Ecommerce is an effective and efficient way to do business, especially if you are starting a new venture. It is also an excellent way to expand into larger markets and compete on a global scale. However, many business owners involved in ecommerce do not consider the necessity of insurance coverage created explicitly for this particular niche.
No matter the size of your operation, it is worth your time to consider how ecommerce business insurance can protect what you have worked so hard to build.
What is Ecommerce Business Insurance?
Ecommerce business insurance is a cover designed with online companies in mind. If your business operates chiefly online, you are exposed to a variety of risks that you may not have considered. The list of potential for liabilities and losses is extensive and includes:
- Data breaches
- Product liability
- Cyber attacks
- Accidents at your office or workshop
- Shipping mishaps
Fortunately, the correct ecommerce business insurance can protect you and your company from these and other potential issues.
For Example:
David owns an online company specialising in customised pet products and clothing. David’s delivery van was in an accident while delivering several large orders to the shipping company. As a result, all orders in transit were ruined. His ecommerce business insurance covered what would have been a substantial financial loss.
Do Online Sellers Need Insurance?
Businesses that sell products or services online should definitely have insurance cover. It minimises the potential risks while protecting you legally and financially. You cannot count on luck to protect your business. It would be best to have a strong safety net surrounding your livelihood.
Some business owners erroneously believe their current personal coverage will also protect aspects of their company. However, unless otherwise stipulated, this is not the case.
For Example:
Hope sells her artwork online and stores all her supplies in her garage. Storms destroy Hope’s garage as well as the supplies she needs to create products for her business. While Hope’s homeowner’s policy will cover her garage and the typical contents, the art supplies used for business are not covered.
Five Ways Ecommerce Business Insurance Can Protect You Against:
- Cyberattacks and Data Breaches – These jeopardise your essential information but also expose customers’ sensitive data. These occurrences are the cause of lawsuits, which have the potential to bankrupt your company.
- Stolen or Damaged Inventory – You will have to cover whether the losses occur at your warehouse or while the inventory is in transit.
- Injuries Caused by Your Product – While you intend to provide every customer with high-quality products, mishaps and malfunctions happen every day. Sometimes, these result in disappointment, but occasionally, damage is done. Ecommerce business insurance can care for your customers and employees if one of your products injures them.
- Lawsuits – Specifically, the insurance protects you from lawsuits originating from breach of contract with vendors or clients.
- Supply Chain Issues – Unexpected problems with the supply chain impact ecommerce businesses can occur without warning, leaving you unable to meet deadlines. There are numerous causes of supply problems. However, these reasons will not matter to the clients you disappoint.
At What Size Should an E-Commerce Website Consider Insurance?
There is no single benchmark that signals you should get insurance for your ecommerce website. Many companies look at revenue as a guideline, but this can be misleading and leave businesses without proper cover. If you have a business with an inventory and value, proper insurance coverage is essential.
Additionally, some businesses (especially larger ones) will require specific levels of insurance for ecommerce companies who work with them.
Which Types of Insurance Apply to an E-Commerce Store?
As the owner of an ecommerce store, there are several types of insurance that you should consider:
- Workers Compensation – All businesses with one or more employees across all Australian states and territories must carry workers comp cover. This includes part-time and casual employees as well as those who work full-time.The policy covers your workers if they are injured on the job or become ill because of their work duties. This includes all job-related illnesses, including those impacting employees’ mental health.
- Public Liability – While you may not have a brick-and-mortar location, you are still responsible for the well-being of those non-employees who enter your place of business. A public liability policy will take care of the cost of damage to people who are injured on your business property. Even if you have few visitors to your location, a public liability policy can give you considerable peace of mind and protection.
- Business Property – This type of cover exists to protect your commercial assets and place of business. Because it is nearly impossible to predict when a disaster will hit, business property insurance will take care of losses to your place of business, office contents, means of performing your business, and other items as described in your policy.
- Business Interruption- When you have a business interruption insurance policy, you are protected from the loss of profits or an increase in expenses because an insured event interrupts the everyday operations of your business. This type of cover gives an added layer of security and, in some cases, is the difference between maintaining your business or closing it.
For Example:
A pipe burst, and your inventory and office equipment are destroyed. Your business property insurance pays for the physical damage to your place of business, equipment and inventory. However, it may take you weeks or even months to replace everything you have lost, and during this time, you are unable to earn a living. This is where business interruption cover takes over and pays you what you could have made if you could operate as usual. - Transit Insurance – Transit insurance is essential if your business typically transports products or other goods. This type of cover means your content is safe whether it is being transported over land, sea, or through the air. Typically, this insurance can be customised to cover specifics that may not be a part of general transit policies. Your insurance broker can help you with coverage details.
- Cyber Insurance – As the owner of an ecommerce company, you depend on the data compiled on your computer systems. Unfortunately, instances of cybercrime are widespread. At any moment, your system can be hit by malware, ransomware, or any one of numerous hacks that compromise your data and your client’s privacy.While investing in solid security is essential, it is crucial to understand that hackers are becoming increasingly adept at breaking through safety systems to get what they want.This is why cyber insurance is absolutely vital for your business. Aside from the damage to your computers and data, cyber breaches open you up to a host of litigation from your clients who have private information exposed.
How Much Does E-commerce Insurance Cost?
Ecommerce insurance rates will vary between businesses as well as insurance providers. This happens because insurers must evaluate your company’s level of risk and then use that information to calculate the cost of your coverage.
How is My Risk Calculated?
Your risk is typically based on what you do, who (if anyone) is with you, where you do business, assets, inherent industry risks, and other individual factors. To get an idea of your company’s risk level, you should look at the areas of your business that are susceptible to disasters.
- People – Whether you are the entire staff or you have a number of employees, this area can be impacted by unforeseen issues. More employees implies more risk, but understaffing is also a risk.
- Processes – How you complete your job is a significant risk factor. Many ecommerce businesses do not have the same process risk level as industries like mining or construction. However, it is essential to pay attention to your process and its level of safety.
- Premises – Even though your company does not require you to be high above the city, where you are housed is a risk factor. If your area is prone to weather-related incidents or in a high-crime area, this can influence your risk level and, with it, your cost. Likewise, your industry may be exceptionally safe, but if you are next door to a gun shop, it might cause your insurance price to increase.
- Past performance – You may be at a higher risk based on your insurance history.
How Do You Find Insurance for an Online Business?
You can go about finding ecommerce business insurance one of a few ways.
Some business owners opt to roll the dice and find insurance on their own. This can be a questionable way to find insurance and can lead to expensive disappointment. Contacting a knowledgeable broker, such as Grace Insurance, allows you to draw on years of industry experience.
