E-commerce Insurance

E-commerce Insurance

E-commerce insurance provides financial protection against the unique risks you are exposed to as an online business owner.  

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Zensurance - Online Business Owner
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Insurance for e-commerce

As an online retailer, you have the unique opportunity to share your passion with customers around the world. From antique furniture to pet supplies, there is a niche to suit every seller’s interests. 

The onset of COVID-19 undoubtedly shifted the retail landscape in a matter of months. With government-mandated closures across the country, retailers either had to open or expand their e-commerce presence to survive. Subscription services for everyday items, such as meal kits and groceries, experienced a significant increase, as did home improvement goods for those who finally found time to get around to that DIY project. However, with any business, there is a significant risk. When you are expanding into the digital space, you are encountering familiar risks (e.g., inventory theft), as well as online threats (e.g., cyber-attacks and data breaches). 

At Zensurance, we’re here to help. More than 100,000 entrepreneurs have trusted us to protect their businesses and cover their needs with comprehensive coverage. We’re on a mission to make insurance as accessible as possible, which is why we’ve created this guide to help you get started with e-commerce insurance.

What is e-commerce insurance?

As an online business owner, you need a policy that can withstand international shipments, customer relations, and general liabilities.

Our e-commerce insurance policy packages protect e-commerce business owners against risks associated with producing and selling merchandise online, such as cyber risks, property damage, and bodily injury.

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What does it cover?

Every business is unique, and insurance requirements may vary by what you sell; however, a comprehensive e-commerce insurance package will typically include the following coverages:

  • Cyber Liability Insurance: Given that you conduct your business online, Cyber Liability Insurance is the most important coverage for retailers selling products online, especially for anyone storing customer data. Cyber Insurance covers costs associated with electronic incidents, such as a cyber hack involving your technology systems and data. For example, an employee clicks on a malicious link, accidentally providing access to your customer database and compromising their financial data. In this scenario, cyber liability insurance could cover the cost to notify your customers and repair your data systems, as well as any legal expenses that result from the data breach.
  • Product Liability Insurance: Product Liability coverage is important coverage for retailers, as it protects against claims alleging third-party property damage or bodily injury caused by a product you manufacture, distribute, or sell. For example, a customer claims the portable phone charger they bought from your Shopify store exploded, causing second-degree burns. Your Product Liability Insurance could cover the legal fees and medical expenses. Different products require different levels of protection, and it is essential to let your broker know anytime you add a new product to your shop.

If you operate a drop-shipping company or are a member of a distribution chain, ensure all suppliers, manufacturers, and distributors are adequately insured. Your broker can help you determine whether or not you need to add them to your policy and if you should be included in theirs, as you can be held responsible for product liability on their end, too.

Damages covered by product liability are usually the result of a defect in the design, manufacturing, or marketing, such as an incorrect label or a lack of safety warnings. If you import or export products outside of North America, check with your broker to ensure that the products meet industry standards.

  • Commercial General Liability Insurance (CGL): While you conduct most, if not all, of your business online, you may also have a brick-and-mortar location or store your inventory at home. Commercial General Liability Insurance, also known as slip-and-fall insurance, protects you against the day-to-day risks that can happen when interacting with third parties, such as claims of third-party bodily injury or property damage. For example, a customer visiting your store to pick up an order trips over the door threshold, injures their wrist and sues you for bodily harm. CGL will typically cover legal expenses and medical fees, regardless of the lawsuit’s outcome.
  • Commercial Property Insurance: If you store your stock in a location, have a brick-and-mortar shop, or operate your business from a home office, it’s important to have Commercial Property Insurance. Commercial Property Insurance protects your physical location, as well as the contents (including stock and inventory) from insured risks that occur beyond your control, such as a fire, theft, or flood. It’s a common misconception that business-related activities that occur at home can be covered through your homeowner policy, but the coverage is often inadequate or non-existent. Commercial Property Insurance often includes business interruption coverage (also called Business Income Coverage), which provides reimbursement for net income lost following an insured event. It may also cover overhead costs, employee wages, and other costs associated with temporarily closing your business. Please note; business interruption coverage does not cover income lost due to a pandemic, infectious disease, or government-mandated closure.

Who needs it?

An e-commerce insurance policy package is critical for any online business that sells, develops, or manufactures products and sells them digitally.

We’ve covered hundreds of e-commerce store owners, including: 

  • Amazon Sellers
  • Dropshipping Companies (Shopify, eBay, Etsy)
  • Subscription Companies
  • E-Commerce & Retail Stores
  • Wholesale Companies
  • Manufacturers

How much does it cost?

Many factors can influence the cost of an insurance policy for your e-commerce stores, such as product and shipping location. For example, high-risk or expensive products, such as fireworks or luxury watches, tend to have a higher premium. For a low-risk, small business, you can anticipate a starting cost of approximately $500 annually for a basic policy.

We’ll ask some quick questions about your business during the online application that will help us determine what coverage you should have. Here are some of the main factors we take into consideration:

  • Sales Volume
  • Type of Products Sold
  • Value of Inventory
  • Number of Employees
  • Claims History

You want to make sure you get the best price for your business, and we do too. That’s why we’ve partnered with over fifty insurance providers to offer you the best coverage to suit your specific business needs.

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Common claims scenarios

Frequently asked questions

Do I need to carry insurance on my stock if I am operating by dropshipping?

Confirm with your supplier if they are responsible for insuring inventory. However, it never hurts to carry this coverage in the event that you get dragged into a claims scenario. If you have multiple suppliers, it can be difficult to keep track of which suppliers have insurance and which don’t. It is highly recommended that you add Property Insurance to your insurance policy to manage your risks.

Do I need Cyber Liability Insurance if I am operating online?

It is recommended that you protect your business operations with Cyber Liability Insurance if you are selling products online as online transactions usually require an exchange of financial information over the internet. Many online retailers also store customer data to complete and ship out orders. If any third party data on your systems are stolen or damaged in a cyber attack, you may need Cyber Liability Insurance to cover the damages. Cyber attacks are becoming increasingly common. According to StatCan, one-fifth of all Canadian small businesses were targets of cyber attacks in 2017, and the number has only gone up since.

Can my online business be held liable for selling a product that caused injury to a customer, despite the product being manufactured by a different company?

Yes, it is possible that you can be held liable for products you have sold even if you did not manufacture the products. Make sure that products liability coverage is present in your insurance policy. Take a thorough look at your inventory to determine if you sell products that are highly likely to cause injuries, such as products for babies and toddlers. Whenever possible, do business with manufacturers that already carry an insurance policy.

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You’ve dedicated your career to share your passion with customers all over the world. You deserve a brokerage that is passionate about finding the best coverage for your business.

Give your e-commerce business the coverage it needs to face the unexpected – get your free quote today in just 5 minutes! 

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