There is no denying the amazing benefits that both sellers and consumers have enjoyed due to the rise and widespread popularity of e-commerce. Retailers enjoy lower overhead costs, shorter communication times, and greater profit margins, while customers love having the power to shop at virtually countless stores, check multiple reviews, and do all of their shopping from the comfort of their own home.
However, when you consider how young the e-commerce industry is compared to the traditional brick-and-mortar commerce industry, you realize that there is one significant problem with e-commerce: legal liabilities. Indeed, the e-commerce industry still has a lot of shaky ground when it comes to the legal system, especially when it comes to disputes, claims, and settlements. What’s more, the business model of the e-commerce industry means that it faces different risks compared to traditional stores. This is why you need to protect your e-commerce business with an e-commerce insurance policy.
Why Can’t I Use my Regular Insurance Policy?
You might be wondering why you would need to purchase e-commerce insurance, especially if your e-commerce business is an offshoot of your traditional store that’s already covered by standard business insurance policies. Logically it seems that your e-commerce business should be protected by the same insurance policy.
Well, no. Standard business insurance policies generally cover liabilities that occur within the business property or property damages. If someone was in your store and slip on the wet floor, your insurance will cover medical and legal costs. If a flood damages your store’s inventory, your policy will cover the water damage and the cost of replacing the products. However, since e-commerce businesses operate in completely different ways, your regular insurance won’t cover liabilities that come from operating it. Simply because the risk factors are completely different.
What is E-Commerce Insurance?
E-commerce insurance is a special and relatively new type of insurance policy that will cover the unique risks that can only come with running an e-commerce business model. There are generally two areas in e-commerce that you need to consider:
- Supply and Service Chain: You are probably relying on third-party services to help your e-commerce business function properly. At the very least, you need to have reliable Internet service and a reputable shipping company for you to be able to sell your products.
- Data Security: If you are selling products or services online, you will have access to your customer’s sensitive data. This means that you have the responsibility of keeping it safe from data breaches. If you expose the information to others, even by accident, you will be held liable for all the damages and losses incurred.
What Kind of E-Commerce Insurance Should I Get?
Here’s the thing: there’s no one fixed e-commerce insurance policy that you can get for your online business. It will vary depending on what type of online business you have. However, here are some policies that you can consider:
1. General Liability Insurance
You can still have general liability insurance for your business even if it’s online. Check your local laws to see which liabilities your business might have and consider whether it falls under the coverage of a general liability policy. One striking example could be if your company does not cater to people with disabilities. If your website, for example, is not accessible for people who have sight or hearing disabilities, you could get sued. A general liability insurance policy will settle legal claims.
2. Contents Coverage
If your e-commerce business focuses on selling products, you probably have these products stored in your home or a warehouse. This policy will cover any damages and the cost of replacing these products.
3. Worker’s Compensation
While most e-commerce businesses don’t have regular employees, there are still instances where you could have employees directly working for you, especially if you own a storage unit for your products. Worker’s compensation insurance will cover any medical and legal costs arising from injuries sustained while your employees are at work.
4. Transportation Coverage
As an e-commerce company, you want to make sure that if your products are damaged during transport, the costs of replacing these products are covered. You also want to make sure that any losses or claims incurred due to delays are properly covered.
5. Intellectual Property Coverage
E-commerce is a dynamic business with a lot of competition, and if you have a successful product or service, you can be sure that there are people out there who want to cash in on your success by stealing your product design, your logo, or even your brand name. This type of insurance will help protect you by covering legal fees to stop people from infringing on your intellectual property rights.