Whether you’re just starting with your online store or you’ve been in business for years, having the right insurance is essential to protecting your company. But with so many options available, it can be challenging to know where to begin.
This guide will help you understand the basics of ecommerce business insurance and what you need to do to get started.
What is Ecommerce Business Insurance?
Business insurance protects you legally and financially if something doesn’t go as planned. Insuring your business reduces risk and protects employees and inventory against various worst-case scenarios, including supply chain problems and work-related injuries. Purchasing insurance should be part of your business plan.
While insurance helps with risk management, personal insurance policies won’t cover things like your inventory. If you’re storing your inventory in your garage or home office, your homeowner’s insurance won’t protect you. Besides the tax deduction, you’ll get for your coverage, other reasons to carry business insurance include protecting:
- Employees and customers, if a product causes injury
- Your business against data breaches and cyberattacks
- Inventory in the event of supply chain problems
- Against broken or stolen inventory
- Against breach of contract lawsuits with suppliers or clients
Once your business achieves a certain income level, you must invest in commercial insurance to meet contractual obligations. Fulfillment centers and major retailers like Amazon often require a minimum amount of liability insurance.
Types of Business Insurance and Costs for Online Retailers
Depending on your business model, you may need one or more types of insurance to protect your small business.
General Liability Insurance Policy
General liability insurance will protect your business if someone is injured on your property or if you’re sued for something like negligence or false advertising.
Professional Liability (Errors and Omissions Insurance)
This coverage protects you from claims arising out of your professional negligence. If you provide professional services, such as consulting or design work, in your online business, you should consider purchasing this type of coverage.
If you sell products online, it’s crucial to have product liability insurance to protect you if your products cause injury or property damage. Product liability claims can be very expensive, so this coverage is essential for any ecommerce business.
This coverage helps protect business owners from financial losses due to damage or loss of their business property. This can include buildings, equipment, inventory, and other business assets. Business property insurance will help cover repair or replacement costs and lost income if the business is forced to close due to damage.
Workers’ comp insurance is a type of business interruption insurance that helps to protect businesses in the event of a work-related injury. This insurance can help cover medical expenses and lost wages, as well as provide replacement services if an employee cannot return to work.
In many cases, worker’s compensation insurance is required by law, and businesses must ensure that they are properly covered. Worker’s compensation insurance can help ensure businesses can continue operating despite an unfortunate accident.
Ecommerce businesses that don’t have employees aren’t typically required to carry this coverage. If you’re growing and adding staff, speak with an attorney about your requirements.
Transit insurance provides coverage for damages that occur during the transit of goods. This can include damage that occurs while the goods are being shipped and while the goods are in transit by rail, road, or air.
Transit insurance can be purchased by businesses or individuals who are shipping goods, and it can protect against various risks, including loss, theft, and damage. Transit insurance can give you peace of mind when shipping your goods and help you avoid costly repairs or replacements. If you are shipping goods, transit insurance is an important consideration.
Cyber Security Insurance
Given the increased reliance on technology for ecommerce businesses, it’s no surprise that cyber liability insurance has become one of the most important types of coverage for these businesses. This type of insurance protects you from financial losses arising from data breaches, hackers, cybercrime, etc.
Business interruption insurance, otherwise known as business income insurance, can help financially protect a business if it is forced to close or suspend business operations due to an unforeseen event. Common causes of business interruptions include natural disasters, pandemics, and civil unrest. Business interruption insurance can help to cover lost income and expenses such as rent and employee salaries.
To be eligible for business interruption insurance, a business must purchase a commercial property insurance policy. This type of policy typically covers physical damage to business premises and contents. Many business interruption policies have exclusions and limitations, so it is important to read the fine print carefully before purchasing one.
Buying Business Insurance
To understand the insurance your business needs, you must first conduct a risk assessment. As your ecommerce company grows, your business operations become riskier, and you may have different insurance requirements as you evolve.
Many risks are unique to your business and location. As you think about the types of policies to carry, consider:
- Disasters, natural or unplanned, that may affect your business
- Accidents that may occur
- The number of employees you have
- Lawsuits you may face
Understanding the risks you deal with will better equip you to choose the best protection for your business.
Choose the Types of Insurance
Not all small business owners require the same insurance coverage. Begin with a basic general liability policy and add more coverage later as your needs change.
