Best eCommerce Business Insurance

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Contributor, Benzinga
February 16, 2022

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It’s now easier than ever before to get involved in eCommerce and open an online store. From handmade clothing to skincare consultations, eCommerce stores have taken the market by storm. If you operate an eCommerce store, be sure that you’re protecting yourself and your livelihood with the right insurance coverage. 

Compare eCommerce Insurance

Benzinga offers insights and reviews on the following eCommerce liability insurance providers. Consider beginning your search for coverage using the links below. 

What is eCommerce Business Insurance?

eCommerce business insurance is a collection of insurance protections customized to the needs of online businesses. You can customize your eCommerce business insurance to fit the unique structure of your business model. For example, as an eCommerce business, you might not have a physical location where you operate from, which means that you can save money on commercial property insurance and extend your product liability coverage.  

Benefits of eCommerce Business Insurance

Some eCommerce business owners assume that they don’t need insurance because they may not have a physical location or any employees beyond themselves. However, the truth is that eCommerce business owners face their own set of risks. For example, eCommerce stores should invest heavily in both product liability insurance and cybersecurity insurance, as these stores can still be sued by their customers just like a traditional business. Operating your business without any type of insurance coverage could put you at risk of being personally financially responsible for any type of legal expenses and judgments incurred in the event that a customer or client takes you to court. 

Types of eCommerce Business Insurance

Several different types of business insurance could help you protect your eCommerce business. Some of the most popular types of coverage that you might purchase as a small business owner include the following. 

Bodily injury: Bodily injury liability coverage helps you pay for the cost of legal expenses and court-ordered judgements in the event that a client or customer injures themselves on your property. For example, imagine that a client visits your warehouse, trips on a tool left on the floor and breaks her ankle. If this client sues you for the cost of her medical bills, your bodily injury liability insurance would help you pay for the cost of your lawyer and any medical bills you’re ordered to pay. 

Property damage: Property damage liability insurance is a type of protection that helps you pay for the cost of legal representation and awarded judgements in the event that you damage a client or customer’s property and they sue you for the cost of a replacement. For example, imagine that a client visits your home business to view a sample product, and you drop his laptop while attempting to show him a new website. If the client sues you for the cost of a replacement laptop, your property damage liability coverage will help pay for it.   

Advertising injury: The phrase “advertising injuries” refers to any harm that you do to a competing business, intentionally or unintentionally, through your advertising. For example, when advertising your business, you might accidentally copy a competitor’s copyrighted slogan. If the competitor sues you for infringement of their copyright, this insurance coverage will help you pay for the cost of legal representation and damages a judge orders you to pay. 

Product liability:  Product liability insurance compensates you if one of your customers purchases your product, the product causes harm to them and they sue you for damages. For example, imagine that you sell cosmetics. A customer purchases an eyeshadow palette from you and has an allergic reaction from an ingredient that was improperly listed on the product packaging. If that customer sues you for the cost of their medical bills, your product liability insurance will help you pay for the cost of legal expenses and court-ordered judgements. Product liability insurance also protects you in the event of claims that your product malfunctioned or failed to provide proper warning, causing damage. 

Workers compensation: Workers compensation insurance is a type of coverage that compensates your employees in the event that they are injured on the job. If you don’t have any employees, you won’t need to purchase workers compensation insurance. However, you might be legally required to purchase and maintain workers compensation insurance as soon as you hire your first full-time or part-time employee depending on the state that you live in and where you conduct business.  

Business property insurance: Business property insurance (sometimes referred to as “commercial property insurance”) is a type of insurance coverage that helps you pay for the cost of damage to your business space, inventory and equipment. For example, if you own a clothing store and an electrical fire damages all the clothing in your warehouse, your business property insurance would help you cover the cost of replacing your inventory. If you rent a commercial space, you might be required to purchase and maintain a certain level of business property insurance as a term of your lease. 

Professional liability insurance: Professional liability insurance helps to protect you against claims of negligence made against your business. For example, if you provide copywriting services and you don’t deliver magazine copy to a client on schedule, the client could potentially sue you, claiming that your delay caused them to lose business. In this instance, your professional liability insurance would help you cover the cost of legal representation and any court-awarded judgements. 

Cybersecurity insurance: As an eCommerce store owner, cybersecurity insurance is an absolute must-have. Cybersecurity insurance helps cover expenses that you incur after a hack or malware attack. For example, if your website is hacked and the hacker releases or sells the credit card information of your customers, cybersecurity insurance would help cover the cost of notifying your customers, legal expenses if a customer sues your business as a result of the hack and providing credit monitoring services for your customers whose information was leaked.

Business interruption insurance: Business interruption insurance (sometimes called “business income insurance”) compensates you when a qualifying peril forces you to shut down your business, resulting in losses. For example, if you store your products in a warehouse and that warehouse catches on fire, your business interruption insurance would cover lost income while you rebuild and prepare to open again. 

Inland marine insurance: Inland marine insurance compensates you for damage done to your merchandise while it is in transit under the control of a third party. For example, imagine that you’re expecting a shipment of accessories for your online store. During transit, your delivery truck is broken into, and a large number of items are stolen. In this instance, your inland marine insurance would help you cover the cost of replacing them. 

How to Customize an eCommerce Business Owners Policy

Every eCommerce business is unique, which means that you’ll want to take steps to customize your eCommerce business insurance. Here’s how to get the policy that’s perfectly suited to your business’s needs. 

Speak to an agent: Insurance agents are experts in providing advice on business insurance coverage. If you’re shopping for commercial insurance for the first time, speak with an agent to learn more about your specific state’s insurance requirements and receive personalized advice on policy options. 

Eliminate coverage your business obviously doesn’t need: Though it’s important to maintain a comprehensive set of business insurance coverages, there may be coverage options that don’t apply to your business. For example, if you’re a sole proprietor and you don’t have any employees, you won’t need workers compensation insurance. Consulting with your insurance agent can help you determine which coverages you may be able to skip to save money. 

Bolster needed coverage: After you eliminate coverages that you don’t need, bolster the coverages that will be most relevant to your business. For example, if you depend on shipments of merchandise arriving regularly, you might want to add extra coverage to your policy’s inland marine insurance. 

Adjust your coverage as the business grows: It’s a good idea to reassess your business insurance needs regularly to keep up with the changing needs of your business. Take a look at your insurance limits annually to be sure that your business doesn’t require any insurance adjustments. 

Keeping Your Insurance Current

The insurance that you’ll need will vary depending on the specifics of your eCommerce business and how your business operates. Be sure to return to Benzinga to explore multiple types of insurance coverages before you sign onto a policy.

Frequently Asked Questions

Q

Do I need insurance for a dropshipping business?

A

If you don’t have any employees, you may not be required to carry business insurance for a dropshipping business. However, going without insurance can put yourself at significant financial risk, so it’s recommended that you maintain coverage regardless of whether it’s required by law.

Q

What are the four types of business insurance?

A

The four primary types of business insurance are general liability insurance, commercial property insurance, commercial auto insurance and professional liability insurance. Other types of insurance coverages also exist that you may want to invest in as a business owner.

About Sarah Horvath

Sarah is an expert in the insurance, investing for retirement and cryptocurrency space.