So, you've picked one of the best eCommerce business ideas and are now starting an eCommerce business. You've already researched what is an LLC so you know if that's pertinent to your business or not.
If you aren't careful, you could lose that business just as easily.
One of the ways you can protect yourself is by getting business insurance. There are many types of insurance, but only some may be right for your particular business.
To help, we've outlined why you need insurance, the different types on the market, and what might be good for you.
Do eCommerce Businesses Need Insurance?
Yes, eCommerce businesses need insurance if they want financial and legal protection. Insurance minimizes a business' risk and can protect their inventory and employees from worst-case scenarios. Though there are many differences between brick-and-mortar and eCommerce businesses, they both need insurance to protect themselves.
You should make sure to seek out eCommerce business insurance when starting your business. If you include it in your eCommerce Business Plan, you'll be able to budget and research the best insurance for you.
What Insurance Do I Need for eCommerce Business?
The insurance you need for your eCommerce business depends on what activities you participate in. There are many types of eCommerce businesses, so insurance needs are varied. The insurance you should get is different if you sell products or services, have a warehouse and fulfillment operation, or have a large physical location.
Here are a few of the most common types of insurance for eCommerce businesses.
What is eCommerce Product Liability Insurance?
Product liability insurance provides coverage for instances when your products cause damages. These damages could be to a person's property, bodily injury, illnesses, or even wrongful death. This is the most common type of insurance used by eCommerce companies.
If your eCommerce business sells products, product liability insurance is essential. Your products are the center of your operations and the most likely part of your business to lead to potential lawsuits. Even if you sell another company's products, you can be held liable for any damages incurred.
What is eCommerce Fraud Insurance?
Fraud insurance protects a business from employee theft, forgery, embezzlement, and fraud. eCommerce companies are not immune to internal problems. Small businesses are also less likely to be able to bounce back from fraud if they don't have insurance since their financials are more strained. It doesn't matter which of the best banks for eCommerce business you keep your money in if someone with access steals it.
Usually, fraud insurance is not needed unless you have multiple employees. You can skimp on this one if you're a solo entrepreneur, but it is worth investing in as your business grows. White-collar crime rose by over 15% in 2019 and companies estimate an average loss of more than $500,000 when they did occur. Unless you have a background in eCommerce accounting, you might not even notice it's happening until it's too late.
What is eCommerce Workers Compensation Insurance?
Workers’ compensation insurance covers costs incurred by employees when they become injured or sick while on the job. In addition to fines from state and local governments for not having workers’ compensation insurance, you can also be sued by the employee. This insurance covers a large portion of legal defense costs which prevents you from spending all of your business' capital.
Like fraud insurance, workers’ compensation insurance is not needed if you're a solo operation. However, once you hire a single employee, you'll want to get this insurance. If not, you're opening yourself up to potentially expensive lawsuits that could easily tank your burgeoning business.
Who has the Best eCommerce Business Insurance?
There is no one best eCommerce insurance, but there are a few things you should look for when shopping.
Here are things you'll want:
- eCommerce specific. An eCommerce business has unique needs and faces issues that may not be encountered by their non-digital counterparts. Make sure the company you use has experience working with eCommerce businesses and knows the challenges involved. Don't make the mistake of going with the cheapest or most basic option and discover that they're out of their depth. If your insurance provider doesn't know how to protect the money you take in an eCommerce payment, keep looking.
- The correct level of coverage. Most insurance companies offer different level packages of insurance. Make sure you get the one with enough coverage to keep you safe in the case of a total loss. The bigger your business gets, the more expensive your insurance should get. You don't want to discover you're underinsured when something bad happens.
- Cyber security insurance. Cyber security insurance protects your company from lawsuits if hackers steal customer data or use your emails for phishing scams. When you run a business entirely online, cyber security becomes vital. Naturally, you'll want to invest in cyber security software that prevents viruses and hacks, but they aren't flawless. That's where the insurance comes in.
- Tailored insurance for all activities. eCommerce insurance isn't one-size-fits-all, make sure you get a package that covers your specific needs. If you have a warehouse or ship products, cargo insurance is a way to recover losses when your products are damaged or destroyed. Bulk shipping isn't the safest, or quickest, way for your products to travel. If you own trademarks or copyrights, intellectual property insurance can protect your brand from copycats and issues with third-party advertisements. If you're selling coffee online, learning how to sell baked goods online, sell whiskey online, selling liquor online, or sell beer online, just know that there are much stricter regulations for the sale and transport of alcohol so you'll need tailored insurance.
Are You Insure about That?
Investing in eCommerce business insurance may seem like an unnecessary cost, but it will save you if and when something happens. There's no reason to risk your business and livelihood if you don't have to. Business insurance can protect you from lawsuits, theft, fire, employee injury, and more.
In addition to insurance, make sure you have a valid and active eCommerce business license. That's another area where you could potentially face large fines or lawsuits, so you don't want to risk it.
Now that you know all about insurance, why not pick up some eCommerce books or read an eCommerce blog to learn how to take your business to the next level? You'll also benefit from finding a robust and easy-to-use online marketplace. Growing your bottom line will make it even easier to afford to protect your business.