Insurance can be quite a tricky subject, especially when it comes to an ecommerce store. It is undeniably true that the inception of ecommerce has brought a huge impact on society, changing the way people shop today without having to move out from their comfort zone. Like any other business, every new invention brings with it a few risks and perils. Although there are no geographical barriers when running an ecommerce business, with increased business opportunities come business liabilities as well.
Sometimes ecommerce business can be quite complicated, especially regarding legal issues. Although ecommerce is active for a few decades now, it still has some loopholes in terms of legal practices. This is why, as an ecommerce business owner, you must protect your online business. However, the question of whether liability insurance is essential or not is a common debatable topic. In this blog, we will be discussing our view on the same, being one of the leading providers of ecommerce solutions. Read on and get answers to this super-hot topic in the ecommerce industry.
Who needs Liability Insurance?
The majority of businesses find it complicated when it comes to taking a financial or legal decision. The biggest fear is whether you are making the right decision or if being sold something that is not necessary but is sold just because you do not know that. While there might not be a one answer fits all for insuring any business. Indeed, every business is unique, and so are their requirements, even for insurance. However, some experts state that small businesses with revenue only from the sold products and services must surely think of insuring their ecommerce business. The best way to evaluate whether you need to ensure your ecommerce store is your revenue. Hey, that’s not all; there are other aspects too!
Whether you are running a dropshipping business, or you are manufacturing your products, if it is an ecommerce business, it must be insured if you are looking for the long-term survival of your ecommerce store. Some of the most common ecommerce stores needing insurance include wholesale companies, manufacturers, subscription companies, dropshipping companies, and ecommerce retail stores.
What is Liability Insurance?
Liability Insurance or the Commercial General Liability Insurance (CGL) is a policy that protects a business from financial loss, provided, you are accountable for property damage, personal injury, business operations, employees, and advertising injury. The policy covers non-professional inattentive acts. Determining the coverage of the policy is an extremely important step in managing the CGL risks of the company. Now firstly, let us know the situations where your business might need to pay charges including the legal, punitive, compensatory, and medical charges. For instance, if a consumer is facing any issues from your business while they visit you, if your employee causes substantial damage to the consumer while servicing, or if a consumer files a class-action lawsuit against your business alleging you for providing misleading information, you would need to pay charges for the concerned matter.
Another type of liability insurance is Product Liability Insurance which focuses on protecting the products you sell in your ecommerce store. Now, products are the core of your business. Any product you sell is subject to a lawsuit if the consumer using or applying them face any kind of injuries or issues. In an ecommerce business, some of the reasons that call for lawsuits are improper or inaccurate instructions, manufacturing defects, lack of warnings, flaws in product design, etc. Therefore, along with the general liability insurance, it becomes crucial for businesses to consider adding on the product liability insurance.
Importance of Liability Insurance
The crux of any insurance policy is that it minimizes the risks involved in businesses. However, there are a few risks that are not covered under your personal insurance policies (if any). For instance, inventories in an ecommerce store are not covered under personal insurance. Well, if you have been in the ecommerce industry for a while, you might know that keeping aside all the requirements for a while, your inventory must be insured, be it your garage inventory or your warehouse or office, we repeat, it must be insured. However, insurance is not the only solution to curb the risks associated.
You need to ask yourself a few questions:
- If you lose your entire inventory in an accident, are you capable to replace the entire inventory?
- Can you get yourself new equipment in case it is lost or stolen?
If you have got answers to these two, you might have understood the importance of insuring your ecommerce store. We had talked about the risks involved in selling on through one of our blogs, ‘What are the risks of running an online store?’ Considering such risks involved in running an ecommerce business including the threat to sensitive consumer data would question the system integrity for ecommerce businesses. Based on your online business concerns, you must pick an insurance policy that addresses exactly what is needed.
How to do it right?
Ecommerce businesses must consider liability protection. However, setting the right limits is the perfect way to get highly protected. The best way to start is by analyzing your businesses’ risk factors as well as your business worth. Based on the size of your business, you must set the limits of your liability insurance.
In case you are skeptical about your business’ liability risks, you can consider seeking professional help for the same. An attorney will be able to describe to you the legal responsibilities you need to follow, the ADA, as well as the patent law, and other factors you might be interested in regarding protecting your ecommerce store. If you are going with insurance agents to seek legal advice for finding the right insurance policy, you must be sure that you find only a reputable insurer who can advise you on the policy after understanding your business completely.
If you go for comprehensive ecommerce insurance, it would typically cover your cyber liabilities, product liabilities, and business interruption losses.
How much will it cost?
The first and foremost question that arises when considering insuring your business, especially being a small or medium-sized business, is the cost that would involve in it. However, there is no one charge fits all for insurance. The insurance costs vary from business to business. Various factors determine the costs involved in insuring an ecommerce store, including the type of products sold, number of employees, sales volume, and the value of inventory. Also, you must know that the insurance policies for high-risk as well as expensive products will have a higher premium. For instance, risky products such as fireworks and expensive products such as luxury watches are bound to have a higher premium. Considering all these factors into account, we can estimate that the costs involved in insuring an ecommerce store could start from $500 per annum.
Conclusion
Liability Insurance for your ecommerce store can protect you from a range of risks that you are regularly exposed to as an ecommerce store owner. Such insurance policies are designed to protect ecommerce stores from the common risks that may be different from the ones faced by the traditional brick and mortar stores; however, the consequences faced by both kinds of businesses are the same. Getting insurance for your business is quick and easy, all you need to do is find the right insurer, or at the least, the right advisor!
