All types of eCommerce business insurance, or eCommerce liability insurance, are designed to protect your online business from third-party claims. You can choose from general liability insurance, product liability insurance, and cyber liability insurance. Read on to understand the types of e-commerce insurance to select the right coverages for your business.
What Is eCommerce Business Insurance?
Whether you have a boutique business, a fashion brand, a t-shirt business, a business that you started with $1,000, a white label business, or don’t have a business idea yet, eCommerce business insurance can offer protection. This insurance includes various types of protection for your online business, from general liability insurance, product liability insurance, and cyber liability insurance to business interruption insurance, commercial property insurance, and transit insurance. You may also get workers’ compensation insurance or professional liability insurance. While these may have similar general terms, exact coverage will vary as per the insurance provider.
Why Should You Have Business Insurance for Your eCommerce?
While eCommerce businesses aren’t required to have insurance, general liability insurance is a good idea for most businesses. In the case of certain businesses, it may be legally required, but for nearly every business, it is a smart business move. Whether you’re facing supply chain issues or have lost, broken, or stolen inventory from transit or the warehouse, insurance can provide peace of mind while protecting revenues.
Likewise, from human error during regular business operations to lost or stolen merchandise, insurance is designed to protect your business when the worst happens. Business insurance can protect your company in the case of cyberattacks and data breaches that expose customers’ sensitive data. Likewise, insurance can protect against lawsuits from breach of contract with clients or vendors.
Types of eCommerce Business Insurance
Here’s a detailed breakdown of the types of eCommerce business insurance you can consider:
General Liability Insurance
General liability insurance protects your business from claims of bodily injury or property damage that may occur during operations, as well as personal and advertising injury. It covers incidents that happen at a physical business location or during activities related to your business, such as product deliveries. General liability insurance is good for all businesses.
Costs vary according to business size and coverage. Some general liability insurance could cost as low as $23 a month. A $2 million general business liability insurance policy costs around $64 monthly.
Product Liability Insurance
Product liability insurance, which covers physical products, is crucial for any business. This type of insurance offers coverage against claims related to injuries or damages caused by the products your business sells. The company is protected in case of defective products, inadequate warnings or instructions, or any other product-related issues.
Sometimes product liability insurance is included with general liability insurance. If not, it could cost an average of $500 to $600 annually.
Commercial Property Insurance
Commercial property insurance covers physical assets, such as inventory, equipment, or office space. It helps protect your physical assets and enables you to recover or replace them if they are damaged or lost. Commercial property insurance can cover damage or loss due to fire, theft, vandalism, or natural disasters.
The cost of commercial property insurance varies based on business and coverage amount. Businesses typically pay between $1,000 and $3,000 per year for $1 million of coverage.
Workers’ Compensation Insurance
Workers’ compensation insurance is an insurance coverage that provides benefits to employees who suffer work-related injuries or illnesses. It is designed to protect employers and employees by providing financial support and medical benefits in case of workplace accidents or occupational diseases.
As an eCommerce business, consider workers’ compensation insurance if you have employees. The cost of worker’s compensation insurance ranges from $40 to $70 per month for small to medium-sized businesses.
Professional Liability Insurance
Professional liability insurance, also known as errors and omissions insurance, covers claims of negligence, errors, or omissions in a company’s professional services.
Professional liability insurance is especially for eCommerce businesses offering consulting, advice, or specialized services. This type of insurance can protect you from legal claims related to professional mistakes or failures. Average professional liability insurance costs about $60 per month.
Business Interruption Insurance
Business interruption insurance protects your business in case of unexpected events or disruption of operations due to natural disasters, fires, major supply chain shutdowns, or other unforeseen circumstances.
Business interruption insurance provides coverage for lost income and ongoing expenses during the period of interruption, allowing you to recover and resume your business activities. It typically costs $40 to $130 per month, but the industry, business, and coverage amount can affect insurance premiums.
Given the digital nature of eCommerce, cyber liability insurance is essential. This insurance covers losses and liabilities from data breaches, cyber-attacks, or cyber threats. With cybersecurity insurance, you’ll be able to cover expenses related to investigating the breach, notifying affected customers, and managing legal claims from the breach.
