Best E-Commerce Business Insurance

Who needs e-commerce business insurance?

Anyone who sells online should consider having e-commerce business insurance. This includes foreign sellers that sell products to customers in the US. 

Common people that need e-commerce insurance include:

• Brick & mortar stores that sell online
• Amazon sellers, Etsy, Ebay, etc. 
• Online marketplaces that host other sellers
• Online brokers

Some e-commerce platforms, such as Amazon, require certain sellers to have business insurance.

Amazon insurance requirements for sellers

Amazon requires small business insurance for Amazon sellers that have sales over $10,000 per month. However, it’s also important to insure yourself regardless of how much you make. Amazon insurance requirements state you must have a basic plan for liability coverage in place as well as a cyber liability insurance plan. 

General liability insurance ensures you will be covered in the event of lawsuits due to issues with customers. Without this coverage, you as a seller can be forced to pay out of pocket if the products you sell malfunction or damage a buyer’s property. 

Cyber liability Insurance is required by Amazon and is especially important for sellers that collect personally identifiable information (PII). PII can include simple data such as names, addresses, and payment information. If this data is leaked or stolen, a cyber liability plan can protect you from potential fallouts.

Compare insurance for Amazon sellers here

Etsy insurance for sellers

If you plan to sell on Etsy, insurance is a good way to limit your risk. However, Etsy doesn’t require its sellers to have business insurance in place. It’s still important to note that not having insurance will leave you exposed to potential financial burdens if something goes wrong with a customer. It’s not hard to find affordable insurance for Etsy sellers that ensure you are covered against potential lawsuits and damages. 

As with Amazon stores, we recommend general liability and cyber liability insurance for Etsy sellers. Since general liability is broad-reaching, it will ensure you are covered should any of your products cause harm to a buyer or their property. Cyber liability can protect you from hacks to your business account, as well as potential data leaks related to sensitive customer information.

Compare insurance plans for Etsy sellers here

Why do online shops and e-commerce businesses need insurance?

Apart from certain websites or platforms requiring member sellers to have business insurance, operating an online business comes with similar risks to operating a physical one. Therefore, just as a physical store protects itself through liability insurance, so should online businesses.

One of the benefits of online businesses is that you often have a greater visibility and reach of audience. However, this also presents a greater risk of lawsuits and potential damages. Therefore, e-commerce businesses should be prepared with adequate business insurance.

Some examples of risks e-commerce businesses face include:

• Copyright infringement, like if you unwittingly used a trademarked photo as part of your advertising.
• Client lawsuits based on injuries sustained from your products or as a result of your services.
• Information or data breaches, such as if a hacker accessed clients’ sensitive information.
• Loss of inventory due to supply chain issues or warehouse problems.
• Breach of contract lawsuits launched by suppliers or vendors.

The right types of business insurance can help protect you from all of the above scenarios.

What does e-commerce business insurance cover?

You can customize your e-commerce business insurance so that it meets the unique needs of your business.

The type of coverage you need for your online shop depends on what you’re selling, who you’re interacting with, and what types of situations you’ll likely encounter in the course of doing business. 

Small operations may be satisfied with a basic policy that covers the essentials. Business owners looking to scale or who already have more complex operations may be better served by investing in a comprehensive one that ensures they’re protected on every level. Larger businesses may also employ a larger workforce, in this case, you may also consider purchasing fidelity bond insurance. You can also opt for extra coverage with a commercial umbrella insurance policy. 

These are some common types of insurance coverages that e-commerce business should consider getting:

• General liability insurance
• Cyber liability insurance
• Product liability insurance
• Business personal property insurance
• Transit insurance
• Professional liability insurance
• Workers’ compensation insurance

To help you determine which types of coverage you need for your online business, we explain these in more detail below.

You can also speak with an experienced professional who can help you better understand your risks and coverage needs.

General liability insurance for e-commerce 

General liability insurance covers three main scenarios:

1. If someone gets hurt while interacting with your business
2. If someone incurs property damage while interacting with your business
3. If someone accuses you of libel, slander, or copyright infringement

Say you hired a writer who was in charge of populating your blog with fantastic, high-converting content. Months after launching that blog, you get an email from a competitor saying they’re suing you for using content stolen from their site. You may be protected from suspected copyright infringement thanks to general liability coverage. For more comprehensive coverage, you can also consider a business owner’s policy.

Cyber liability insurance for e-commerce

Global cybercrime costs are expected to hit an annual total of $10.5 trillion USD by 2025, according to Cybersecurity Ventures. Cyber attacks can ruin a business’s reputation and even lead to a company’s collapse, but having cyber liability insurance can help.