You may purchase ecommerce business insurance at a discounted rate by bundling it with other forms of coverage, such as property insurance, under a business owner’s policy (BOP). A BOP is a more comprehensive solution that includes multiple forms of ecommerce business insurance. Speak with your insurance agent to see if a BOP makes the most sense for you.
As with other kinds of insurance, it’s important to shop around and compare insurance products. Reach out to multiple insurance companies for a free quote, either independently, through an online marketplace, or through a broker, to get quotes for the policies you need.
Compare Policy Options
Compare insurance quotes side-by-side to choose the one that works best for you. Consider:
- Policy coverage
- Liability limits
- Payment terms
- Premium and deductible
- Ratings and reviews
- Company customer service
The goal is to find small business insurance from a reputable provider that meets your needs at a price you can afford.
Purchase and Renew Every Year
After you choose the policy that makes the most sense, purchase the policy or policies you need. Create your online account and learn how to pay, file a claim, contact customer service, and request your certificate of insurance. You can do most of this online.
Top 12 Ecommerce Business Insurance Providers
Hiscox business insurance is designed to give companies the protection they need to thrive. From property damage to liability, Hiscox has the coverage options businesses need to protect themselves from a wide range of risks. Hiscox also offers customizable policies to make creating a package that meets your needs easier.
Nationwide offers comprehensive business insurance policies that can be tailored to meet your specific needs. Bundle discounts make it easy to manage.
As an experienced insurance provider, The Harford has you work with independent agents to get policy advice. Claims are handled in-house, and you’ll get access to everything via an online portal.
You’ll pay $687/year for a BOP with $15,000 in property protection, $1 million per occurrence in general liability, and data breach insurance.
Best suited for business owners earning $1 million or less in annual revenue, Chubb offers an automated coverage assistant that makes it easy to purchase a BPO. You can still work with Chubb if you earn more than $1 million. You’ll just need to work with an agent.
All policies aren’t available in all states, and phone support is only available if you purchase a policy directly from Chubb instead of an agent.
Geico offers a variety of business insurance products to help protect your company. From commercial auto insurance to workers’ compensation, Geico has the coverage you need to keep your business running smoothly.
Geico offers discounts on certain types of business insurance when you bundle them together. For example, you can save up to 10% on commercial auto insurance while purchasing workers’ compensation insurance through Geico. And if you have multiple businesses, you can qualify for additional savings.
Progressive offers a wide range of business insurance products, from property and casualty to workers’ compensation and more. And with flexible coverage options and customized plans, businesses can find the right protection for their specific needs. That said, most business policies are through a third party.
State Farm offers a wide range of options to fit the needs of any company. From property and liability coverage to workers’ compensation and more, State Farm has the policy to protect businesses of all sizes. And with convenient online quoting and 24/7 customer service, it’s easy to get the coverage you need.
Next Insurance offers various policies you can purchase individually or bundle together for a 10% discount. If you need a specialized kind of insurance, you may not find it here. The online application makes signing up and getting coverage in minutes easy.
BiBERK is a division of Berkshire Hathaway, a well-known financial company. They offer comprehensive business insurance solutions to fit your specific needs. Whether you’re looking for property damage protection, liability coverage, or product liability insurance, biBERK has you covered. They also offer specialized coverage for businesses in high-risk industries and customizable insurance packages. Not all products are available in all states.
Allstate business insurance is a great way to protect your business from potential risks. Whether you’re looking for property, liability, or workers’ compensation insurance, Allstate has you covered. With Allstate, you can customize your coverage to fit the specific needs of your business. They offer convenient payment options and 24/7 customer service.
Travelers offers a full range of business insurance products, from property and liability coverage to workers’ compensation and more. And with over 160 years of experience, you can be confident that they have the knowledge and expertise to protect your business.
USAA offers a variety of options to meet the needs of your company. They can tailor a policy to fit your business from property and liability coverage to workers’ compensation and business interruption insurance.
Now’s the Time to Get Started with Insurance for Your Online Business
There is no one-size-fits-all answer when buying ecommerce business insurance policies for your ecommerce store. The best way to determine what coverage you need is to assess your risks and decide which types of protection are best for your company. Property and liability insurance are two of the most common types of coverage. Still, many others are available depending on your needs. Once you understand what you need, shopping around for quotes from different insurers is the best way to find the coverage that’s right for your business at the best price.