Dropshipping Insurance

Dropshipping Insurance

Protect your business and customers with customized business insurance for dropshipping

Zensurance - Dropshipping Insurance

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Business insurance for dropshipping

Many retailers and online sellers rely on dropshipping to sell their products online without having to operate a facility or warehouse where goods are stored, processed, and shipped for delivery.

It is generally considered a low-risk order fulfillment method for online sellers and small businesses without incurring large operating costs by outsourcing the handling and shipping of their products. But do you need insurance for dropshipping?

Yes. That’s because retailers and online sellers using dropshipping services need to protect themselves against various risks and liabilities, including product liability claims if items shipped are lost, stolen, or damaged, customer-related disputes, and cyber payment fraud.

Dropshipping insurance is a customizable policy containing various coverages designed to shield your business from expensive claims and potential lawsuits. 

For example, it covers potential customer disputes regarding product quality, delivery times, or other order fulfillment issues. Depending on the policy and the options you choose, it may include reimbursement for refunds, returns, or compensation for damages resulting from dissatisfied customers, chargebacks, or legal claims.

A dropshipping insurance policy usually includes the following types of coverage:

  • Commercial General Liability (CGL) Insurance: CGL, or general liability insurance, covers you for third-party bodily injury and third-party property damage claims arising from your regular business operations. It also includes tenants’ legal liability coverage to cover paying to repair or replace damage to a commercial property and personal and advertising injury liability insurance to cover claims or allegations of defamation and false advertising. CGL is designed to cover these damage costs and provide you with funds for your legal defence and settlements if you are sued.
  • Product Liability Insurance: Product liability insurance is typically included with general liability insurance. If it isn’t, you should add it to your policy. It is essential protection for retailers and online sellers. Product liability insurance covers you for any product you manufacture, distribute, or sell, including foods and beverages, if facing a claim or lawsuit from a customer because a product you sold them caused them physical or financial harm.
  • Cyber Liability Insurance: Selling goods online, running an online business, using point-of-sale (POS) systems, having a website, and using email and social media – all of these put you at risk of cyber-attacks and data breaches. Cyber liability insurance can help you recover quickly following a data breach or a cyber-attack if a hacker infiltrates your systems and compromises or steals your and your customers’ confidential information. It covers you for legal advice, credit monitoring and crisis management services, and repairs to your software systems following a cybersecurity-related incident.

There may be other types of coverage your customized policy requires, such as:

  • Cargo Insurance: Most dropshipping providers do not cover damages to or losses of items you ship through them unless it is due to their negligence. Cargo insurance protects your finances in such incidents. It is designed to cover the items or products you ship to customers in transit or stored at a third party’s location if damaged or lost due to a natural disaster, fire, flood, theft and vandalism, customs rejections, and vehicle-related accidents. 

What an insurer charges for a dropshipping insurance policy depends on several factors about your business, including:

  • Your location
  • What your business does and the industry you’re in
  • The types of products you sell and their value
  • The types of products you ship and how often
  • Your years of experience as a business owner
  • Your annual and projected revenue
  • Your business insurance claim history

Any retailer, online seller, or small business owner that uses outsourced dropshipping services should purchase dropshipping insurance, including:

  • Amazon, eBay, Etsy sellers
  • Auction sellers
  • Dropshipping aggregators
  • E-commerce businesses
  • Home-based businesses
  • Niche retailers
  • Print-on-demand businesses
  • Social media sellers
  • Wholesalers and distributors

Getting insured is quick and easy!

Complete our 5-minute online application for a free dropshipping business insurance quote.

Common claims scenarios

Dropshipping Product

Problem: A product your online business sells and ships through dropshipping is recalled due to product safety concerns or defects.

: Product liability insurance may cover product recall costs, including notifying customers and retrieving and replacing a recalled product.

Shipping Product

Problem: Your retail store ships the wrong product to a customer. They express their frustration online and demand compensation.

Outcome: Product liability insurance may cover return shipping fees and replacement fees to ship the correct item to your customer.

Ecommerce Cyber Attack

Problem: Your online store experiences a cyber-attack. Sensitive data, including customers’ identities and payment data, is stolen.

: Cyber liability insurance may cover notification fees, credit monitoring for affected customers, and restoration of your software and online store.

Frequently asked questions

Does dropshipping insurance cover products shipped to customers outside of Canada?

It depends on your policy’s terms, conditions, and exclusions. A dropshipping insurance policy’s coverage terms and exclusions may vary depending on the provider. Speak to a licensed Zensurance broker about your options to cover items shipped internationally.

Can dropshipping insurance help protect my business against customer chargebacks?

Yes. Dropshipping insurance, which includes product liability coverage, is designed to cover financial losses due to chargebacks, customer disputes, fraud, and legal expenses for dispute resolution.

Do I need dropshipping insurance if I already have product liability insurance?

Although product liability insurance covers risks associated with products you sell to customers, dropshipping insurance covers you for specific risks related to using outsourced dropshipping providers, such as shipping damage, order fulfillment errors, and errors by the dropshipping provider.

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Ready to start? Let’s get a quote!

Get comprehensive, low-cost dropshipping business insurance quickly from Zensurance and protect your finances.

Fill out our online application for a free quote. Our knowledgeable brokers will find the coverage from one of more than 50 insurers in our insurance provider partner network and tailor it to address your specific risks.