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A Beginner’s Guide to Business Insurance for Ecommerce

12 min read

Business insurance is an extremely important purchase that every business owner hopes they never need. If you own a small business, you might be unsure whether or not you need insurance. You may also be wondering what types of insurance are necessary. With so many different types of coverage and insurance companies, choosing an insurance plan can seem daunting. But neglecting the need for insurance could severely impact your business in the event of an accident. This is why it’s important to educate yourself about business insurance if you are unfamiliar with your insurance needs.

Adding more uncertainty for some business owners is what to do with insurance when it comes to ecommerce. Digital commerce is playing a more and more prominent role in the business world, with many companies focused exclusively on ecommerce. Do these companies also need business insurance? And if so, what are the unique insurance needs of an ecommerce business? What is ecommerce business insurance? We can answer those questions and more below!

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Do Ecommerce Businesses Need Insurance?

If you own an ecommerce business, you might be asking this fundamental question. Do ecommerce businesses need insurance? After all, your business is largely conducted online. With no physical storefront, there is less personal liability, less chance of theft, no risk of worker injury, etc. But it is incorrect to assume that just because your business is web-based you don’t need business insurance.

Ecommerce businesses need insurance just like any other business. If you are selling products online, you should still be insuring your assets in case of damage. Product liability insurance is also needed to protect you and your customers in case of faulty products. And even if your business does not have a physical storefront or office, you still own physical property. Your homeowner’s insurance will not cover business property that’s stored in your home.

One common misconception among ecommerce business owners is that there is nothing to insure because they conduct business exclusively online. But if you engage in ecommerce, you likely deal with sensitive data and information. This could simply be financial information belonging to yourself and your customers. You may also have access to other personal information for employees, clients, or partners. All this information must be protected, and you should be insured in the event of a data breach.

No matter what your business is, if you engage in ecommerce, you should have insurance. Let’s take a look at the different types of insurance that ecommerce businesses need.

What Insurance Do I Need for My Ecommerce Business?

General liability

General liability insurance, as the name suggests, is the standard insurance type to protect you from damages. In business, general liability insurance can protect you in case somebody is harmed using your product or service. General liability insurance will cover claims of bodily harm, property damage, libel, slander, and copyright infringement. All businesses, including ecommerce businesses, should have general liability insurance.

Product liability

Product liability specifically provides coverage for businesses in the event that a faulty product causes bodily injury. This is similar to, but more specific than, general liability insurance. Product liability insurance specifically focuses on the design, manufacture, and use of a company’s products.

Product liability offers coverage for businesses in a few ways. If a customer requires medical treatment due to an injury caused by your product, your product liability insurance can cover their medical expenses. Product liability insurance can also cover your legal fees, as well as settlement fees. Product liability insurance is a must for any company that sells and manufactures physical products. Even if you believe your product comes with little to no risk, it is better to be insured.

Business property

Business property insurance is an interesting insurance category, and also an extremely important one. Even ecommerce businesses should absolutely have business property insurance. To illustrate why, consider the following example.

Suppose you run a small ecommerce business out of your home. You store your products and business equipment in the home. You have homeowners’ insurance to protect against damage to your personal property. Then one day, by some accident or theft, your business’ inventory is lost or damaged. Does your homeowners’ insurance fully cover that? You might have limited protection, but not to the extent that you would like.

But with business property insurance, any property belonging to your business is fully insured. This does not just apply to ecommerce businesses operating out of a personal residence, of course. Every business has some form of physical property worth insuring. That could be a store, an office, or your inventory.

Business property insurance will cover any loss, damage, or theft of property belonging to your business. In most cases, it will cover the full cost to replace any lost or damaged property as long as the cost is properly documented.

Cybersecurity

If your business is engaged in any form of ecommerce, you likely have access to sensitive data. At a minimum, you receive financial information from your clients and customers. Payment security is a very important aspect of ecommerce all around the world.

Depending on your industry or the type of transactions you process, you could have a greater volume of sensitive data. This data is always at risk of cyberattack. If you do not have cybersecurity insurance, this could be a serious problem.

Cybersecurity insurance is wide-ranging and may vary from case to case. It most often covers legal costs, fines, lawsuits, and settlements related to data breaches or cyberattacks. Some cybersecurity policies will also cover the cost to investigate the source or cause of a data breach. It will also replace any lost or missing funds.

Workers’ compensation

Workers’ compensation insurance is a legal requirement in most U.S. states. Even ecommerce businesses need to be insured in case an employee is injured in the line of work. This is true even if you are the only employee at your company!

Workers’ compensation insurance covers medical expenses and lost pay caused by injury, disability, or chronic health condition. There is always a risk of a worker being injured at any workplace. Even if workers’ compensation insurance was not a legal requirement, we would highly advise all ecommerce businesses to get it.

Other types of insurance

There are other types of insurance that may be relevant to some ecommerce businesses, but not all. Transit insurance, for instance, covers large shipments of inventory if your company deals with high-volume shipments. For most small businesses, this is not a concern. But large ecommerce businesses may need transit insurance coverage for their shipping.

If you use a company vehicle in your business, you will need commercial auto insurance. Commercially registered vehicles require a separate policy from personal vehicles. Even ecommerce businesses may sometimes use a commercial vehicle for some aspect of their business. If this is the case, you will be required to get a commercial auto insurance policy.

There may be many other examples of specific insurance policies for niche businesses. If there is an area of your business that isn’t covered by insurance, be sure to research policies for better protection.

Best Insurance Companies for Ecommerce Businesses

The Hartford

The Hartford offers a robust range of business insurance options to suit a variety of businesses. But The Hartford also arguably provides the best insurance for ecommerce businesses. This is because their wide range of insurance types (general liability, workers’ compensation, commercial auto) is matched with very strong cybersecurity insurance.

Small business owners can create a custom Business Owner’s Plan which includes all the basics of a strong cybersecurity insurance policy. For those looking for more expansive cyber protection, The Hartford also offers comprehensive cyber liability insurance policies.

The Hartford homepage

The Hartford homepage

Hiscox

Hiscox is a small business insurance provider that offers a very comprehensive cybersecurity package. This makes them an ideal choice for small ecommerce businesses. Hiscox is well versed in the needs and challenges of insuring small businesses, especially those who conduct business digitally. Hiscox even provides its clients with complimentary access to the cybersecurity platform Paladin Shield as an extra defense measure.

Hiscox homepage

Hiscox homepage

Chubb

Chubb is an insurance provider that covers a wide range of clients. From individuals and families, to businesses both small and large, Chubb has a well-rounded portfolio. This portfolio includes all the essential types of insurance that an ecommerce business might need, including cyber insurance. Like The Hartford and Hiscox, Chubb allows small business owners to build custom business insurance policies to suit their unique needs.

Chubb homepage

Choosing the Best Insurance for Your Ecommerce Business

When selecting your insurance provider, it is always best to shop around. Get multiple quotes, and look for the policy that provides the best coverage at the best price. The most important thing is to understand the needs of your business, and what needs to be insured. Remember that insurance coverage should protect everyone involved in your ecommerce business. You, your employees, and your customers may all need help from your business insurance at some point.

Read more about security for your online business?

 

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About the author

Max has been working in the ecommerce industry for the last six years helping brands to establish and level-up content marketing and SEO. Despite that, he has experience with entrepreneurship. He is a fiction writer in his free time.

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