Business entails risks. In the realm of eCommerce, these risks are intensified. And the thing is, as your business grows, and you gain more and more customers, the risks get even higher. Statista survey indicates that the number of eCommerce users is expected to reach 284.6m by 2025.
The rule of thumb is wherever there’s risk involved, you want to make sure you have the right insurance in place to counterbalance it.
eCommerce liability insurance is a powerful tool that protects online retailers by covering them for various liabilities they are likely to face in their everyday business activities.
What is eCommerce liability insurance?
eCommerce liability insurance is liability insurance that is suited to eCommerce stores. Unlike brick-and-mortar commerce, eCommerce stores have unique characteristics and needs, and therefore the liability insurance that is best suited to them, is eCommerce liability insurance. Liability leads to insurance. eCommerce liability insurance refers to covers against multiple liabilities to sellers that may arise during the course of business. Some of these are – general liability which covers claims involving bodily injury and copyright infringement, and product liability, which deals with claims due to product defects or manufacturing flaws.
Other types of insurance may include; cyber liability which covers any costs or damages that arise as a result of data breaches or cyber-attacks, and workers’ compensation, that refers to paying wages, medical benefits, and coverage in case of workplace injuries or death.
Why do you need eCommerce liability insurance?
As an online retailer, you have more kinds of liabilities to watch out for. Some of these include general liability, product liability, cyber liability, and more. When you sell online, you can’t control who buys your products and how they will use them. The more you sell, the higher chances there are of misuse which may lead to a liability claim against your online business. In addition, as an eCommerce business owner, you want to make sure that your business is as fortified as possible and that there is no chance that a claim against you will destroy your store.
The right kind of eCommerce liability insurance means you can rest assured knowing that your business is protected in the worst-case scenarios. You also know that you have someone to turn to when things get rough, and that there is an insurance company that will not let your business suffer. The cost of a lawsuit could make your business go bankrupt and the reputational damage of a claim against you is sometimes hard to recover from. However, with eCommerce liability insurance, you can sleep easy.
What kinds of insurance do you need for an eCommerce business?
For your online retail businesses, especially the ones just setting their foot, you must consider the below eCommerce liability insurance types:
As an online business owner, your general liability insurance covers:
- Any bodily injury claims made by customers or people interacting with your business, such as delivery staff, etc.
- Any property damage resulting from engaging in your business
- Any claims of slander or copyright infringement made against your business.
Product Liability insurance refers to a type of eCommerce liability insurance that protects retailers from third-party claims alleging product damage or bodily injury caused by product design defects or manufacturing flaws. Any product you sell has the potential for a lawsuit if the customer gets injured by using your product. Regardless of your position in the distribution chain, manufacturing defects, design issues, improper instructions, etc., are likely to cause severe liabilities.
Product liability insurance covers:
- Customers’ costs towards the treatment of the injuries
- Legal costs related to the trial
- Settlement paid out
If you don’t have product liability insurance, and you get sued, you may find yourself shelling out these costs from your pocket! Besides, the insurance also covers claims related to
- Defects in the product design like missing safety measures or accidentally designing a dangerous product
- Hidden defects like toxic substances in the food
- Failure to provide appropriate warning or instructions on product use
Insurance companies usually offer this insurance as a standalone policy and as an add-on to general liability insurance.
In this regard, check if your suppliers are adequately insured, providing you with a certificate of insurance that mentions you as an Additional Insured, before going ahead with the business.
Cyber Liability Insurance
In today’s world, digital crime is on the rise and hackers can steal your customers’ credit card information, and other data or install malicious software on their computers. Research indicates that 32.4% of all cyberattacks target the eCommerce industry. When you are in an online business, you are accountable for safeguarding your customers’ data and sensitive information.
You might want to consider getting eCommerce liability insurance, namely cyber liability insurance, that protects you from lawsuits, customer penalties, and fines related to data breaches or cyberattacks. In the event of such an attack, the insurance would cover your expenses to investigate the causes or restore data or funds to the affected customers.
While what aspects an insurance covers might vary, mostly, the cyber liability insurance covers:
- Loss of revenue due to a breach
- Data loss and recovery costs
- Cyber Extortion
- Forensic consulting costs to prevent future breaches
- Investigating and informing the affected customers
Workers’ Compensation/Employer Liability Insurance
Workers’ Compensation insurance, a form of eCommerce liability insurance, covers any expenses you as an employer would have to bear in case your worker gets injured or dies on the job. It also covers the death benefits you need to pay to the family of someone who dies on the job. The State government determines how much wage, coverage, and medical benefits a worker receives.
The insurance mostly includes:
- Medical expenses related to workplace injury, such as emergency room visits, surgeries, etc.
- Lost wages if they need time to recover from a work-related injury or illness
- Ongoing care if the injury is so severe that it requires multiple treatments
- Funeral costs, in the event of the death of the worker
- Disability, when a worker is temporarily or permanently disabled, the insurance covers their medical bills and lost wages
How much does eCommerce liability insurance cost?
Multiple factors come into play to determine the eCommerce liability insurance costs for your eCommerce stores, like product and shipping location.
It involves a simple process of filling in a few details so that your insurance application gets processed quickly. Some of the factors taken into consideration include:
- Sales Volume
- Types of Products sold
- Number of Employees
- Claims History
- Value of Inventory
How does Spott help you in this process?
At Spott, we understand the importance of eCommerce liability insurance and offer you world-class insurance options to stay assured. Our tailor-made plans are designed to suit the niche requirements of our esteemed clients. In addition, we certainly value your time and ensure the insurance coverage process is completed in a convenient, timely, and hassle-free manner. We ensure that we are 100% compliant with the current trends and practices of eCommerce marketplaces and platforms.
Need eCommerce liability insurance? Just reach us here.