The average cost of cybersecurity insurance in 2021 was $1,589 per year or $132 per month in the US. However, common premiums can range from $650 to $2,357 for cyber insurance, depending on company type and coverage amount.
Transit insurance covers the products in transit. If you ship products to customers, this type of insurance will protect your company from losses due to damage, theft, or loss that occurs during transportation.
Generally, transit insurance covers the value of the goods being shipped until they reach their destination, offering peace of mind and financial protection during shipping. Transit insurance costs can vary widely according to shipment volume, company, and merchandise covered.
How Much Does eCommerce Insurance Cost?
Every business is different and requires a personalized plan for insurance coverage. Many factors go into calculating the total insurance costs, some of which include:
- Business size: Coverage for a business with $50 million in revenue will be more than a company with a revenue of $500,000. Total coverage amount and business size will affect insurance premiums.
- Revenue: Revenue is often connected to product inventory, shipment volume, number of employees, warehouse volume, and more. All these factors can affect insurance costs and coverage requirements.
- Product inventory: Businesses that keep a large volume of inventory in storage will have to pay more for product insurance or even general liability insurance.
- Insurance coverage limit: The higher the insurance coverage limit, the higher the premium. However, it’s rarely proportionate. The extra $10 per month for an additional $1 million in coverage is more than worth it in case the worst happens.
- Claims history: Businesses with a history of claims, especially workers’ compensation claims or product insurance claims due to damage or theft, may have higher insurance premiums.
- Deductible: Many eCommerce business insurance options offer an optional deductible. This deductible can lead to lower monthly premiums, but the company will be liable to cover the deductible amount.
- Business structure: Business structure can affect insurance offerings, as some insurers may offer different insurance packages for corporations, LLCs, sole proprietorships, or partnerships.
How to Buy eCommerce Business Insurance in 5 Steps?
From a sticker business to a box truck business or a 3D printing business, there are just a few simple steps to get eCommerce business insurance.
1. Determine the Type of Coverage Needed
In addition to coverage type, you’ll need to determine the coverage amount. Consider the amount you’d need to replace inventory or cover revenue losses, as well as legal costs and additional expenses your company may incur. An insurance agent can help you select this based on total company revenue, inventory volume, number of employees, and others.
2. Research Different Insurance Providers
Different insurance providers offer different coverage amounts, terms, and pricing. Research insurance providers online. If you already have business or personal insurance, you can also contact your existing insurance provider for a quote.
3. Get Quotes from Multiple Providers
Get at least three quotes and compare coverage amounts and monthly premiums to find the best option for your business.
4. Read the Policy Details Thoroughly
The details are everything in insurance coverage. For example, you don’t want worker’s compensation insurance that explicitly excludes your industry. Check and double-check coverage amounts, and if needed, ask a lawyer to review the policy details to confirm appropriate coverage for your business.
5. Review and Renew the Policy Regularly
Review and renew the policy each year, and check the policy each time there is a significant change in business structure or activities.
Building Your eCommerce Business
If you’re busy running a business, you don’t want to worry about insurance liability or bookkeeping. Doola can help with bookkeeping, and a good insurance provider can offer peace of mind and security as your business grows. Get Doola books for access to the best bookkeeping software for founders and entrepreneurs.
Is there a waiting period for eCommerce business insurance coverage?
Waiting periods for eCommerce business coverage vary by insurance type and provider. For example, a business interruption policy typically has a 72-hour waiting period before coverage kicks in.
What is not covered under eCommerce business insurance?
General liability business insurance usually doesn’t cover business-related car accidents, employee injuries and illnesses, damage to the physical business property, or mistakes in professional services. It also does not cover claims that exceed your policy limit. And, of course, business insurance doesn’t cover illegal acts by any business owners or employees.
How do you file a claim with your eCommerce business insurance provider?
You can file a claim with your eCommerce business insurance provider online. You can also call the provider and ask for claim filing requirements and the additional documentation you need to file for claims.
Are there any discounts available for eCommerce business insurance?
Yes, some eCommerce business insurance providers offer bundled insurance at a discount. This can be a way to get comprehensive insurance for lower costs.
Can you cancel your eCommerce business insurance policy if you no longer need it?
Yes, you may be able to cancel an eCommerce business insurance policy if you no longer need it, but that depends on the policy terms and the provider.