With the increase in e-commerce businesses in recent years, the subject of ensuring these businesses properly has become increasingly applicable. After all, according to U.S. Department of Commerce figures, e-commerce grew by 14.2% in 2021, accounting for $870.78 billion in spending, and is only showing signs of increased growth as more and more shoppers are opting for online buying over traditional brick-and-mortar options. Of course, owning a business of any type isn't without its risks.
For example, while being an online retailer in today’s market can reduce some liability risks you might associate with owning and operating a traditional brick-and-mortar store (like slip and fall accidents or storefront damage), there are still some risks to consider and protect yourself against as an e-commerce business owner. The best way to counteract these risks is to get e-commerce business insurance.
Read on to learn more:
Why You Need Insurance as an E-Commerce Business
With your e-commerce business, you reach a worldwide audience and are not restricted by geographical limits like an in-person business. This wider audience can, unfortunately, come along with an increase in liability as well, and since e-commerce is such a unique industry, as you might imagine, the risk profile for such a business is equally unique and nuanced.
E-commerce brings about many new and unexplored business models. This means that when you join this industry, you are also embracing some business risks you might not have previously encountered. This is especially true if you are switching over from a traditional business setting to the new e-commerce world.
This new environment in which you are doing business demands a new way to protect you as a business owner from the risks of doing business. The right kind of insurance can protect you and your e-commerce business from the following situations:
- Injuries or property damage that is caused by defective products.
- A breach of website data exposes your customer information.
- An issue with a vendor or supply chain that prevents you from fulfilling customer orders.
- Lawsuits resulting from failure to deliver a product or service on time or a breach of contract.
- Merchandise or inventory that is damaged or stolen, whether in your business location, in transit, or in storage.
What Kind of Insurance do You Need?
As an e-commerce business owner you want to ensure that you have the following types of coverage:
General Liability Insurance
This coverage will protect you against claims launched by a third party regarding property or bodily injury. Most e-commerce businesses require general liability coverage. Product liability insurance also provides protection against claims related to defective or flawed items for online retailers who sell physical goods. General liability insurance covers:
- Bodily Injury: This protects against third-party claims of bodily injury as a result of interacting with your business.
- Property Damage: This protects against third-party claims of property damage as a result of interacting with your business.
- Personal and Advertising Injury: This ensures protection against third-party claims of libel, slander, or copyright infringement made against your business.
Other Insurance Options
While General Liability is the most common type of coverage, it is not the only variety you might consider purchasing as an e-commerce business owner. The following are other types of coverage that could prove beneficial to you:
- Product Liability Insurance: This protects your online store from third-party claims of property damage or bodily injury that was caused by a product that you made or sold.
- Business Property Insurance: This covers financial losses that were caused by property damage resulting from accidents, hazards, or weather events.
- Workers’ Compensation Insurance: This coverage protects your employees providing for their medical expenses when they are caused by work-related illnesses or injuries.
- Professional Liability Insurance: This protects you from claims of error, professional negligence, breach of contract, or failure to deliver a promised service on time.
- Cyber Liability Insurance: This protects you against the financial losses caused by cyber incidents like data breaches, ransomware attacks, and hacking.
- Business Interruption Insurance: This coverage protects you against the loss of income and helps you cover operating expenses, like rent and payroll and rent after a major disaster.
How Much Does E-Commerce Insurance Cost?
Of course, your cost for e-commerce insurance will vary based on several factors. For example, your price will vary based on the following:
- The amount of coverage you need for your business.
- The limits of your policy and the extent of your coverage. In general, the greater the coverage, the higher the cost.
- The location of your business. Certain areas have a higher risk of crime and/or weather-related issues, and this will be taken into consideration when setting your rates.
- The types of services and products you offer.
- Your employee counts. The more employees you have, the greater your coverage needs.
- The assets your business owns.
- The history you have of previous claims.
E-Commerce Insurance is a Worthwhile Investment
A variety of insurance policies are necessary for your e-commerce business to be adequately protected from lawsuits, accidents, and disasters. Unfortunately, even though you don’t operate your business in a traditional store, it doesn't mean you don't also have risks when it comes to running and operating your business.
To prevent your business from facing fines and lawsuits, it’s important to ensure an e-commerce business in much the same way you would a traditional business with some adjustments. At Winter-Dent, we understand the nuances associated with owning a successful e-commerce business. Contact us today to learn more about what type of insurance coverage is vital for protecting your business.