Ecommerce Business Insurance Essentials

Ecommerce business insurance is a specialized type of coverage designed to protect online businesses from financial losses and liabilities associated with their digital operations.

Like any business insurance, it acts as a protection against various risks in running an online store, helping you avoid significant monetary setbacks if something goes wrong.

Do Ecommerce Businesses Need Insurance?

Short answer: yes, ecommerce businesses are advised to have insurance.

While the internet offers a vast marketplace with endless possibilities, it also comes with its unique set of risks and vulnerabilities. Just like a brick-and-mortar store needs insurance to protect against theft, property damage, and customer injuries, an ecommerce business needs insurance to safeguard itself from financial losses and business interruptions.

What Insurance Do You Need for Your Ecommerce Business?

Like most small business insurance, insurance coverage for ecommerce businesses, each layer addressing a specific vulnerability of your online business It’s not about preventing every hiccup, but about having essential protection in place for potentially damaging situations.

Types of Insurance Coverage for Ecommerce Business

General liability insurance for ecommerce businesses

General liability coverage usually covers accidental bodily injury, advertising injury, and property damage to customers as a result of your business operations, both online and offline.

General liability insurance coverage typically covers:

• Bodily injury: If a customer suffers an allergic reaction to a product, the insurance can cover medical expenses and any legal costs and settlements.
• Property damage: If a customer’s property gets damaged due to faulty packaging or a delivery mishap, the insurance can cover repair or replacement costs.
• Advertising injury: If your marketing campaigns accidentally infringe on someone’s copyright or trademark, the insurance can help cover legal fees and settlements.

Product liability insurance for ecommerce businesses

Another type of insurance that is recommended for online stores is product liability insurance. This coverage protects you from third-party claims arising from a defective or potentially harmful product you sell.

Product liability insurance covers:

• Manufacturing defects: Product malfunctions, material flaws, or improper assembly.
• Design flaws: Dangerous product design, inadequate warnings, or lack of necessary safety features.
• Failure to warn: Not providing proper instructions or adequate warnings about potential risks associated with the product.

Cybersecurity insurance for ecommerce business

Cybersecurity has been a growing problem for businesses, both online and brick-and-mortar. Ecommerce works with sensitive customer data, which makes it a prime target for cyber crime.

Cybersecurity, also known as cyber liability insurance, covers financial losses caused by cyber attacks like data breaches, hacking, and system outages.

A proper cyber insurance typically covers:

• Data breaches: Protecting you from costly customer notification, credit monitoring, and potential fines in an event of customer data leak.
• Cyber attacks: Covering recovery costs like tech assistance, data restoration, and lost income.
• System outages: Minimizing financial losses caused by website downtime or platform disruptions.

Other Recommended Insurance Coverage for Online Businesses

Besides general liability insurance, product liability insurance and cyber liability insurance, it would be of best interest for ecommerce businesses to acquire additional protection.

Here are some optional but recommended insurance coverage online businesses should consider:

Business property insurance

From inventory and equipment to your workspace itself, business property insurance protects your physical assets from severe weather conditions, power surge, and other accidents.

Business property insurance covers:

• Workspace: Whether it’s a cozy home office or a small commercial property, the building itself is protected.
• Work equipment: Computers, printers, packaging machines are some of the equipment covered by this insurance.
• Extra expenses: Temporary storage for your inventory or renting a replacement workspace, some policies might help with these additional costs.

Workers’ compensation insurance

Workers’ compensation insurance only covers hired employees and may not cover independent contractors.

Mandatory in most states, workers’ compensation insurance covers medical costs and lost wages for hired workers, including the business owner, injured on the job.

Workers compensation insurance typically covers:

• Medical expenses: From ambulance rides to therapy, unexpected injuries and illnesses are financially covered.
• Lost wages: If an employee can’t work due to a work-related injury or illness, their income stream is protected.
• Disability benefits: In case of permanent disabilities, long-term financial support is provided.
• Death benefits: Tragic losses are supported with financial assistance for surviving family members.

Inland marine insurance

A handful of ecommerce businesses ship their products and store them in a third-party facility. Inland marine insurance secures your inventory against damage or loss during shipping.

Some of the specific coverages include:

• Damage from accidents: Crashes, collisions, and weather events during transportation.
• Theft: Goods stolen from vehicles, warehouses, or exhibition spaces.
• Spoilage: Temperature fluctuation or mishandling causing damage to perishable goods.
• Mysterious disappearance: Unexplained loss of goods during transit or storage.

Business interruption insurance

Business interruption insurance (BI) for ecommerce businesses provides financial support if your business operations are forced to halt due to unforeseen events, such as lost revenue due to a cyberattack or a natural disaster hitting an online business fulfillment center.

This insurance typically covers:

• Lost income: The insurance reimburses you for missed profits and ongoing expenses like rent and salaries if a covered event forces you to temporarily suspend your online store.
• Extra expenses: If you need to relocate temporary workers or rent replacement equipment to get back online faster, BI can help cover these additional costs.

Professional liability insurance

If you are an ecommerce business that deal with sensitive client data or offer custom and bespoke products, you’ll likely need a professional liability coverage since it covers:

• Legal fees and expenses associated with lawsuits alleging negligence, errors, or omissions in your professional services.
• Settlements awarded to clients who suffer financial losses due to your work.
• Costs associated with defending yourself against legal claims.

Ecommerce Business Insurance Cost

The cost of your insurance package will depend on several factors, including the size and nature of your business and the specific coverages you choose.

Here are some key elements that influence insurance costs based on the business profile:

Type of business

A small Etsy shop selling handmade jewelry will have different insurance needs and costs than a large online retailer dealing with consumer electronics.

Revenue

Generally, higher revenue translates to higher insurance premiums.

Location

Online businesses that are located in areas prone to natural disasters or with higher crime rates might have higher insurance costs.

Claims history

Businesses with a history of claims might pay more for insurance.

Types of insurance

Each type of coverage (general liability, product liability, etc.) has its own cost, and the more types you choose, the higher the total premium.

Here are the general price range of the essential insurance coverage for ecommerce businesses:

• General liability insurance: $23-$31 per month
• Product liability insurance: $300-$600 per year
• Cybersecurity insurance: $25-$75 per month

Coverage limits

Higher coverage limits mean higher premiums.

Deductibles

Lower deductibles (the amount you pay before the insurance kicks in) mean higher premiums.

Where to Get the Best Insurance for Ecommerce Businesses

Investing in ecommerce business insurance might seem like an additional expense, but it’s a wise investment that can save you from crippling financial blows and ensure the long-term stability of your online venture.

Today’s dynamic insurance landscape, merely purchasing a policy is no longer enough. This is where the Premium Control Plan (PCP), our revolutionary offering, steps in to transform your insurance experience. Designed to outshine traditional, passive approaches, PCP is not just a plan; it’s a commitment to proactive premium management.

Contact us today to learn more about the Premium Control Plan and take the first step towards smarter, more efficient insurance management for your online business. Request for a quote or reach out directly, and let us show you how PCP can redefine your insurance experience.

Ecommerce Business Insurance FAQs