What Business or Commercial Insurance Does Your E-Commerce Company Need?
The big question is, do you need business insurance for a medium or small e-commerce business. The short answer is yes in general, as with any business you should have some insurance to at least protect against liability, but there is no such thing as a one-size-fits-all plan when it comes to e-commerce. We will cover what options are available in more detail later in the article.
What we are referring to as business insurance is also called commercial insurance. Both are general terms used to describe a standard group of insurance products specifically packaged for business entities.
The following are the most common insurance types that e-commerce businesses require. This is not an exhaustive list, but will get you on the right path when talking to your insurance provider about the individual needs of your e-commerce enterprise.
Property Insurance
If you sell any kind of physical product, toys, clothes or any other tangible product that you maintain in inventory locally, then you will want to consider property insurance. Property insurance will cover you in case of loss, theft and damage. It will also cover business assets, such as computers and other equipment.
Now, if you are running your business from home, you need to be aware that your standard homeowner’s insurance will not cover any business assets you store within your house. If on the off chance your homeowner’s insurance does cover business assets, it will most likely only cover the cost of replacement, not the retail cost of inventory. This can be disastrous for small businesses that are relying on a profit margin to stay afloat.
Marine/Transit Insurance
When moving products from a factory or from a business location to a fulfillment location, transit and marine insurance covers the retail value of the products in case of damage or theft. It can also cover potential contractual liability that can be incurred if products are not viable due to transportation. It is also important to remember that most manufacturers’ insurance will only cover product damage or loss within their own supply chain. As soon as the product is discharged to another freight hauler or shipping company, the manufacturer’s insurance will cease to provide you with protection.
Liability Insurance
The most important insurance for almost all business types is liability insurance. If you sell or provide any product, whether physical or intangible you open your business up to potential for civil liability. If a product or service fails to perform as advertised and incurs a loss for a customer, depending on the scale, you may incur liability. If a physical product causes injury or death, even if unintentionally, you may incur liability. Liability insurance helps to mitigate what can add up to be disastrous losses for a business.
Data Breach Insurance
If your online presence uses or stores personally identifiable information, such as emails, credit/debit cards, or social security numbers you should consider Data Breach Insurance. Even if you do not store the information yourself, if the data passes through your system to a third party you may still be liable, if not for any fraud, then for the cost of remedial action and notification of individuals affected.
The four business insurance types we have just covered are a good jumping off point for you to discuss your insurance needs with a reputable insurance agent. Do not be afraid to question the agent as to why a specific insurance they recommend is in your interest, and then weigh the potential liability against the value of the business, and the liability shield provided by your business type. Also bear in mind, that some states and countries require a basic level of insurance for any business entity to operate inside of its borders or to sell to customers within those borders.
