Do you need insurance for your eCommerce website?
Many eCommerce website owners find themselves asking this question at some point in their business life cycle.
Insurance is a tricky topic and therefore many people try to avoid it as much as they can. They feel intimidated by the complex jargon and try to maintain as much distance as possible.
At the same time, however, insurance protects you and your business. It is mandatory in some cases while preferred in others. With insurance, you have something to back you up in case of a total disaster or an unfortunate situation.
Not sure whether you need insurance for your eCommerce store or not?
Here’s everything you need to know to make that decision.
Who Should Opt for Commercial Insurance?
The main reason why most people avoid getting into insurance is the fear that they will have to buy something they don’t really need. Most of us don’t understand what we are buying when it comes to insurance.
With insurance, there’s no one-size-fits-all model. However, there are some situations where insurance for eCommerce websites becomes mandatory.
If you have a small online business with revenue coming from the products you sell, then you should consider getting commercial insurance. You need protection when your business starts giving you considerable revenue.
Revenue is one factor to help you decide whether you need commercial insurance for your eCommerce website or not. However, you must consider other things as well.
Insurance Offers Risk Protection
The main purpose of insurance is to protect against risk. Risk can be anything you can think of in worst-case scenarios. For example, what if the garage you put all your inventory in catches afire? You must insure all your inventory to protect yourself from potential loss of this kind.
Commercial insurance can handle such risks. If you think you will not be able to recover the cost of damages from any accident, then it is best to opt for commercial insurance for eCommerce websites.
Insurance can be Mandatory
Some situations call for insurance whether you like it or not. When your eCommerce business reaches a level where you have to abide by contractual obligations, you will need to buy commercial insurance.
Similarly, you will also need insurance if you are selling your products to a major retailer or working with a fulfillment center.
If you realize that you need insurance for your eCommerce website, the next step is to find out where you would buy it and how.
How to Buy Insurance for eCommerce Websites
Finding the right insurance and buying may initially seem like a daunting task. While you can do it on your own, it is best to have a professional by your side to help you make the right decision. You must do your research and take your time before you opt for an insurance plan for your eCommerce store.
If you want to find the best insurance plan for your eCommerce store, then prepare for some legwork.
1. Ask for Recommendations
Start by asking your peers and other eCommerce website owners for recommendations. Make sure you ask someone who is at the same stage as you in their business. Also, ask around your industry. This will give you a clear perspective of what you will need in your insurance plan.
Can’t find anyone who can help you? Ask professionals for help.
You can look for financial consultants who can help you make the best choice. They will guide you on what you really need and what the best options are for you. This will allow you to make an informed decision that will be beneficial for your online business.
2. Find the Right Insurance Companies
When you are opting for commercial insurance for your eCommerce website, make sure you find the right companies that understand your specific needs and give you the right insurance plans. Look for someone who understands your products and can give you a plan that fits your needs.
Do your research. Don’t just settle for the first insurance company you come across. Ask for recommendations. Make a list of choices and then compare the pros and cons of each. This will help you pick the right insurance company that best fits your needs.
3. Interview the Insurance Company
Again, don’t just settle for what the first insurance company offers. You should interview a number of different insurance companies and find out which one is really the best for you. Ask them if they have any prior experience with eCommerce businesses. Ask them about their clients. You should also contact their clients and ask them about their services.
If you are satisfied with their performance, you can then ask for quotes for the services you need. Again, don’t just settle for one company. Take quotes from multiple companies and then choose the one that suits you the best.
The number of online buyers is expected to increase to 2.14 billion by 2021. It is already a big industry today and will be even bigger in the coming years. If you want to be a top player in the eCommerce industry, then you will have to invest in your safety and protection using eCommerce insurance.
Common Types of Insurance You Need for an eCommerce Store
To find the type of insurance coverage you may need, you should try to figure out the potential risks your online business is faced with. Then, you need to find the right amount of insurance coverage that can help you mitigate these risks.
