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March 18, 2024
How big does my business need to be to require ecommerce insurance? Do I need it if my business is just starting out? The answer is that you need commercial insurance for your ecommerce business, even if it’s small and you’re just starting out.
From cyber threats to supply chain disruptions, the online marketplace presents challenges that traditional brick-and-mortar stores may not encounter to the same extent.
Whether you’re a new entrepreneur, selling products on Amazon, or a full-scale brand shipping internationally, business insurance is a necessity for ecommerce businesses of any size.
These are the five major threats that your digital business can face:
With the increasing prevalence of cyberattacks, ecommerce platforms are prime targets for hackers seeking to exploit vulnerabilities in digital systems.
Data breaches, ransomware attacks, and phishing scams can easily compromise sensitive customer information, leading to legal liabilities and damage to your business’s reputation. Cyber insurance helps provide coverage for financial losses due to cyber incidents and helps in the recovery process, including data restoration and customer notification.
Ecommerce businesses that sell physical goods are exposed to product liability risks, where defective products or misrepresentations in product descriptions can result in lawsuits and financial settlements.
Product liability insurance offers protection against claims arising from injuries or damages caused by products sold through online platforms, ensuring that businesses are shielded from the financial consequences of legal disputes.
The global nature of ecommerce relies heavily on supply chains, which are susceptible to disruptions caused by natural disasters, political instability, or economic crises.
Business interruption insurance supports you when your ecommerce business can’t operate due to a covered loss.
There are a number of losses that can force your business to shut down. Some examples include:
Business interruption insurance can help with expenses such as:
Intellectual property (IP) disputes are not uncommon in ecommerce. Online businesses may inadvertently infringe upon trademarks, copyrights, or patents owned by others.
IP insurance typically helps cover litigation costs related to the enforcement or defense of patents, trademarks, or copyrights. IP insurance can also help protect your ecommerce business from patent infringement claims brought against it.
Maintaining customer satisfaction is essential in ecommerce. You need to respond quickly and transparently to customer complaints and concerns.
Reputation management insurance can help cover expenses associated with public relations efforts, crisis communications, and reputation repair strategies aimed at restoring brand credibility and trust.
For ecommerce businesses involved in the shipment of physical goods, cargo insurance provides coverage for loss or damage to goods in transit. It protects against risks such as theft, damage caused by accidents or natural disasters, and other perils during transportation.
If you have a physical office that suppliers visit, for example, as part of your ecommerce business, commercial general liability (CGL) insurance will help protect you.
It helps protect your e-business should it be sued for third-party injury (supplier gets injured when they slip and fall on a wet floor) or third-party property damage claims. This type of insurance helps cover legal fees, settlements, and medical expenses that you could be responsible for paying. Without general liability insurance, you would be paying for these expenses out of your own pocket should a customer be injured or their belongings damaged.
Here are some commonly asked questions about insurance for ecommerce businesses:
Ecommerce businesses run from your home (or garage) typically still require a range of insurance coverages, including cyber liability insurance, product liability insurance, business interruption insurance, intellectual property insurance, cargo insurance, and general liability insurance, among others.
Yes, even if you use a third-party platform for ecommerce, such as Shopify or Amazon, you may still need cyber liability insurance to protect your business from cyber threats and data breaches. While third-party platforms may offer some level of security, the responsibility for safeguarding sensitive customer data ultimately rests with the business owner.
General liability insurance typically covers third-party (customer/supplier) bodily injury, third-party property damage, and advertising injury claims arising from your business operations, including online sales.
Product liability insurance provides coverage for legal expenses, settlements, and judgments arising from claims of bodily injury or property damage caused by defective products sold through your ecommerce platform. It protects your business from financial losses resulting from product-related lawsuits and liability claims.
In addition to having cyber liability insurance, ecommerce businesses can implement strong cybersecurity measures, such as using encryption protocols, regularly updating software and security patches, conducting employee training on cybersecurity best practices, and implementing multi-factor authentication for access to sensitive data.
You and your employees need to know how to prevent cyber crime.
Work with a Western Coast business expert to get insurance that protects your online business.
You should also do regular reviews of your insurance policy and update coverage limits as your online business grows.
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Western Coast Insurance Services Ltd. is a wholly-owned division of Western Financial Group Ltd. Insurance products are underwritten by certain licensed insurance companies and are only available throughout British Columbia, Canada.
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