What are the 9 Key Reasons You Need to Invest in Ecommerce business Insurance today?
Ecommerce is an exciting space that continues to grow year after year. In fact, the global ecommerce market was worth over $1.2 trillion in 2018 and is expected to surpass $2 trillion by 2022. However, with this rapid growth comes new risks that traditional insurers are not equipped to handle.
For example, a standard property and casualty policy will not cover damage to your inventory in the event of a natural disaster or other catastrophes. Ecommerce insurance covers a business’s revenue if their site is inaccessible or they can no longer sell their products online due to a covered risk like a cyber attack, competitor hack, virus outbreak, etc.
If you operate an ecommerce business and don’t have ecommerce insurance yet, keep reading to learn more about what it covers and why you should invest in it as soon as possible.
In this article, we covered:
- What is Ecommerce Insurance?
- What does ecommerce insurance cover?
- What are the benefits of ecommerce insurance?
- Type of insurance for your ecommerce business
- Do I need insurance for an Ecommerce Business?
- What kind of insurance do you need for your online business?
- 9 key reasons you must invest in ecommerce insurance today
- How much does ecommerce insurance cost?
- Best ecommerce insurance companies you can buy from
- How to make an ecommerce insurance claim
- Final words – is ecommerce insurance worth it?
What Is Ecommerce Insurance?
E-commerce insurance is a policy that shields all online shops from the common or rare threats they face. These have the same benefits even though they are not real businesses such as shops and organizations. The most prevalent risks involve client injury as well as product loss or damage.
What Does Ecommerce Insurance Cover?
In brief, ecommerce insurance covers business interruption, cyber liability, and data breach risks. Business interruption insurance will help you stay afloat if a covered risk results in a drop in revenue that prevents you from maintaining your normal cash flow.
Cyber liability insurance will help you cover the cost of the damage caused by a cyber attack. Data breach insurance protects you against the costs associated with a data breach such as notifying customers, paying fines, and hiring a crisis management firm.
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Once you’re insured, you’ll also be covered for any legal fees associated with defending yourself against lawsuits stemming from these three areas. The most important thing to remember when shopping for ecommerce insurance is that it’s not a one-size-fits-all product.
In fact, there are many different types of ecommerce insurance policies that vary in price and coverage. Make sure you choose a policy that’s best suited to your business so you can receive the most protection at the best price.
What Are The Benefits Of Ecommerce Insurance?
The benefits of ecommerce insurance are not far-fetched. This is because it has gained so much momentum in the insurance industry. Being a retailer in any digital space, the possibility of something going wrong in the course of running your business is high.
Of course, being a proactive retailer you might always be on your toes to watch all the moving parts, but, you just can not avoid it. Things will go wrong.
The insurance you buy for your business provides comprehensive protection for your workers, your goods, your tools, and your obligations to clients and stakeholders. So, what are the benefits you will enjoy from having ecommerce insurance?
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There are numerous advantages to company insurance. Here are several that are particular to or necessary for running an online business:
- It shields you from disaster
- It aids you in paying the cost of damages
- It helps with meeting contract demands especially when in partnership with an online store
- It supports also with financial implications of a cyber attack. This could include legal fees as well as data recovery fees
- Having online business insurance gives you peace of mind towards any risk faced during operation
Types of Insurance For An Ecommerce Business
The multiple business insurance plans related to digital operations are collectively referred to as “e-commerce insurance” in this context. Business owners who conduct their operations online or through digital means would also need to think about the following types:
Business Interruption Insurance
Your data breach is covered by cyber liability insurance, along with the expense of notifying clients and retrieving lost data. If something happens that prevents you from running your business and paying your bills, such as a fire or a power outage, business interruption insurance will protect you. Loss of revenue from your firm will be covered.
Transit Insurance
This kind of insurance is frequently carried by distributors and retailers. Whatever deals you have had with them allow you to check for it. Items damaged while being transported are covered under transit insurance.
General Liability Insurance
If you run an online store and sell goods, it’s possible that someone could get hurt by your goods or that your goods would harm property. For instance, your goods might cause someone an allergic reaction. Both advertising injury and your goods’ third-party insurance would be insured via general liability insurance.
Cyber Liability Insurance
An e-commerce company’s data breach is protected with cyber liability coverage. Credit monitoring solutions and consumer alerts for everyone who has an existing profile with you should be part of it. Many digital store businesses require this kind.
The insurance for your actual software and hardware is not the same as this form of insurance coverage. For that, you’ll require business property insurance.
Intellectual Property Insurance
Let’s include this insurance policy which an e-commerce business would require when we’re talking about products. This kind of insurance guards you against anyone stealing your product if you invented and/or built it.
Commercial Property Insurance
You need protection if your business uses machinery or has products or inventory that is kept in storage. Check with your homeowner’s insurance provider if you work from home. Homeowner’s insurance coverage often distinguishes between commercial and personal property. You will need commercial insurance to protect the office equipment you keep in your house.
