Company insurance is intended to safeguard the financial assets of a firm owner and is a necessary investment for an eCommerce business.
This article will discuss the primary insurance coverage for ecommerce enterprises, general liability insurance, as well as additional policies that are appropriate for this industry.
ECommerce Businesses, General Liability Insurance
Every firm, regardless of sector, has risks that should be insured. General liability insurance is the most frequent and comprehensive form of coverage that company owners purchase.
General liability insurance covers the following risks:
Physical harm
Damage to property
Medical expenses
Legal defence and decision
Personal and commercial harm
While general liability insurance is not legally needed for companies, operating without it is exceedingly dangerous. If your company is sued, you might face costs in the hundreds of thousands of dollars (or more). The only way to avoid this sort of catastrophe from destroying your organisation is to have an adequate general liability insurance coverage in place to assist pay for these losses.
GENERAL LIABILITY INSURANCE MAY COVER COMMON SITUATIONS FOR AN ECOMMERCE BUSINESS
Example 1: You join up to sell items at a local conference to increase exposure for your company. The conference requires all vendors to have $1 million in liability insurance, which a general liability coverage would meet.
Example 2: Your new website includes a copyrighted picture, and the owner of the photo sues you for infringement. Your legal bills and any payment made to the claimant would be covered by general liability insurance (up to the limits of the policy).
Example 3: You want to grow your firm by selling new products, but you need a bank loan to do it. Your bank demands proof of liability insurance as part of the loan conditions, and a general liability policy would suffice.
Of course, this is not an entire list of risks covered by a general liability insurance policy, and certain situations may result in a specific peril not being covered. To minimise coverage gaps, it’s always better to speak with your agent about the terms of your policy.
General Liability Insurance Cost
In the United States, eCommerce enterprises pay between $350 and $900 per year for $1 million in general liability insurance.
The cost of your coverage will be determined by a number of variables. Among them are your:
Location
Deductible
Employees’ number
Per-occurrence restriction
The overall aggregate limit
You may be able to get general liability insurance at a lower cost if you buy it as part of a business owner’s policy (BOP) rather than as a separate policy. A business interruption policy (BOP) is a more complete option that covers numerous types of coverage, such as business interruption and property insurance.
Other Types of Coverage Required by Ecommerce Businesses
While general liability insurance is the most crucial, there are various different types of coverage to be aware of. Other forms of insurance that all eCommerce enterprises should have are listed below.
Insurance for Product Liability
Even if your eCommerce company does not have a physical location, you still face a variety of liability issues. If someone alleges that a product you sold injured or harmed them, product liability insurance would cover your legal bills as well as any awarded damages in the case of a lawsuit.
As part of a business owners policy, you may obtain product liability coverage that is customised to your company’s unique requirements (BOP).
Insurance for Data Breach
According to research, shops, especially those operating eCommerce sites, are the most vulnerable to cyber attacks. Data breach insurance compensates for losses caused by stolen client information, and most general liability plans expressly exclude this sort of coverage.
Insurance for Commercial Property
Your corporate property is critical to your income stream as an eCommerce firm. In the case of a fire, burglary, or natural catastrophe, commercial property insurance will cover the cost of repairing or replacing any business-related property. This covers the things you sell as well as any structures owned by your company. Because e-commerce businesses vary from traditional merchants, owners should consult with an insurance specialist to verify there are no coverage gaps.
Commercial property insurance may be purchased as part of a company owner’s coverage (BOP).
Coverage Options for Some Ecommerce Businesses
In addition to the insurance listed above, your eCommerce firm may need other forms of coverage based on particular elements of your operations. Some of them may not apply to you, so be sure to ask your agent whether policies are appropriate for your company.
Insurance for Business Interruption
If your firm is involved in a major accident and loses inventory, you might be out of commission for days, weeks, or months. Business interruption insurance may assist cover part of your missed income while you make repairs and restock, preventing your firm from failing before you’re fully operational again.
Company interruption insurance may be purchased as part of a business owner’s coverage (BOP).
Insurance for Workers’ Compensation
Workers’ compensation insurance is required in most states for both part-time and full-time employees. This coverage covers your workers if they are hurt at work or get sick as a result of a workplace accident. It covers not just an employee’s medical expenditures and missed pay if they need time off to recuperate, but also any disability or death benefits resulting from a work-related accident. These plans also cover your legal bills if an injured employee sues your company.
While many states enable business owners to exempt themselves from their workers’ compensation coverage, if you intend to engage in your company’s daily operations, you should avoid this choice.
This coverage is available as a stand-alone insurance.
Additional Security Measures for Your Company
Although investing in company insurance is simple (and necessary), it should not be your first line of defence. Yes, insurance will reimburse your company for cash losses incurred as a result of an occurrence, but it is much preferable to avoid losses altogether.
With this in mind, here are a few steps you can take to better secure your company:
Make use of legally binding contracts and other business agreements. (We provide free templates for several of the most often used legal forms.)
To safeguard your personal assets, form a limited liability company (LLC) or a corporation. (To discover how to incorporate an LLC or company in your state, see our step-by-step tutorials.)
Keep your company licences up to date.
Streamline the internal procedures of your company. This will eliminate unneeded variables from routine activities and establish a secure, consistent environment in which to do business.
If your company is an LLC, you should check into LLC insurance.