance For e-commerce
Transit insurance for e-commerce covers any loss, damage, or theft during the transfer of inventory from one warehouse to another. That is why suppliers and distributors usually have this type of insurance.
When shipping products, it is also likely to run the risk of the product not reaching the customer or being received in poor condition, so the transit policy also applies here.
Worker’s Compensation For e-commerce
Workers’ compensation insurance for e-commerce protects the brand or company if an employee is injured or killed on the job.
It typically covers medical costs for bodily injury and pays death benefits to the family of someone killed in their workplace.
How Much Does an e-commerce Business Insurance Cost?
To get an idea of the cost of insurance for your online business, you could start paying from $50 to $300 a month – or even more. You should consider some factors before setting an estimated cost, such as:
- The number of policies you need.
- The extent of the policy coverage.
- The location of the business.
- The products or services you offer.
- Your number of employees.
- Your business assets.
- Your claims history.
Typically, businesses with higher risk and those that need more insurance coverage will have higher costs.
This means that an e-commerce store with small monthly traffic and a few sales – based on WooCommerce or Shopify analytics – would probably have to spend less than a consolidated online business with several employees.
However, if you need a customized quote tailored to your business, we recommend contacting an insurance provider.
