Bookstore Insurance – Cost and Types of Policies
For managers of bookstores, one of the essential budget items is proper bookstore insurance, whether they are opening their doors to business as a retailer, or operating as an online vendor through the internet.
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Like any retailer, you need to protect your business interests against the unforeseen events and hazards that normal commercial activity carries.
We will try to outline below the risks and best approaches to ensure that you do not suffer the consequences that can come from not being properly insured.
A bookstore can also carry many unique risks that expose the store owners to multiple losses.
They can only be covered when you have the proper insurance arranged in advance.
In this article, we will try to cover most of the particular risks encountered by bookstores.
Having the correct and sufficient insurance in place up-front allows you to not be exposed personally.
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A Short Primer on Book Trade
Bookselling is the term we are using to describe commercial trading of books in the retail and distribution cycle of the publishing sector.
Trade in books goes back over three millennia, to the establishment of libraries in Greece around 300 BCE that created the Athenian booksellers.
Over the following eras, especially in Rome, it was fashionable among the wealthy and powerful to have a private library.
Roman bookselling became a flourishing trade.
The introduction of printing during the 16th and 17th centuries in Europe was followed shortly afterwards by North America, and it is now the chief center of the bookselling world.
The book selling business has been substantially altered by the development of internet-based trading.
Major websites are now large-volume book distributors that offer affiliate programs, franchises and that dominate book sales.
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Typically, privately owned stores offer a range from several hundred to thousands of titles.
They may be street-level or shopping-center based (referred to as brick-and-mortar stores) or internet only stores. Most of the larger enterprises have a combination of both, offering half a million or more titles.
Bookstores can also boost revenue by selling other things besides books, such as magazines, newspapers, and educational material.
There is no specific limit to the range so product range may vary enormously, particularly for independent bookstores.
Universities and colleges frequently have bookstores on their campuses that concentrate on textbooks and scientific publications.
Some of these on-campus bookstores are owned or operated by large commercial chains.
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Used bookstores or second-hand bookshops have been a feature of many of the larger cities such as New York, Boston and San Francisco.
They buy and sell used and out-of-print books in various conditions. Book collectors and students like to frequent these used bookstores both for the savings over retail prices, and also to get titles that are no longer in print.
What are a Bookstore’s Standard Requirements for Insurance?
No matter whether a retail store conducts its business on the open street, in shopping malls, on campus or through the internet, whether through direct sales or online marketing of any other kind, all retail business operators share basic common aspects that dictate the kinds of insurance they need. These are:
- Protecting the safety of all people on the shop premises
- Having responsibility that the goods and services provided match specifications and meet your description
- Protecting all investments in assets, including property, equipment, inventory
- Ensuring income continuity
- Maintaining the security of goods in transit to customers
- Maintaining the security of business data
- Keeping employees safe and healthy
We will outline below what specific risks relate to each of these aspects. We recommend the proper way to protect yourself against the possible outcomes.
Public access means risk
Anytime a customer or passer-by steps into your bookstore, you are responsible for their safety and that of their property.
Any retail business activity carries the duty of care to prevent injury or damage to third parties, like the customer browsing through your shelves, or simply when someone casually steps through your front door.
Anything belonging to the person also needs to be protected from damage or loss due to your or a member of your staff’s negligence. It means that businesses of all sizes need some form of general liability insurance.
For any book retailer, general liability insurance is the most basic kind of cover when you deal in any way with the public.
It can protect you if you are faced with a claim from a person that some incident occurred in your store, causing them some kind of injury or loss.
Claims like this can arise from a simple accident, like the person tripping over a carton of books that has been left standing in an aisle waiting to be unpacked.
Similarly, if you or a member of your staff has climbed up on a ladder to reach a high shelf and accidentally dislodge a heavy book that falls onto someone passing underneath, you can be held responsible and liable for all the consequences.
To summarize, general liability insurance covers you for any accidental damages or injuries caused to third parties arising directly from your business activities that are claimed to be the result of negligence on your part.
There is no limit to the amount you can be sued for.
A jury can award a complainant for direct costs for hospitalization and medical treatment, for pain and suffering, loss of income while off work, and damage to possessions.
Such claims can add up quickly to an amount that will completely overwhelm your business and could even result in you as the owner having to meet the claim.
Whatever the jury decides, it is your responsibility. So you need to protect your business and yourself from potentially unlimited claims.
Like other specialty retailers, such as perfume stores and fabric stores, you are attracting a relatively high volume of visitors in order to keep your turnover going, unlike major-item retailers who can sustain business from just one or two sales a day.
For this reason, your risks are higher, and insurance should be at the top of your list of requirements from the very beginning.
Responsibility for goods and services
Whatever items you sell or advice you give about them, there is the risk that customers may claim that the items did not meet your description.
Especially for an internet business, if the books supplied did not match your advertisements and description, you may be held responsible for any loss sustained.
To cover yourself, you need Product Liability insurance.
When a customer consults with you before making a choice and then makes the claim that your advice was incorrect, you need Errors & Omissions insurance to cover your losses in the event of a possible lawsuit.
These three liability insurances do not only cover you if you lose!
Coming out of a liability case is not just a matter of winning.
