Business Commerce

A Comprehensive Guide to Insurance for eCommerce Businesses

By the year 2040, as much as 95% of all purchases will be done online. In other words, if you want to run a business that you know will be safe and successful down the line, you can’t go wrong with eCommerce.

But just like with any other business, you need to think about insurance. Most people find business insurance daunting because it can be a complex process to insure your items, but it doesn’t have to be as complicated as most people think.

You can get commercial liability insurance in minutes today if you know what to look for and what kind of insurance you need. To find out more about eCommerce business insurance, just keep reading.

Who needs insurance?

A pile of question marks

While there isn’t a definitive answer to this question, a general rule of thumb is to track your revenue so you can evaluate if you need commercial insurance. When your business starts growing and you figure out how to build an unstoppable eCommerce brand, you need to start thinking about how to protect that revenue and the business itself.

The point of insurance is to minimize the risk in your business, and if you think that you’re safe because you have a personal insurance policy, think again.

For instance, if you keep inventory at home and something happens to it, your homeowner’s insurance policy won’t cover the cost of the loss because it’s for your business. The same goes for business equipment.

In some cases, you will be obligated to get a commercial insurance policy due to contractual obligations. For example, if you sell your products to a major retailer, they will probably request you have different types of commercial insurance.

To make it simple, every eCommerce owner who is serious about becoming a success needs insurance.

How to purchase insurance

A man signing a document

It’s clear that business owners all over the world are starting to understand the importance of insurance. You can easily find a way to purchase commercial insurance for your business as there are many companies that sell commercial insurance that can give you fair prices. However, one important thing you need to remember is that you should always hire a broker.

To ensure you’re working with the best possible broker, do the following things:

  • Ask other professionals for recommendations. Look to the people in your industry who have already found success and have been through the stage you’re in now and ask them who their insurance broker is and how satisfied they are.
  • Find a specialized insurance company. Regular insurance companies with multiple types of insurance probably don’t understand their policies as well as they should. But with a company that only specializes in commercial insurance, you can be sure you’ll be working with professionals.
  • Know what questions to ask. Ask your broker if they’ve worked with eCommerce businesses before, if they understand your needs, and if they’re able to sell products only from certain companies. It’s best if a broker can provide you with quotes from multiple companies, not just two or three.

Different types of commercial insurance

Once you’ve selected the broker you want to work with, they will evaluate your business and determine which risks you need to consider. Then, they’ll help you find the right type of insurance to protect you from those risks.

However, a smart business owner is an informed one, and as an eCommerce owner, you need to know the different types of insurance you can choose from.

Liability insurance

Customers can sue your business if they get injured while using your product or interacting with people while at your company. If a lawsuit happens, you can fall back on liability insurance which will protect you whenever a customer gets hurt.

Liability isn’t limited by any product category and if you think that someone can’t get injured by your product, it happens more often than you think. And even if someone files a lawsuit without a well-founded legal claim, you’re still going to have to go through the process and pay the legal fees.

But with liability insurance, all of your legal fees will be covered.

As for how much you’re going to pay for this type of insurance, it’s usually priced based on the products you’re selling and your volume of sales. If you sell a higher-risk product or have a high volume of sales, you can expect a high liability insurance quota.

Property insurance

If you sell physical products, property insurance is a necessity. It will protect you whenever something goes wrong with your inventory and business property. This can include loss, theft, complete or partial destruction, or damage to your property and inventory.

As we already mentioned, while a homeowner’s policy will cover any destruction, theft, or loss of your personal items, it probably won’t cover anything business-related.

Property insurance covers the replacement cost of the items you lost, not the retail value. As long as you can provide proof of the replacement cost, you will get the amount of money you paid for the property when you bought it.

The cost of your property insurance will depend on the total value of the property you’re insuring and naturally, if you’re insuring property with a high value, you can expect a high quota.

Transit insurance

You probably never heard of transit insurance before, and that’s because it’s relevant only in a specific business context. It’s also known as inland marine insurance, and it’s something eCommerce business owners who sell physical products need to be well aware of, especially as their business starts to grow.

As you may have guessed from the name, transit insurance is there to protect your inventory while it’s in transit or to be more specific, when inventory is shipped in large batches. This policy covers inventory while it’s shipped to you from distributors and when you’re shipping it somewhere like a warehouse or a fulfillment center.

Most warehousing companies will require you to get this type of insurance as nobody wants to be held responsible for your inventory in case of an accident.

Final thoughts

Some people don’t get commercial insurance because they believe that their business is immune to disasters and lawsuits. But a business is not something you should gamble with.

Running a business always comes with a certain amount of risks. However, if you’re a cautious and smart business owner, you can identify those risks and stop them from becoming serious problems down the line.

If you truly want to feel secure and know you will have coverage for almost everything that can go wrong, do yourself a favor and purchase commercial insurance.