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Business Insurance Needs for Online Companies

Saturday, March 18, 2023

If you’re considering starting an online business, or perhaps already have, make sure that you have an adequate commercial insurance policy. Online businesses are just as vulnerable to risks as in-person businesses. An insurance policy can help prevent excessive financial loss resulting in the failure of your business. We’re here to answer some common questions about online business insurance and talk about your coverage options.

What is Business Insurance?

Business insurance is a customizable insurance policy designed around the needs of your business. The purpose is to help you manage the risks that your company faces in day-to-day operations. This type of insurance typically includes coverage for:

  • Lawsuits
  • Loss of income
  • Property damage
  • Bodily injuries
  • Other covered expenses

Every company that conducts business with the public or the government needs to have a business insurance policy tailored to their specific needs. Speaking with an insurance broker can help you understand the various types of commercial insurance that are necessary for your business.

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Do I Need Insurance for an Online Retail Business?

Yes! Online commercial insurance is there to protect you from problems that can occur online from standard business concerns as well as cyber-specific issues. Even online, your company likely interfaces with the public which subjects you to the same risks as operating in person.

In some ways, conducting business online can actually open you up to more risk. Outside of standard in-person concerns, online businesses are vulnerable to:

  • Copyright violations
  • Hackers
  • Computer viruses
  • Privacy of customer information
  • Myriad other issues related to conducting business online

Various types of insurance policies are available to help mitigate the risks of each of these potential issues that could bankrupt your business.

Do You Need General Liability Insurance for an Ecommerce Business?

Yes! Every type of business needs general liability insurance. An e-commerce business – a type of business that sells goods and services online – is no exception. General liability helps cover claims that your business caused bodily harm or property damage.

What Kind of Ecommerce Business Insurance Do I Need?

Business insurance is highly customizable to fit your needs – no matter how small or how niche. Evaluate what risks you experience running your business to determine your ecommerce insurance priorities. Depending on your situation, you should consider getting the following types of coverage:

Policy TypeRecommended for…
General liabilityAll businesses (in-person or e-commerce).
Cyber liability (or cybersecurity)Online businesses that store important data, have high revenue, and large customer bases.
Workers’ compensationAll businesses (in-person or online) with employees.
Business interruptionBusinesses that cannot afford temporary closure.
Product liabilityCompanies that create or deal with products like those in manufacturing, distribution, retail, food, construction, etc.
Business propertyBusinesses that own property, tools, buildings, furniture, and other equipment.
Inland marineCompanies that ship large volumes or expensive products by land.
CargoCompanies that ship large volumes or expensive products by sea.

Do You Need Insurance for Amazon Business?

Yes! If you’re working with online marketplaces, they will often tell you how much and what type of insurance you need to conduct business with them. Amazon requires professional sellers, or merchants, who sell more than $10,000 a month to have general liability and commercial umbrella insurance coverage of at least $1 million dollars per occurrence. Even if your sales fall below the volume where insurance is required, it is still a good idea to get a commercial policy.

What Insurance Do I Need for Dropshipping?

Dropshipping is a method of fulfilling orders by purchasing inventory from a third party rather than keeping items in stock. If this describes your type of business, at a minimum you need general liability insurance and product liability insurance in the unfortunate case the items you sell injure the customers. You might also benefit from some other policies like:

  • Property insurance
  • Cargo insurance
  • Inland marine insurance
  • Cyber liability insurance

You should speak with an insurance agent to help decide which types of insurance best fit your business to ensure there are no gaps in coverage.

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How Much Does Insurance Cost for an Ecommerce Business?

The insurance premium for an online business varies widely depending on the scale and scope of your business. However, Shopify has assembled a detailed breakdown of average monthly and yearly premiums by insurance type here that can help your planning purposes. Speak with a local insurance agent who specializes in commercial insurance to get a quote tailored for your business.

We are proud to offer customizable commercial insurance options at Independent Insurance Associates. Give us a call today or stop by our local Fort Mill office to speak with an insurance expert.