Some businesses think that insurance is an additional expense but in reality, it is a wise investment as it helps keep the operations protected against risks. Accidents can happen no matter how prepared you are.
With insurance, you can protect your business against huge financial losses due to claims related to bodily injury and/or damage to property. This is usually the case for brick-and-mortar businesses but what about eCommerce businesses or online stores? Do they still need to carry insurance?
The short answer is YES. Every business faces different risks, and online stores are not an exception. It is also important to carry insurance before an accident occurs. If you don’t have coverage, you will have no choice but to pay for the damages incurred with your own money.
What types of insurance coverage do eCommerce startups need?
The types of insurance you need depend on several factors such as the products or services you provide, the number of employees you have, and how long your business has been operating. However, in general, there are some basic policies every eCommerce business should consider.
Most businesses, whether they are completely digital or not, are often required by state regulators to carry General Liability and Workers Compensation insurance. Make sure you double-check what the requirements are in your state.
In this day and age when more people are taking the digital route, web-based businesses need to protect their operations and customers against cyber-related attacks such as data breaches and identity theft. One way to keep your business protected is by carrying Cyber Liability insurance. This policy covers financial losses due to data breaches, malware infections, and other types of cyberattacks.
Your eCommerce startup also needs Product Liability insurance. This protects your business against huge financial losses due to claims that are related to product recalls that can cause damage or injury to your customers.
Directors & Officers insurance is another policy to consider, especially if you’re looking for venture-backed funding. Your venture capital firm may require you to have this coverage to protect their investment in your startup.
What should you look for when purchasing insurance?
With so many policies on the market, choosing the right ones for your eCommerce business can seem overwhelming. What you need is guidance from a reputable insurance broker that has the knowledge and experience in the industry that you’re in. They will be able to perform a risk assessment and customize the policies based on your business’ specific needs.
An insurance company will also be able to inform you about other important factors such as insurance renewal. There are policies that need to be renewed every year. However, you may need to update or change your existing policies depending on the needs of your business.
When choosing an insurance company, do your research. Check online reviews. You can also get feedback from peers in the industry or fellow eCommerce startup owners about their experience with their insurance companies.
Here are some other important factors to keep in mind:
- Insurance is not a one-size-fits-all solution. Keep in mind that different businesses come with different risks. Several factors can affect the types of policies that you need for your operations. One thing’s for sure: insurance is an essential component of any business. Work with an insurance company that offers customized solutions for your eCommerce business.
- Consider buying policy bundles. You can actually bundle policies to save some money. This is called a Business Owner’s Policy (BOP). It is usually a combination of General Liability insurance and Commercial Property insurance. It helps you save money since you are not paying for two separate policies. Keep in mind, even if you don’t have a storefront, you may still need Commercial Property insurance if your team operates out of an office.
- Check your budget. As an eCommerce startup, the budget may be tight. Ask your insurance company if they offer payment options to make paying premiums more manageable. For example, some carriers offer a pay-as-you-go premium option, rather than paying one lump sum annually.
- Keep your policies updated. Insurance coverage should always be updated to make sure that your business is well-protected. Review your policies regularly especially if there are changes such as hiring more employees, buying additional computers and software programs, etc.
Like businesses with physical stores, eCommerce startups also need insurance for protection against financial losses. The key is to have an insurance company that is knowledgeable enough to assess your risks and come up with customized solutions for your operations.
Read more: 2021’s best WooCommerce themes for your store.