Legal representation is costly, and as well you may be finding it necessary to pay for any investigations to find out all of the facts of the claim. Even if In the end you win the case, you could still find yourself left with having to pay the bill for all of these.
Having the proper liability insurance will cover most if not all costs relating to any claim, win or lose.
In terms of the policies, the insurance company is obliged to conduct a full and proper defense at its own cost, regardless of the decision.
Property and asset insurance
If you are operating a retail bookstore in a mall, a shopping complex or on the high street, it means you occupy some physical space that you either have to own or rent.
All physical locations should carry enough insurance coverage for total loss, up to the value of the building and business contents.
Protection should extend to all possible causes, including natural occurrences like floods and storms, as well as man-made occurrences like fire and vandalism.
If your business is located in an area of high risk, you may need to add-on additional coverage for earthquakes and hurricanes or tornadoes.
Included in most commercial insurance policies is the cover of the business content of the premises, like furniture and equipment, computers, and the inventory.
For booksellers, the level of risk of damage is quite high, coming from fire, water damage, storm damage, roof damage etc.
A bookstore is especially vulnerable to two particular hazards:
- Water damage from rain, burst pipes, leaking fire extinguishers and all other sources can quickly ruin the whole inventory
- Fire can spread quickly and uncontrollably because of the flammable nature of the stock. Even when good fire controls exist, it can cause secondary damage that renders the stock unusable.
Business Owners Policy (BOP) insurance
Insurance companies may also offer you a combination of commercial property and general liability insurance in a single package.
This is known as a Business Owners policy – BOP.
You can also opt to take extra coverage for some of the special risks that come along with book trade.
These are outlined below, under
- Business continuity insurance
- Insurance against data loss or theft
- e-Commerce insurance for internet vendors
- Cover against employee theft or misappropriation.
Business continuity insurance is essential to protect you in the event of total shut-down in your operations.
Something totally unrelated to your own business may have caused it, such as a fire that burns down part of the shopping center where your business is located, preventing the shop from operating.
Until the building repairs are complete, you are still having to pay out any “fixed expenses” such as mortgage or rental payment, payroll, and other regular costs.
It means you need to have some way to replace the lost income so that you can meet these outlays and still have something for yourself.
Be aware though that ‘catastrophes’ such as floods or earthquakes are not typically covered in a business continuity policy.
Modern business is highly dependent on computer operations, and even more so in the case of internet trading operators.
When you are offering to display and sell your books on a website, you have a special and additional need for e-commerce insurance.
Cyber insurance covers damage to or theft of any data stored in your bookstore’s computers or on the cloud or dedicated home computer.
You should fully protect all of the information regarding your financial transactions, as well as your customer records and anything else that could become a target for cyber theft.
Business crime insurance is designed to protect your bookstore business from fraud and theft by employees.
It can be effective to cover any gap between your commercial insurance policy if it does not specifically cover employee theft.
Commercial vehicle insurance
When your business is involved in delivery of books to your customers, such as when you operate an online website, you should make sure that you have the right kind of vehicle insurance. Commercial vehicle insurance is not the same as private auto insurance.
If you are using a personal auto for deliveries on behalf of the business, you will almost certainly be breaching the terms of your private auto insurance policy. Such a policy will almost always exclude commercial activity.
If you are using a delivery service provided by a third-party, then you should make sure that they have their own insurance.
As soon as goods move off of your premises, your own business insurance cover stops.
Workers Compensation Insurance
Worker’s compensation insurance is required in most states if your retail book business has more than the designated number of employees.
Refer to the US Department of Labor website for specifics in your state.
The requirement for workers comp insurance applies regardless of whether they are full-time, part-time or casual.
Workers compensation insurance covers your business against any claims if an employee suffers an injury or becomes sick directly due to work.
Worker compensation insurance rates are dependent on the level of worker remunerations, usually calculated based on premium per $100.
What does insurance for a small bookstore cost?
Insurance companies always take care to cover the level of risk that they can expect, so rates can vary according to where your business is located, the type of operation, and many other factors.
Bookstores usually have different levels of risks from fire or of water damage depending on your location.
For example, a bookstore on the main street is exposed to higher risks from storms than one located in a shopping center, whereas on the other hand one in the center has a greater risk of fire coming from the surrounding stores.
While we can’t give exact costs, since they depend very much on the size and the location of the bookstore, here are some general guidelines.
The list below is a rough estimate of average annual premiums for the main types of insurance small bookstores will probably have to pay. They could change at any time.
|Product Liability insurance
|Commercial vehicle insurance
|Commercial Property insurance
|General Liability insurance
How do you calculate the level of coverage you need?
Only you will be able to decide the coverage limit you need. It is good to speak to insurance agents and brokers, or search the internet for the best advice.
Your coverage needs may not be the same as other businesses in the same location, or other bookstores located elsewhere.
For the example used in our table above, it is based on the fact that most small stores choose public liability insurance of one million dollars for a single occurrence, with an annual aggregate of $2 million.
If you think more cover is required in your case, these limits can be raised.
The premium will need to be adjusted accordingly.
Real estate property, inventory, income insurance and the other options, and commercial vehicle insurance, are all based on specific levels of your own business operations.