What is insurance for eCommerce?

ECommerce insurance provides online sellers with financial protection against the various risks you and your business are exposed to in the virtual marketplace.  

When the COVID-19 pandemic broke out, the retail landscape shifted drastically within months, opening up many opportunities for online sellers. But with this digital expansion came new risks bringing an acceleration of product-related lawsuits due to online hijacking, international shipments, and general liabilities, among others, leaving many to wonder what is the best eCommerce business insurance. Online sellers began to purchase eCommerce insurance liability policies to withstand costly third-party claims, including medical and legal expenses. 

Why do online sellers need eCommerce insurance?

Though eCommerce businesses do mitigate some of the risks that traditional brick-and-mortar businesses face daily (such as slip-and-fall accidents and physical storefront damages) online retailers are not free of risk. This is why eCommerce insurance is needed, and in fact required to help cover the financial losses and damages that can occur as a result of malfunctioning business operations.

Most online sellers acquire product liability insurance to protect themselves from the most common risks e-commerce retailers face, such as customer injury and property damage. 

You might be asking, “What insurance do I need for my eCommerce business?”. We’re here to tell you just that.

These are the most common insurance policies online sellers purchase to  protect themselves from the risks their e-commerce businesses face:

1. Product liability insurance

The most important policy for online sellers, which protects you and your business from claims alleging customer property damage or bodily injury caused by a product you manufacture, distribute, or sell. These cases occur when the product you sell was defective, damaged or when a customer had an accident while holding your product, meaning – even if it wasn’t your fault. In either case, you as the third-party seller are liable.

For example, if a customer claims the coffee maker they bought from your Amazon store explodes, causing second-degree burns or damaging their kitchen, your product liability insurance will cover the legal and medical expenses, should you be sued by your customer. 

2. Commercial General Liability insurance (CGL)

General liability insurance, aka the slip-and-fall insurance helps protect eCommerce business owners from the unique risks they face in everyday situations. If a product malfunctions and injures a client or damages their property you will likely face a lawsuit. CGL will cover legal expenses and medical fees, regardless of the lawsuit’s outcome.  

Most companies go for the general liability policy, but product liability insurance is specifically made for cases that involve malfunctioned products, i.e. tailor-made for the products your company sells.

Click here to read more about the differences between product liability and CGL.

Additional liability insurances include:

  • Professional liability insurance protects you from customers who claim breach of contract, for instance failing to deliver a product/service on time due to a vendor or supply chain issue
  • Cyber liability insurance is needed when you endure exposure of customer information due to website data breach. If your business involves customers sharing personal information on web forms or in emails, you can face a lawsuit should anything happen to that data.
  • Transit insurance (Aka inland marine insurance🙂 This type of policy will protect you from risks that arise from stolen merchandise or inventory getting at your physical business location, while in transit or at your supply warehouse.
  • eCommerce chargeback insurance which protects sellers from credit-card providers demanding they make good the loss on a fraudulent or disputed transaction.

Who needs sCommerce insurance?

An eCommerce insurance policy is critical for any online business that sells, develops, or manufactures products sold digitally, whether on Amazon, Shopify or dropshipping on Ebay or Etsy.

Different products require different levels of protection. Here at Spott we tailor-make the insurance policy you need for your store. Liability insurance for eCommerce is of utmost importance when it comes to protecting your business from claims and unexpected losses. If you’re looking to find out more about purchasing insurance for your Amazon store, click here.

6 simple steps to get your e-commerce business insurance:

To get business insurance for your e-commerce store, you can follow these six steps:

  1. What risks does your store face in terms of accidents, or disasters? Can you face a lawsuit? Is your online store home-based? Do you have employees? Where do you store your inventory, and how do you transport it to customers? Answering questions like these can help you identify the risks your business faces.
  1. Decide which types of policies you need. Once you’ve identified the risks your store can face, you can determine which e-commerce insurance policies protect your business best. For most online sellers, general liability and product liability coverage are good options to start with, but additional policies — such as cybersecurity insurance, transit or professional liability insurance — can be a great boost.
  2. Choose how to shop and purchase a policy. When it comes to shopping for e-commerce business insurance, you have a variety of options. You can work with a broker, use an online marketplace or contact insurance providers directly. Online retailers may find it easier to opt for either of the latter options, as these can be much quicker and more hands-on than working with a broker.
  3. Upload your COI. You should also make sure that you know how to contact customer service — and, if you need a certificate of insurance to sell using an online marketplace like Amazon — that you request it from your provider.
  1. Keep your policies up to date. You should renew your e-commerce insurance on an annual basis. When your policies are up for renewal, you can reevaluate your risks to determine if you need to change or adapt your coverage. However, if your online store experiences an impactful change before your policy is up for renewal, such as hiring your first employee, you can reevaluate your insurance coverage at that time.

Our goal is to protect your businesses and cover your needs with our coverage. We’re on a mission to make insurance as easy and accessible as possible, which is why we’ve created a state-of-the-art AI to get you the right quote for the products you sell in zero time, and with zero hassle. If you want more information about what eCommmerce insurance is, click here.


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