These policies cover lawsuits, settlements, legal penalties, and fines related to data breaches brought on by hackers and other cyberattacks. You may also receive reimbursement for revenue lost due to an attack, as well as payments related to managing breaches. 

For example, if you run an online business that was held hostage by hackers asking for ransom, your terms might cover lost revenue and PR agency fees to assist in reputation management post-attack.

Product liability insurance for e-commerce

Product liability coverage usually comes included as part of your general liability insurance plan.

If a customer is injured or contracts an illness because of your products, you may be protected if you have product liability insurance. This covers products that are poorly made, broken or toxic and injuries sustained because you didn’t include the right instructions or usage warnings.

For instance, say that you’re selling a type of colorful craft clay intended for kids. You’ve tested the product, but somehow, the latest batch has caused allergic reactions in some of your customers. This policy type would theoretically cover your liability in relation to customers’ medical bills and/or any settlements you had to pay out during arbitration or in court.

Business personal property insurance for e-commerce 

Most of your business may exist in cyberspace, but your physical products must be stored somewhere in the real world. Business personal property insurance and commercial property insurance protect against loss of or damage to those products and any other property directly connected to your business.

One of the most obvious examples of this would be a flood that totaled your home. Your home insurance covers personal items, like your bedroom furniture and clothes, but you need business personal property insurance to pay for replacing all of your inventory, the computers you used for your business, and more.

Transit insurance for e-commerce 

Transit insurance could benefit you if your business often sends out large shipments of valuable goods. Transit insurance covers product damage or loss that occurs during transit due to theft or natural disasters, including wind, fire, or water.

Transit insurance can generally be broken down into two types:

• Inland marine insurance:
  This covers goods transported over land by trucks, trains, automobiles, and other vehicles.
• Marine insurance:
  This covers goods, equipment, & merchandise that are transported over water.

Say you’re a wholesale art purveyor who regularly ships out tens of thousands of dollars in prints and paintings. Unfortunately, some of your paintings are stolen while in transit. Hopefully, your carrier has its own insurance, but doubling down with inland marine insurance ensures you’re fully covered and not suffering a pricey loss.

Professional liability insurance for e-commerce

Running a business can be a minefield, and you need help dodging liability related to true mistakes made on contracts and essential paperwork. Professional liability insurance is sometimes referred to as errors and omissions (E&O) insurance because it covers you in case you forget to do something or fail to live up to a legal promise.

A great example of this in the e-commerce world would be missing a guaranteed delivery date that causes financial losses for your customer. You said you’d have 1,000 widgets to them by December 1st, but you failed and they lost sales as a result. They’re suing to recover missing revenue, but this is where your insurance hopefully kicks in.

Workers’ compensation insurance for e-commerce 

Many states, such as California, require businesses of a certain size to carry workers’ compensation insurance. This ensures that employees are protected in case they’re injured or even killed on the job. Some of the most common workers comp scenarios are a slip and fall in your warehouse or an employee who is injured making a local delivery at your company’s request.

How much does e-commerce insurance cost?

According to Next Insurance, e-commerce liability insurance can cost as little as $25 a month for small businesses with a limited workforce and premises. 

That said, the exact amount it will cost to protect your online store depends on a variety of factors, including:

• Business size and number of employees: 
  The bigger your business becomes, the higher the risk that something bad can happen. It’s simple statistics, really. Sending out one shipment per day with one employee in charge of transaction oversight is relatively easy to manage. Sending out hundred shipments per day with multiple workers can be significantly more complicated, and you’ll need coverage (with costly premiums) to match.
• Geographic area: 
  Your insurance costs also depend on where you live. Even though you’re operating online, you’re still subject to the laws and regulations of your home state. Where you conduct business may determine the type and level of coverage you need, both of which affect how much you’ll pay each month.
• Industry and type of products: 
  A business selling clothes probably won’t need as much coverage as a business selling toxic chemicals. Businesses that involve higher-risk activities, like driving a truck or operating heavy machinery in a warehouse, may have to pay higher premiums as well. 
• Number of claims previously made: 
  The more claims your company has made in the past, the more likely it is that a new insurer would view you as high risk. High-risk applicants are subject to higher premiums, so expect to pay up.

How to get e-commerce business insurance

There are several ways to get coverage for your e-commerce business, but the most important thing is to get several quotes so you know you’re getting the best business insurance for your specific needs.

Visit our online tool to get insurance policies from top companies. Search by type of insurance or look at insurance recommendations based on specific circumstances, such as if you have a home-based business or sole proprietorship. 

Before signing on the dotted line, be certain about what type of insurance you need and ask about bundling services to take advantage of any available discounts.

Speak with an insurance agent to get a personalized comparison and free quote.