It is important to understand the financial products you are signing up for before you finalize anything. While there are many different kinds of insurance, the following are especially important for eCommerce businesses.
1. Liability Insurance
You may think that no one could possibly get injured by your products.
You shouldn’t really leave room for “ifs” and “buts”.
Liability insurance also covers you in case someone gets injured by interacting with not just your product but also the people at your company. A classic example of this is a kid choking on a small piece of plastic or rubber toys you sell.
It is important to note that small parts are not the only culprits. Imagine someone getting an allergic reaction to the kind of material you use in your apparel. Similarly, someone’s skin could also get severely affected by your makeup products.
Even seemingly harmless products can lead to serious liability issues. Don’t skip liability insurance just because you think that the products you sell on your eCommerce website will harm no one.
Liability insurance is priced according to the kind of products you are selling and the volume of sales. If you sell high-risk products like fireworks, then you will definitely need more protection. For low-risk products, the cost will be lower.
2. Property Insurance
Running an eCommerce store may require you to store your inventory on property. You may not need property insurance if you sell digital products but physical products are prone to damage and you need to cover your inventory.
Property insurance provides coverage for your inventory and property against loss, theft and complete or partial destruction. Imagine if the building where you keep your inventory burns down. This is a big loss for your business and this is where property insurance can help you.
If your plan includes it, your property insurance will cover the cost of replacement of your inventory, damage to your property and also the damage to any equipment that the fire may have caused.
If you run a business from your home, then it will cover your personal items only. Anything related to your business won’t be covered. Therefore, you must talk to an expert so that insurance covers both your home and business.
3. Transit Insurance
This type of insurance covers your inventory when in transit. Imagine that you shipped your inventory from point A to point B. The truck met in an accident and almost all of your inventory got completely damaged and without use. Transit insurance coverage should provide you with protection against such evenualities.
Transit insurance will protect your inventory en route from one place to another. This protects your inventory against any unforeseen accidents.
Before you go on and opt for transit insurance, read your contracts with your suppliers, distributors and warehouses carefully. While this happens very rarely, you may be covered by their insurance policies and may not need to buy transit insurance of your own. This will save you a lot of money.
However, if you are not covered by their contract, then it is important to get a transit insurance plan. This plan will keep you covered even if your inventory gets into an accident and is destroyed beyond use.
4. Cyber Liability and Data Breach Insurance
Another type of insurance that eCommerce website owners should consider getting is a cyber liability and data breach insurance. Data breaches and cyber-attacks against online stores is common these days.
Based on research, 60% of small online businesses go out of businesses within 6 months if they suffer a data breach. This sheds light on the importance of having data breach insurance.
You will be covered for any such breaches with cyber liability and data breach plans. Thus, include it in your insurance plan so that your eCommerce website doesn’t have to pay for the damages caused by data breaches and online invasions.
5. Intellectual Property Insurance
Intellectual property insurance is important for eCommerce websites that sell intangible products. So, if you sell products such as games, apps, data or software, etc., then you should cover your products with intellectual property insurance. This insurance will cover you for your legal defense.
Intellectual property insurance will cover you if a company or an inventor sues you for infringement. Some intellectual property insurance plans also cover monetary damages as a result of such claims.
6. Worker’s Compensation Insurance
Another insurance type that eCommerce website owners should consider opting for is worker’s compensation insurance. You can find out if you are legally required to opt for this type of insurance by checking your state and federal laws.
It is a good idea to get a worker’s compensation insurance when you have three or more full-time employees working for you. This insurance plan covers you in case any of your employees get injured at work. You won’t have to pay out of pocket for their medical expenses.
The Final Word
Running a business online comes with its own risks. If you run an eCommerce store, then you must cover your business through insurance. This should help to keep you protected against any unforeseen incidents.
There are different types of insurance for eCommerce websites that online business sellers can opt for. It is best to discuss your specific scenario with a professional before you opt for any of the policies mentioned above. This will help you make a much more informed decision.