Of all the different types of business insurance policies, E-commerce is a relative newbie. E-commerce businesses aren’t limited to sellers of merchandise, and online business can also include therapy, financial advice, instruction and more.
If you’re conducting an online business, how do you know if you need E-commerce insurance coverage? For any business owner conducting E-commerce, there are risks. When there are risks, you need insurance – in this case, E-commerce insurance.
What is Ecommerce Insurance?
First, a brief definition of E-commerce. Think of it as either B2B (business to business) or C2C (client to client). E-commerce businesses can involve sellers/online and retailers who offer a product that people buy. But by definition, e-commerce includes all commercial transactions that are conducted electronically.
In other words, a customer buys a candle from an online seller. A customer has an online meeting with a financial representative. Both customers pay bills electronically. If there’s a potential for data breaches, you need e-commerce insurance.
Benefits of Having E-Commerce Business Insurance
There are many business insurance benefits. Here are a few which are specific or needed to conduct e-commerce business:
- Protects you against risk
- Helps you recover the cost of damages
- It may be mandatory to have as a stipulation in a contract
- Often required when you’re working with an online retailer or fulfillment center
- Help with the costs of a data breach, including data recovery and legal fees
Types of Insurance for Online Businesses
E-commerce insurance is a broad term that sums up the many business insurance products needed for online businesses. Business owners using the online marketplace or making 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 client notification for each who had an online account with you, and credit monitoring services. Most online retailers need this type.
Don’t confuse this type of insurance coverage with protection for your actual computer equipment and software. You’ll need commercial property insurance for that.
General Liability Insurance
If you’re an e-commerce business that is selling a product, someone could be injured by your product, or your product could cause property damage. Your product could cause an allergic reaction or other harm to someone or someone’s property, for example. Your product liability insurance would be covered under general liability insurance, as well as advertising injury.
Intellectual Property Insurance
While we’re talking about products, let’s add this type of insurance that an e-commerce business may need. If you’ve designed and/or fabricated your unique property, this type of insurance protects you against someone stealing your product.
Professional Liability Insurance
This is commonly called Errors & Omissions insurance. As an online business, you may need this if you work as a dietician, financial consultant, 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. Check with your insurance company.
Commercial Property Insurance
If you have equipment as part of your business, or if you have products/inventory that is stored, you need commercial insurance. If you work from home, check with your homeowner’s insurance company. Most often, homeowner’s policies make definite distinctions between personal assets and business property. To cover business equipment that’s in your home, you need commercial insurance.
Workers Compensation Insurance
You need worker’s compensation insurance if you have employees. Worker’s compensation protects you if an employee is injured at work and has medical expenses. It will also cover the medical costs for bodily injury to the employee. If you have employees, this type of small business insurance is mandatory.
Employment Practices Liability Insurance
As a business owner, with one employee or more, you’re leaving the door open for lawsuits if you don’t have this type of insurance. The EPLI insurance protects you if lawsuits claiming workplace harassment or wrongful termination are launched.
Suppliers and distributors often carry this type of insurance. You can check for it with the contracts you have with them. Transit Insurance covers damages to items that are in transit.
Business Interruption Insurance
Cyber liability insurance covers you for a data breach, including the cost of client notification and data recovery.
Business interruption insurance covers you if an event happens – such as a power outage or fire – and you’re unable to conduct business operations and cover costs. You’ll be covered for loss of business income.
How Much Does E-Commerce Business Insurance Cost?
The costs vary by insurance providers and by which types you choose to buy. First, you should find an insurance company that offers a BOP, so you can combine general liability and commercial property insurance.
Remember, you should buy commercial insurance if you’re working from home and have business equipment there. That will protect you against commercial property damage.
Most e-commerce businesses have a BOP, especially if they have any business equipment. Purchased separately, you could expect to pay about $50 a month for general liability, and from $60 to $800 a month for commercial property (depending on the value of your business equipment). The average cost for cyber liability insurance is $150 a month.
Increasingly, insurance companies are including cyber liability with the BOP policy. That’s because they realize how important cyber insurance is for many small business owners who have e-commerce businesses. A BOP policy that includes those types starts at about $300 a month. Costs vary by type of small business. The cost to the small business owner is worth the financial protection provided.
How to Choose the Right Ecommerce Insurance Policies
E-commerce insurance policies are a grouping of policies. Before you choose, take these steps:
List possible scenarios that could damage your e-commerce store or business.
List Types of Insurance Needed
List each type of insurance policy you may need.
Network with other small businesses, especially those who 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 insurances they carry, and any claims-related issues they have had.
Ask other small business owners who they’d recommend as an insurance company. List them, along with contact information.
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 who represents that insurance company.
- During the interview, discuss your conclusions about needed coverages and ask the agent for input.
- Compare a number of offers and see if you can umbrella and save.
- Before you make your final decision, call the customer service number for each insurance agency or agent. If the wait time is long, and interactions with customer service personnel don’t go smoothly, reconsider. Remember, this is the number you would use if you have a claim.