Ready to set up shop and launch your new ecommerce business? If so, you’re probably looking for answers to the following questions:
- Do online companies need commercial insurance?
- How much and what kind of insurance do I need for my ecommerce business?
The bottom line is if you’re selling products or services and bringing in revenue—no matter how little or how much—you should strongly consider getting business insurance. Here are two more reasons for you:
- You run your business from home or another physical location.
- You own or store physical or digital property that can be damaged or stolen (including personally identifiable information)
Ecommerce comes with its own set of risks and challenges, which we’ll cover today. We want to ensure you have everything you need when you open for business.
Why do I need insurance if I have an online business?
Business owners need commercial insurance for protection against potential claims and lawsuits.
Let’s say you offend someone on a social media platform, and they sue you. Or someone hacks into your system and steals customers’ credit card information (breaches happen to 62% of retailers). Imagine accidentally posting a photo somewhere without giving the owner proper credit (it’s easy to do!). Or maybe your online store picks up a virus and spreads it to your customers’ devices.
If you have the right types of business insurance, you’ll be covered in these types of situations. If you don’t, you’ll be forced to pay out of pocket to make amends, which can be detrimental to your business.
Insurance will give you the peace of mind you need to run your business confidently. Then if a worst-case scenario does pop up, your business will be safe.
What types of insurance do I need for my ecommerce business?
Here are several types of insurance you should consider if you want to protect yourself and your ecommerce business fully. The specific types of insurance you need will depend on the size and scope of your business. Generally, the larger your business grows and the more revenue you bring in, the more protection you’ll need.
1. General Liability Insurance
This is one that most small business owners need—at a minimum. If you’re just starting, take out a simple liability insurance policy. It will help cover the issues you’re most likely to run into as a startup.
If anyone, for any reason, is injured while using your product or interacting with someone from your business on your physical property, general liability will protect you.
2. Product Liability Insurance
Product liability protects you if your product malfunctions, is flawed, causes someone harm, or damages someone’s property. It will help cover medical bills and legal fees.
Product liability is another “essential” type of insurance for businesses selling physical products. Consider adding it to your general liability policy.
3. Cyber Liability Insurance
Today, almost every business needs cyber liability, as well. And since we’re talking ecommerce, you’ll want to add cyber insurance to your policy posthaste. Online companies are highly vulnerable to cyberattacks and data breaches, which can cost your business millions of dollars, along with your good reputation. Cyber insurance provides first-party and third-party coverages against cybersecurity issues.
4. Workers’ Compensation
If you don’t have employees, you don’t need to worry about this one. If you do, check with your state to see if you should buy workers’ comp insurance. It protects you and offers benefits to employees if they become sick or get injured on the job.
5. Professional Liability Insurance
If your product or service results in a customer losing money for any reason, they could sue you. Professional liability insurance will help cover costs and legal fees associated with this type of incident.
6. Commercial Auto Insurance
If you have a designated vehicle for work purposes or use your personal vehicle for business, ask your insurance carrier if you need commercial auto insurance. A commercial auto policy will cover damages incurred on the job that your personal policy may not cover.
7. Umbrella Insurance
It can sometimes be more affordable to add an umbrella policy versus increasing your liability insurance policy limits. Umbrella insurance offers extra protection on top of an existing liability policy.
8. Property Insurance
Here’s another big one. Let’s say you run your business out of your home and store inventory in your basement office. If there’s a flood and your computer, printer, shelving units, and inventory are all destroyed, you’ll need property insurance (separate from your homeowners policy) to replace everything.
Property insurance covers loss due to damage, destruction, and theft.
9. Technology Errors and Omissions Insurance
Technology errors and omissions insurance offers coverage if your product fails to perform its intended purpose or your services result in some kind of mistake.
10. Cargo Insurance
Cargo insurance covers inventory lost either on its way to another location or while being stored in a facility. You should consider adding cargo insurance to your policy if you meet at least one of the following criteria:
- You own a warehouse to store products.
- Your business ships products to distributors or customers directly.
- You use a third-party business to store products for you.
Need help finding the right ecommerce business insurance?
Finding the perfect coverage for your small online business can be a confusing process. You most likely won’t need every type of insurance listed throughout this article. Some insurance types won’t apply to your business, and others may overlap in certain areas.
Most often, small online businesses should look at taking out an insurance policy for the first three types of coverage we mentioned above: general liability, product liability, and cyber liability.
If you’d like some help pinpointing which types of coverage you need for adequate protection against risks you may face, contact Coverage Direct. We’d love to help you out!