Professional Liability Insurance
Traditionally, this is referred to as blunders and omissions insurance. If you operate an internet business and you are a professional service provider, you could require this. Or, if your recommendation might be harmful.
Workers Compensation Insurance
If you have workers, you must obtain worker’s compensation insurance. If a worker has an injury at work and needs medical care, worker’s compensation will protect you. Additionally, it will pay for the employee’s medical bills related to any physical harm.
BOP or Business Owners Policy
Liability insurance and commercial insurance should be grouped under the BOP umbrella of business insurance plans for an eCommerce business owner. The top insurance providers for small businesses are beginning to cover cyber security.
Employment Practices Liability Insurance
If you run a company with one staff or more and don’t have this form of insurance, you’re inviting lawsuits. If lawsuits alleging sexual harassment in the workplace or unfair dismissals are filed, your EPLI insurance will cover you.
Do I need insurance for Ecommerce Business?
Emphatic Yes, you do need ecommerce insurance.
However, you are not legally bound to have business insurance. While this is true, you must have an employer’s liability. This is required by law for every company, especially one that houses staff who are not directly related to the owners of the business.
Although not required by law, many companies decide to purchase coverings out of a sense of obligation and to safeguard their operations. To safeguard their online retail firm against conceivably arising claims, this also includes product liability, public liability, business equipment, and business disruption.
Any online firm that creates, develops, or manufactures things and sells them digitally needs an e-commerce insurance policy bundle.
If you are of any of these or have anything you do with any of these below, you should think about getting ecommerce insurance.
- Ecommerce & Retail Stores
- Shopify Business
- Etsy Sellers
- Wholesale Companies
- Subscription Companies
- Amazon Sellers
- Manufacturers
- Dropshipping Companies (eBay)
You could be more, but provided you have an ecommerce business, getting insurance is highly recommended.
What Kind Of Insurance Do I Need For My Ecommerce Business?
What are the key 9 reasons you must invest in ecommerce insurance today?
If you are part of the millions of online business owners asking this question above. Then, you need to give utter attention to this part of the article. This is because we have extensively explained each of the 6 reasons you need ecommerce insurance now.
That is, we gave a straightforward look at the kind of protection you will get for your online business.
They are:
Inventory Protection
If your ecommerce business sells physical goods, then inventory protection is one of the most important coverage types to look for in an ecommerce insurance policy. It covers the cost of replacing the goods that were lost or damaged.
If your inventory was destroyed due to a covered risk such as fire, a natural disaster, or employee theft, then you could file a claim for the value of the missing goods. The amount of inventory protection you receive will vary from policy to policy.
Some ecommerce insurance providers offer a fixed dollar amount while others offer a percentage of the total covered value. Whatever coverage you receive, make sure it’s enough to protect your business in the event of a catastrophe.
Don’t base your coverage amount on the value of the goods you currently have in stock. Instead, base it on the value of your projected inventory over the next year.
Protection For Website
If your ecommerce business is built on a website that’s hosted by a third-party provider like Squarespace, Shopify, or Bigcommerce, you may not realize that they aren’t responsible for protecting you in the event of a cyber attack.
In fact, they likely don’t offer any cyber protection at all. If your site is hacked and your data, customer information, and product inventory are stolen, you could be facing extensive legal and financial consequences.
In order to protect yourself, look for an ecommerce insurance policy that includes website protection. It will cover the cost of hiring a security firm to investigate the hack, replacing your stolen data, and repairing your reputation by posting a message on your website explaining what happened.
Cyber Risk Coverage
Most ecommerce insurance providers will offer basic cyber protection coverage as part of a standard policy. However, it may not be enough to fully protect your business against the rising risks of cyber attacks.
If your ecommerce business accepts credit or debit card payments, you are probably required to maintain a certain level of cyber security. If you fail to protect your customers’ payment data, you could face fines and reputational damage that could put your ecommerce business out of business.
Any ecommerce insurance policy worth it’s salt will include coverage for the cost of defending against a data breach lawsuit. It will also cover the cost of hiring a reputable crisis management firm to help you manage the PR fallout so that it doesn’t damage your business beyond repair.
Return of Merchandise Protection (RMEP)
If your ecommerce customers buy products that don’t work as advertised, you are legally required to offer a refund or replacement product. Unfortunately, some customers will try to scam you by sending defective or used products back in exchange for a refund.
If your ecommerce insurance provider offers a return of merchandise protection (RMEP), it will cover the cost of determining if the product is authentic or not. It will also cover the cost of sending the customer a prepaid shipping label to return the product to you.
Even if the customer refuses to return the product, you’ll be covered for the amount of the refund. Unfortunately, not all insurance providers offer RMEP so make sure you read the fine print to see if it’s included in the policy you’re considering. If not, you can purchase a stand-alone RMEP policy for a reasonable price.
Coverage For Loss of Customer Data
If your ecommerce business runs an online store and stores customer data, you’ll want to make sure your ecommerce insurance policy covers data loss. Otherwise, you’ll be liable for the cost of notifying each customer of the breach.
