Of all the different types of business insurance, e-commerce is a relative newcomer. Ecommerce businesses are not limited to merchandise sellers, and online business can also include therapy, financial advice, instruction, and more.
If you do business online, how do you know if you need ecommerce insurance? There are risks for any business owner running e-commerce. If there are risks, you need insurance – in this case Ecommerce Insurance.
What is Ecommerce Insurance?
First, a brief definition of e-commerce. Think of it as B2B (business to business) or C2C (client to client). Ecommerce businesses may involve merchants/online and retailers offering a product that people buy. But by definition, e-commerce includes all commercial transactions conducted electronically.
In other words, a customer buys a candle from an online retailer. A customer has an online meeting with a financial representative. Both customers pay invoices electronically. If there is a risk of data breaches, you need e-commerce insurance.
Benefits of having business insurance for e-commerce
There are many benefits to business insurance. Here are a few that are specific or necessary to do ecommerce business:Protects you from risk Helps you recover the cost of damages May be required to include a provision in a contract Often required when working with an online store or fulfillment center Help with the costs of a data breach, including data recovery and legal fees
Types of Insurance for Online Businesses
Ecommerce insurance is a broad term that summarizes the many business insurance products required by online businesses. Business owners using the online marketplace or conducting commercial transactions electronically may also need to consider these types:
Cyber Liability Insurance
Cyber Liability Coverage is for a data breach that occurs in an e-commerce business. It should include a customer notification for anyone who had an online account with you, and credit monitoring services. Most online retailers require this type.
Do not confuse this type of insurance coverage with protection for your actual computer equipment and software. For this you need business real estate insurance.
General liability insurance
If you are an e-commerce company that sells a product, someone could be injured by your product or your product could cause property damage. For example, your product may cause an allergic reaction or other damage to someone or someone’s property. Your product liability insurance is covered by general liability insurance, as well as advertising damage.
Intellectual Property Insurance
Speaking of products, let’s add this type of insurance that an ecommerce business might need. If you have designed and/or manufactured your unique property, this type of insurance protects you from someone stealing your product.
Professional liability insurance
This is commonly referred to as error and absenteeism insurance. As an online business, you may need this if you work as a dietitian, financial advisor, IT specialist, or provide other professional services. In other words, if your advice could cause harm.
BOP or Business Owners Policy
An e-commerce business should be able to group types of liability insurance and commercial insurance under the BOP umbrella of business insurance policies. The best small business insurance companies are starting to include Cyber Security under the umbrella. Contact your insurance company.
Commercial Property Insurance
If you have equipment as part of your business, or if you have products/inventory that will be stored, you will need commercial insurance. If you work from home, check with your homeowner’s insurance company. Usually, homeowners’ policies make a clear distinction between personal property and business property. To cover business equipment in your home, you need commercial insurance.
Employee Compensation Insurance
You need occupational accident insurance if you have employees. Workers’ compensation protects you if an employee is injured on the job and has medical expenses. It also covers medical expenses for the employee’s bodily injury. If you have employees, this type of SME insurance is mandatory.
Employment Practices Liability Insurance
As an entrepreneur, with one or more employees, you leave the door open to lawsuits if you don’t have this type of insurance. The EPLI insurance protects you if lawsuits are filed alleging harassment or wrongful termination at work.
Suppliers and distributors often have this type of insurance. You can check it with the contracts you have with them. Transit insurance covers damage to items in transit.
Business interruption insurance
Cyber liability insurance covers you for a data breach, including the costs of customer reporting and data recovery.
Business loss insurance covers you if an event occurs – such as a power failure or fire – and you are unable to run your business and cover costs. You are covered for loss of business income.
How much does e-commerce business insurance cost?
Costs vary by insurer and by type you choose to buy. First, you need to find an insurance company that offers a BOP so that you can combine general liability insurance and business property insurance.
Remember that you need commercial insurance if you work from home and have business equipment there. This way you are protected against business damage.
Most e-commerce businesses have a BOP, especially if they have business equipment. Bought separately, you can expect to pay about $50 a month for general liability and from $60 to $800 a month for commercial real estate (depending on the value of your business equipment). The average cost of cyber liability insurance is $150 per month.
Insurers are increasingly including cyber liability in the BOP policy. That’s because they realize how important cyber insurance is to many small business owners with e-commerce businesses. A BOP policy that includes these types starts at about $300 per month. Costs vary by type of small business. The cost to the small business owner is worth the financial protection afforded.
How to Choose the Right Ecommerce Insurance Policies
E-commerce insurance is a group of policies. Before making a selection, complete the following steps:
List possible scenarios that could harm your ecommerce store or business.
List Types of Insurance Needed
List every type of insurance you may need.
Network with other small businesses, especially those that have online stores (if you have an online store). Network with online service providers if that’s what you do. Find out what types of insurance they have and what claim-related issues they’ve had.
Ask other small business owners who they would recommend as an insurance company. List them along with contact details.
How to get insurance for online businesses
Now take the next step. Armed with information, including what types of policies you need and which insurance company is most often recommended by other business owners, start your research.Schedule an interview with an agent representing that insurance company. During the interview, discuss your conclusions about the required coverages and ask the agent for input. Compare a number of offers and see if you can coordinate and save. Before making your final decision, call the customer service number of each insurance company or agent. If the wait time is long and the interaction with the customer service staff is not smooth, reconsider. Remember this is the number you would use if you have a claim.
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