Protect Your Online Store With Ecommerce Business Insurance

If you operate an online store, you should consider purchasing multiple types of commercial insurance to protect yourself from costly lawsuits and other claims that could put your business on hold. Even if you don’t have a physical space that customers can visit, there are numerous risks associated with ecommerce that an insurance policy can account for.

Keep reading to find out what coverage types you may want to include in your ecommerce business insurance policy and how you can obtain the right coverage for your small business.

On This Page

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  Types of Coverage Needed for an Ecommerce Business

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  How Much Does Ecommerce Insurance Cost?

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  Do Companies Like Shopify and Etsy Provide Ecommerce Insurance?

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  How Do I Get Ecommerce Business Insurance?

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  FAQs

Types of Coverage Needed for an Ecommerce Business

Small businesses that primarily conduct business transactions over the internet face different risks compared to brick-and-mortar businesses and should consider purchasing the following types of commercial insurance as a result.

General Liability Insurance

General liability insurance is perhaps the most foundational type of commercial insurance as it can cover medical expenses, property repairs and legal expenses. Even if you never have customers on the premises of your business, you may still have vendors, delivery people and other guests drop by. If any of them are injured during their visit, this policy would cover the financial losses.

In addition, general liability insurance includes coverage for personal and advertising injury claims. As a result, it can cover legal fees, settlements and judgments if you are ever sued for violating someone else’s copyrights or defaming them through your advertising materials.

Commercial Property Insurance

Commercial property coverage can insure any buildings you use for your business as well as the property stored inside of them such as furniture, documents, equipment and inventory. If you exclusively work from home, you could alternatively insure some types of business property by adding a permitted incidental occupancies endorsement to your homeowners insurance policy.^[1]

Many small business owners opt to purchase a business owners policy (BOP) that combines general liability and commercial property insurance. BOPs may also come with business interruption insurance, which can take care of expenses like payroll, loan payments and relocation costs if you are temporarily unable to operate your business due to a covered peril like fire or theft.

Product Liability Insurance

Product liability insurance covers liability claims related to a defect in the design, manufacturing or marketing of your product. For example, product liability insurance could cover a legal settlement if a family sues you after their child gets injured because a baby swing they bought from your online business broke and did not have proper cushioning. Depending on your insurance company, your general liability policy may automatically come with product liability coverage.

Inland Marine Insurance

Once you have finished your products and shipped them to your customers, inland marine insurance will cover them while they are in transit. As a result, this coverage type could pay to replace items that get destroyed or otherwise lost in the mail. If you ship internationally, you may also want to buy ocean marine insurance or air cargo insurance.

Cyber Insurance

If you store your customers’ information digitally, cyber insurance is crucial to protect your business from liability claims related to a data breach or some other cybercrime. For example, cyber liability insurance could pay for your legal defense if a customer sues you because their credit card information was stolen or their home address and email address were leaked.

Workers’ Compensation

Workers’ compensation insurance can pay for an employee’s medical and rehabilitation treatments, make up for lost income and more if they get injured while carrying out the responsibilities of their job. Most states require you to maintain this coverage type if your ecommerce business employs multiple people.^[2]

In general, remote workers’ rights are dictated by the state they live in.^[3] As a result, it may not be enough to merely satisfy your own state’s workers’ compensation requirements if you have employees all over the country.

For example, businesses in Texas only have to purchase workers’ compensation coverage if they are contracting with the government. However, California requires all companies with at least one employee to maintain coverage.^[2] As a result, if your ecommerce business is based in Texas but you have a single employee in California, you would most likely need to buy workers’ compensation insurance to cover that employee.

Additional Insurance Policies Ecommerce Stores Should Consider

You may be able to improve your online store insurance policy even further by adding the following coverage types:

• Commercial car insurance: Commercial auto insurance is required by law in most states if you use a vehicle for business purposes such as picking up materials that you use to create homemade jewelry for sale online.^[4]
• Professional liability insurance: Also known as errors and omissions (E&O) insurance, professional liability insurance covers liability claims based on failures in the performance of your professional duties like misrepresentation, negligence or breach of contract. For example, if you sell clothing online, professional liability insurance could cover a lawsuit if a customer gets a rash from a shirt you sold them because you did not specify the types of synthetics used to make the shirt.
• Commercial umbrella insurance: If you are forced to file a highly costly claim or a series of smaller claims that exceed the coverage limits on any of your liability policies, a commercial umbrella insurance policy can step in to provide excess liability coverage.
• Commercial crime insurance: Commercial crime insurance can cover losses related to a wide array of crimes including theft, fraud, employee dishonesty and other cybercrimes.

How Much Does Ecommerce Insurance Cost?

The cost of insurance for ecommerce depends on several factors such as the size and scope of your business, the coverage types and coverage limits you select for your policy, your insurance and claims history and where your business is based.

For example, the majority of NEXT Insurance’s ecommerce customers pay around $77 to $85 per month for general liability, workers’ compensation and commercial property insurance. However, some customers could pay more than $275 per month for the same coverage.^[5]

Do Companies Like Shopify and Etsy Provide Ecommerce Insurance?

Ecommerce platforms like Shopify and Etsy can insure your goods during the shipping process but don’t offer comprehensive business insurance.

As a result, it is recommended that you maintain more insurance coverage on top of whatever insurance you opt to purchase from your respective ecommerce platform.

Shopify offers up to $5,000 worth of shipping insurance per shipment to users who purchase Shopify Shipping labels. Shopify’s insurance costs 89 cents per $100 of coverage for domestic shipments and $1.29 per $100 of coverage for international shipments. In addition, users with advanced plans automatically receive $200 worth of shipping insurance for every shipment.^[6]

Similarly, Etsy offers up to $5,000 worth of shipping insurance at a price of 80 cents per $100 worth of coverage for domestic shipments and $1.35 per $100 worth of coverage for international shipments. Some shipments may also automatically include shipping insurance with the exact amount of coverage depending on the shipping company you select.^[7]

How Do I Get Ecommerce Business Insurance?

To find the best ecommerce business insurance, it’s recommended that you obtain quotes from three to five different insurance companies. You’ll need to present information like your location, industry, annual revenue and number of employees. Of course, individually reaching out to several carriers to give this information can be tedious.

As a result, it’s best to streamline the process by using an online insurance marketplace like SmartFinancial. If you fill out our questionnaire about your coverage needs and budget, we can connect you with an insurance agent in your area who can provide you with the personalized commercial insurance policy you need. Start the process by entering your zip code below and we can help you get a free commercial insurance quote.