Online stores are businesses just like any other, and that means you’ve got risks and liabilities to cover, which has probably sent you to Google looking to see if eCommerce insurance is a thing. While not a specific policy, you can get covered in a variety of ways.
The good news is that the booming eCommerce space has gotten the attention of insurance companies, and there are specific policy options designed just for you and how you operate. Insurers want to protect you against exposures unique to your business, especially around inventory, cybersecurity, and even how you sell online through channels like Amazon.
Yes, there is an “Amazon insurance” if you list products there!
Insurance is always complicated, and we’ve tried to break things down as much as possible to get you started. Remember that you want to get advice and information directly from multiple insurance carriers after checking a guide like this. We’re here to get you started thinking about what you need and where you might be exposed. If you need help understanding business licensing, start here, and then come back to this insurance review.
Let’s dive into the heart of ecommerce insurance and how it works with your business and partners.
What is ecommerce insurance anyway?
There’s no single type of insurance that covers all of your ecommerce needs — though we wouldn’t put it past a crafty insurer to create their own custom “ecommerce insurance” product.
What most people mean, and what your business should consider, when talking about ecommerce insurance is a variety of commercial insurance types. You’re going to have various risks and needs based on how you run your business, and that can look distinctly different in the ecommerce space.
Focus on the risks that your business faces.
Ecommerce companies that also make or import their products should ensure they have product liability insurance in their product mix. You want to protect people against injury by a product as well as protecting overall operations.
On the other hand, dropshippers don’t need to focus as much on product coverage but should secure protections for third-party partners. And dropshippers tend to have lower total revenues, which means you’ll want to shop around to stretch your dollar while being protected.
No matter your size, if you work in the eCommerce space, you do need some commercial insurance. When your business grows, the need increases because of your liabilities and the risks you face from accidents, cyberattacks, and more.
9 insurance options that cover common eCommerce risks
So, we put everything in a big “eCommerce insurance” bucket. Here are some of the most likely options you’ll want and a brief explanation of what they protect. Remember that every policy is nuanced, and you may find that one insurer or other gives added benefits and protections.
- General liability insurance: This is your broad business protection covering things like third-party lawsuits, bodily injuries, property damage, and even some advertising-related injuries and concerns.
- Workers’ compensation coverage: This insurance pays an employee or their family when someone is injured, sickened, or killed at work. It’s not only a smart way to protect your business just in case, but it is mandatory in most states if you have any employees.
- Commercial property insurance: This coverage helps you repair or replace damaged business-owned property, buildings, fixtures, and inventory. Office equipment, signs, things you own and lease, and other tools you need to operate are usually covered.
- Cargo insurance: If you have your own products and are shipping them from the manufacturer to your warehouse — or if you manage all the shipping to a 3PL — cargo insurance is right for you. It’ll protect you in the event of loss due to them or damage of inventory as your goods are in transit. You’ll want this protection in place because property policies won’t cover your goods before they arrive at your warehouse. Transport and freight companies usually offer some coverage for shipments they handle, but those have their own costs and might not be as comprehensive as what you can get directly.
- Business interruption insurance: These policies are designed to help you stay in business when something forces you closed. There are two flavors relevant to ecommerce businesses. If you’re online-only and don’t have a physical location or handle your own goods (like a dropshipper or if you outsource entirely with our eCommerce order fulfillment services), there are cyber liability insurance policies that cover if your website or service is attacked and you can’t sell goods anymore. This coverage helps protect your orders and realize lost income until your online presence is restored. The second option is the more traditional business interruption protection that covers your property and operations. It pays you whenever something happens at your location that forces you to shut down or reduce operations, like a fire or truck accident. These policies have specific coverage items, so always check what falls under their coverage to ensure you have full protection.
- Cybersecurity, liability, and data breach coverage: Cybersecurity insurance products have many different names across insurers, but at their heart, they protect your business from losses and damages related to cyberattacks and data breaches. This is essential because of the risk you have when handling payments, customer addresses, and other information. These policies almost always prove their worth when something happens. They cover client notification and credit monitoring, forensic services, lost income, if you have to make ransom payments, and sometimes even the cost of PR to get your name in the clear.
- Business owner’s policy (BOP): A BOP plan is a combo option. These cover different things depending on the insurer who provides it. Generally speaking, though, a BOP plan will include some form of professional liability coverage, general liability coverage, business income insurance, and commercial property insurance. Groups like The Hartford allow for customization to also include cybersecurity and data breach coverage.
- Suspension and Chargeback coverage: There are two new eCommerce-focused policies to consider. Not all companies are going to offer these, so you better shop around. Suspension insurance is often called “Amazon insurance” because it is a policy that protects you if your account is suspended from selling on an online marketplace like Amazon. These policies are new, and the underwriting is uncertain, so be crystal clear on what is covered and what must be able to prove to get paid. Chargeback insurance is also relatively new and is designed to address credit card payment risk. Ecommerce businesses can get hit with chargebacks due to credit card fraud. Generally, chargeback insurance protects you against charges and losses when someone pays with a stolen card, a counterfeit card, or order-related fraud involving these payments and fake ship addresses.
- Intellectual property: If you’ve made your own products, but they’re similar to something else on the market, intellectual property is your shield. These policies cover legal costs if a competitor accuses you of infringing on their copyright or IP. These can be complex policies, and consulting with an IP lawyer or service can help you get the right coverage amount.
You might also want to look at an Umbrella policy to round out your coverage, especially if you have significant sales volume or a large staff. In general terms, Umbrella policies act as an umbrella and cover your general liability policies – some also add to auto policies. You get the amount of your coverage added to other specific liability coverage in case something happens.
The big note on umbrella policies is that they don’t give you extra protection. It merely gives you a larger dollar amount for your general liability policy. Many companies get umbrella coverage because it can be cheaper to add this product than to pay outright to increase your general liability coverage.
Who offers ecommerce insurance?
Nearly any insurer who provides business and commercial insurance products can offer you some ecommerce insurance coverage. You can find major insurance products from companies that you’ve seen advertised online and on TV — like The Hartford and Nationwide — plus smaller shops that are more niche, including CoverWallet or Layr.
Layr has guides worth reading specific to ecommerce companies, and some of its explanations for different niches may help you find all of the protection you need.
Depending on your area and how you operate, you should look for companies that cater to your size and policy needs. Many companies offer ecommerce insurance, but comparing price and coverage will help you find the right fit.
One of the most crucial elements for finalizing your carrier choice is their customer service. You need someone who is going to help you when you have to make a claim. That’s one of the most stressful times for any business owner. An insurer who drags their feet or makes it hard to recover is just going to increase stress and make it less likely that you can minimize harm and keep your customers.
Find someone who will help you on your worst day.
Is Red Stag Fulfillment insured?
At Red Stag Fulfillment, we’re fully covered to protect our people, our customers, and the inventory and equipment on site. There are policies in place that cover your goods while in our care. Beyond insurance, we also have full 24/7 coverage of our entire facility with security and monitoring systems, controlled access points, and best-in-class operational security.
Our commitments and guarantees extend to not only how we protect your goods, but also how we protect your business. That means accurate inventory, reliable receiving, order protection, and management security, order accuracy, and guaranteed shipping speeds. We have multiple redundancies in place for data management and cybersecurity, on-site connections and hosting, power backups, and more.
We’re also transparent with our customers. If you have a question, ask it. We’ll answer it truthfully and demonstrate our commitment to you and your security. Our customers trust us, and we think you will too. That level of confidence is also why we give every company a risk-free trial, helping you see what we can do and what our guarantees mean.