Notifying each customer of a data breach can be costly since you’ll likely have to use a third-party notification service to notify them all at once. Ecommerce insurance providers offer data loss coverage that will cover the cost of notifying each customer of the breach and offering identity theft protection for up to one year.
It will also cover the cost of hiring a forensic team to investigate the data breach. Ecommerce data loss coverage can vary from one policy to the next. However, you can generally expect to receive between $1,000 and $50,000 worth of coverage per customer.
Coverage For Consumer Data Breach
Just as some ecommerce insurance policies cover data loss due to a data breach, others include coverage for a consumer data breach. A consumer data breach occurs when a hacker or malware breaches your ecommerce website but doesn’t steal customer data.
It could also happen if your staff members accidentally delete customer data or if your database crashes and loses its data. If a consumer data breach occurs, you’ll be responsible for notifying your customers and helping them take steps to protect their identity.
The cost of hiring a crisis management firm, notifying customers, and hiring a forensic team to investigate the breach could run into hundreds of thousands of dollars. Ecommerce insurance policies that cover consumer data breaches will help you pay for these expensive costs.
Protection For Computer Equipment and Software Loss
If your ecommerce business is built on an online platform that was created in-house, you could be at risk of losing your investment due to computer equipment or software loss. For example, if your server catches fire and is destroyed, you’ll lose everything. This could be your website, customer data, and product inventory.
Computer equipment and software loss coverage will help you replace or rebuild your server. If you lose your data, or the data becomes corrupted, this coverage will help you rebuild the system from scratch or hire a third-party team to recover the data from the server’s hard drive.
Be sure to choose the right amount of coverage to protect your business from unexpected losses.
Protection For Electronic Commerce Fraud
If your ecommerce business accepts credit or debit card payments, you are at risk for electronic commerce fraud. This type of fraud occurs when the person making the purchase uses a stolen card or other fraudulent information.
If you approve the sale, you’ll be responsible for refunding the money if the person is caught and charged with fraud. If your ecommerce insurance policy includes electronic commerce fraud protection, it will cover the cost of refunding the fraudulent sales.
However, you’ll also want to look into adding a chargeback coverage rider to your policy. Chargeback coverage will help you protect your business if a legitimate customer files a chargeback against you. It will also help you fight the misuse of chargeback rights.
How Much Does Ecommerce Insurance Cost?
The price of an insurance plan for your e-commerce sites might vary depending on several criteria, including goods and delivery location. For instance, costly items, like designer watches or explosives have a larger premium. You might estimate a beginning cost of around $500 per year for simple coverage for a small, firm.
To purchase ecommerce insurance, most insurance companies will ask for some details about your business. These details will be collected during your application and this will help the insurer to ascertain which coverage you need as an online retailer.
These questions will be around these factors below:
- Number of employees
- Value of inventory
- Sales Volume
- Claims History
- Type of Products Sold
Ultimately, the kind of protection you want for your business will determine the budget too. Some insurers charge online retailers £15.33 per month.
Best Ecommerce Insurance Companies You Can Buy From
There are so many companies you can buy your ecommerce insurance from. To make a quick list, here is a list of companies you can reach out to for the purchase of coverage.
They are:
- Nationwide
- Embroker
- The Hartford
- Layr
- CoverWallet
- Hiscox
- CyberPolicy
How To Make An Ecommerce Insurance Claim
After you purchase this coverage, making a claim is a must. However, for you to make a claim, you need to follow a process. What is the process for making a claim?
1. You make a claim
Reach out to your insurer via their customer service to make a claim. Or, log into your account on the digital site of the insurance provider and click the ‘Make a claim’ part of the site. With this, you can claim without having to call the customer service of the insurance provider.
Afterward, the insurer will request some information about the claim you making. These details could be:
- A reference number (if applicable)
- The date of loss,
- The specific type of claim
- Other details, documentation, and description.
2. Assessment of claim made
At this point, the insurance company will assess your claim for verification and “next line of action” according to the bought policy. While the claim evaluation is being done, expect the company to come back to you for more details if your claim is big.
However, the most insurer will process the claim for settlement within days provided the claim is small. Nevertheless, an excellent insurance company will keep you in the loop of the processing.
3. Settlement of claim
Here, it is whether your claim is successful for settlement or not. Whichever reason you made the claim, the insurance company will give you what your policy demands in the context for which the claim is made.
Is Ecommerce Insurance Worth It? – Final Words
We can tell you for a fact that Ecommerce Insurance should be prioritized because it is worth it compared to what you will lose if you do not have it. As you can see, ecommerce insurance offers a wide range of protection that far exceeds the coverage provided by a standard policy.
If you operate an ecommerce business and don’t have ecommerce insurance yet, you’re leaving yourself liable for thousands of dollars in potential losses. Therefore, be proactive enough to protect your company from avoidable financial burden.
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