eCommerce Business Insurance – the best protection for e-commerce
Whether you run an online or offline business, there’s a certain degree of risk involved with each.
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The e-commerce industry is growing exponentially, with sales reaching a staggering $4+ billion in 2020 alone.
However, it’s important to note that e-commerce businesses are a bit more complicated to run than many other types.
It carries a more significant number of risks, and is subject to more grey areas from a legal point of view.
Due to the reasons mentioned above, you must safeguard your e-commerce business with e-commerce insurance.
What is e-Commerce insurance?
As an e-commerce business owner, you face many different risks each day.
E-commerce insurance coverage is designed to protect you from potential losses arising from events that may occur when doing business online.
Small Business General Liability Protection:
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Furthermore, e-commerce business insurance protects your e-commerce financial assets, intellectual, online, and physical inventory, if any, from:
- Loss of income
- Employee injuries and illnesses
More about the most significant risks faced by e-commerce businesses
Fraud is perhaps one of the greatest threats to owners of e-commerce businesses.
E-commerce fraud volume has been snowballing in the last few years.
In terms of numbers, e-commerce fraud increased by over 40 percent in 2017, which resulted in losses of more than 50 billion dollars.
E-commerce business fraud is due to several reasons, including stolen or fake credit cards, identity falsification, and many others.
Even though security procedures to protect e-commerce have greatly improved, fraud is still a significant cause of e-commerce business losses.
Data security is critical to surviving in the 21st-century e-commerce landscape.
Compromised data exposes e-commerce businesses to numerous new vulnerabilities.
Data breaches such as cyber-attacks can happen more often than e-commerce businesses anticipated, and can quickly transform a thriving business with an unforeseen cash flow crisis.
One prominent example is the leading retail giant Target, which had information about more than 100 million customer credit cards stolen in 2013.
Another case of losses because of a data breach was the US multinational computer software company Adobe, which had approximately 35 million IDs and encrypted passwords for 38 million of its active users compromised.
DDoS attacks are another significant reason why you should get e-commerce business insurance.
A DDoS (short for Distributed denial of service) attack occurs when hackers attempt to crash a website and make it unavailable to users by overloading the service with thousands of simultaneous access attempts.
DDoS attacks have a direct and significant impact on e-commerce business revenue, and the loyalty you’ve built with your customers.
Sometimes, DDoS attacks aren’t able to ultimately achieve total denial of service.
However, they impact network performance to the point where customers give up, which interrupts regular trade. DDoS may also serve as a preliminary path to more malicious attacks.
E-commerce businesses provide consumers access to a wide range of products and deliver the selected products right to their doorstep in a few clicks.
But product defects can not only have a significant impact on the bottom line of your e-commerce business but can also expose your business to unlimited claims in lawsuits.
An excellent example of this is the world-renowned furniture retailer Ikea.
In 2013, the company had to recall more than 25 million faulty chests and dressers due to the discovery of a tripping hazard.
These defects caused the death of three children and resulted in lawsuits amounting to $50 million.
Even though the company settled these lawsuits, it was probably e-commerce insurance that saved the company’s bottom line from substantial losses!
Different types of e-commerce insurance policies and coverage
E-commerce insurance can be a tricky area, and dealing with it may be overwhelming given the jargon and complexities.
As well, the different types of e-commerce insurance coverages to choose from present another level of difficulty. But here, we describe for you the three most common e-commerce insurance coverages to choose from to help you get the right policy for your business.
Liability Insurance for eCommerce
Many of the top e-commerce businesses were started in a garage, and one such great example is Amazon.
E-commerce general liability insurance covers several different risks, including property damage, lawsuits related to bodily injury, advertising injury, and much more.
So, whether you operate your e-commerce business from a warehouse, an office or out of your home, you’re going to need general liability insurance first before going on to select any other type of e-commerce insurance coverage.
If you run your e-commerce business from your home, things get a bit more complex, and here’s why!
Assuming you have a homeowners insurance policy, you must be aware that in most cases, this type of policy won’t cover any business activities you pursue from your home.
Even if your homeowners’ insurance policy does cover business property stored in your home, it will not provide coverage with limits that are high enough to protect your e-commerce business.
Therefore, your best option to protect your home-based e-commerce business is with a separate e-commerce policy.
And if you’re active on social media as a way of boosting your market presence, then getting insurance for media influencers is a great option.
Product Liability Insurance
If you sell physical products rather than intangible products, such as software, through your e-commerce business, then getting product liability insurance shouldn’t be an option – it’s a necessity
As well, if you sell products via Amazon as an FBA seller, securing insurance for FBA sellers is a good option.
Just as happened for Ikea, any physical product you sell could pose a hazard for your customers, regardless of how safe you think they may be.
E-commerce product liability insurance is generally an add-on over and above general liability insurance.
It covers your e-commerce business if your product causes bodily injury or property damage to a third party.
Whether you’re a baker selling delicious cupcakes through your Shopify store, or a boutique selling the trendiest carpets, product damage could occur, such as food poisoning or slipping or falling on a carpet.
Do you recall the time 79-year-old Stella Liebeck sued McDonalds because she accidentally spilled hot coffee in her lap? Well, she was awarded a hefty $3 million for the burns she suffered.
If your e-commerce business offers professional advice- and service-providing individuals, it may be a good idea to protect your company with errors and omissions insurance.
Since all insurance companies operate online, getting cyber insurance for your e-commerce business makes sense, particularly if your business collects personal data and sensitive information such as credit card information.
Cyber e-commerce insurance is essential to all types of e-commerce business, even if you’re just providing something as innocent as matchmaking services.
The Ashley Madison and MeetMindful dating websites are prime examples of why e-commerce business owners need cyber insurance.
In the first case instance, Ashley Madison lost a court case and had to settle a whopping $11 million-plus.
Other types of e-commerce business insurance include:
- Technology Errors & Omissions Insurance
- Employment Practices Liability Insurance
- Commercial Crime Insurance
- Directors & Officers Insurance
- Workers Compensation Insurance
- Cargo Insurance
E-commerce insurance buyers guide
There are several vital things to consider when on the shopping trail for the best e-commerce insurance.
- Determining what you need
It is important to make of list of things you’d like to cover through your e-commerce insurance policy, including your website, warehouse, etc.
You also must understand your legal obligations that arise when you are renting a commercial space.
Take care as well to cater for third-party property damage or injuries.
Remember, legal obligations vary across states, so it’s essential to research and get information in states where you will be doing business.
- Coverage is more important than the cost of the coverage
Once you’ve figured out the type of e-commerce insurance coverage you need, you prioritize getting the best insurance coverage rather than skimping on the costs.
If your product results in damage, you could end up paying a vast amount of money in damages and legal costs arising from the lawsuits.
If you don’t have the right kind and amount of coverage, these unexpected expenses will come straight out of your own pockets.
- Select a reputable insurance provider
There are many hundreds of e-commerce insurance companies to choose from.
What’s important is choosing a company that boasts a stellar rating and reputation.
Of course, along with the reputation, the company should also offer the type of coverage you need and should be able to create a bespoke insurance policy tailored to your business model.
Once you receive your e-commerce insurance policy, be sure to read it thoroughly, including the fine print, before signing off on it because the last thing you want is unanticipated surprises when you file a claim.
If you’re planning on launching an e-commerce business – big or small,l or are already operating one, you need the best ecommerce business insurance policy.
You can search for e-commerce insurance companies in any search engine to get good recommendations, then compared coverage and quotes before selecting the best e-commerce company for your business.