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What Insurance Policy Does Your Online Business Need?

The COVID-19 pandemic drove e-commerce to the forefront of today’s digital economic landscape. But, like other ventures, doing business online also carries risks.

These, in turn, can hinder growth.

Luckily, online business leaders can protect their firms by investing in insurance. But, choosing the insurance policy for your business can be a challenging feat.

This article outlines the risks online companies face. It also highlights the different types of insurance you may need for your business.

After reading, you may get an idea of the best insurance policy your e-commerce firm needs.

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Different Risks of E-commerce

E-commerce companies are vulnerable to various risks, including cyber and product liability issues. Other potential problems that online businesses may face involve professional liability and privacy.

The e-commerce industry is vulnerable to cyber threats. The sector is a goldmine for sensitive data, including buyers’ credit card info.

Malicious actors can steal personal information. It is the responsibility of online business owners to prevent this from happening.

Hackers can also crash a site, leading to downtime and profit loss. Much like regular businesses, online retailers also worry about product liability. 

Malfunctioning products can result in unsatisfied customers, and worse, injuries. Online retailers must also deal with issues involving professional liability concerns.

Customers can take legal action if you sell products that are not up to specifications. They can sue if your actions result in your customers losing money.

E-commerce businesses also collect sensitive information about their clients, customers, and visitors. Suppose you do not follow the proper regulations for this process.

In that case, you may be liable for invasion, infringement, or interference with rights of privacy. 

Having insurance can address issues that can hinder the boost of small businesses. With insurance, company leaders can be more assured and confident.

Insurance for Online Businesses

Below is a list of relevant insurance coverages all e-commerce businesses should secure. With these insurance coverages, online retailers can cover common and industry-specific risks.

Business Owner’s Policy (BOP)

A Business Owner’s Policy (BOP) combines three coverages into one policy. This insurance covers:

Data Breach or Cyber Insurance

Because online businesses store sensitive customer data, they need data breach insurance. This insurance cover the costs to respond to a data breach, including

  • Notify affected customers
  • Provide credit monitoring services
  • Improve business reputation

You will need data breach or cyber insurance if your business does the following:

  • Collect any personal data from your clients or partners
  • Need people to log in to your website for transactions
  • Integrate with other systems and transfer client data with them

Product Liability Insurance

Product liability insurance is crucial for online businesses. This is because products are the core of their operations.

All goods can create a potential for a lawsuit if a customer gets hurt while using them. 

Customers can sue for design flaws, manufacturing defects, or inaccurate instructions.

Technology Errors & Omissions (E&O) Insurance

The holy trinity of coverages for online businesses include:

  • Cyber insurance
  • Product Liability Insurance
  • And finally, Tech E&O Insurance

Technology E&O covers the costs involving claims arising from product failure. 

Customers can sue you if your product fails to perform its intended purpose. They can also take legal action if they encounter errors related to the services you offer.

Employment Practices Liability Insurance (EPLI)

If you have employees, EPLI protects you against lawsuits linked to workplace discrimination. It can also protect against claims related to wrongful termination and other similar issues.

Preventing workplace discrimination is essential, even in digital workspaces. Having EPLI demonstrates respect to employees.

It also discourages any violation of their legal rights.

Commercial Crime Insurance

This type of insurance protects your online business if your employee commits a crime. For e-commerce companies, these crimes can be embezzlement or fraud. 

Commercial crime insurance also covers robberies involving your inventory.

Directors & Officers (D&O) Insurance

Regardless of industry, startups leaders should consider getting D&O insurance. This insurance can protect owners against lawsuits alleging mismanagement and other issues.

D&O insurance can help you grow your company with confidence. It can help in the recruitment process, assuring top talent that they will not be at risk while at work.

The insurance can also help you attract venture capital to help grow your business.

Workers Compensation Insurance

If you have employees, you may want to consider getting workers’ compensation insurance

This insurance covers the medical costs and lost wages from work-related injuries. For e-commerce businesses, the cost of coverage tends to be relatively low.

This is because most online companies have processes that do not pose hazards to employees.

But, if you manage a warehouse with heavy machinery, the cost can be higher. The reason for this is that it poses higher risks to your employees.

Cargo or Shipping Insurance

Shipping insurance covers costs involving lost, stolen, and damaged parcels. The insurance protects you from inventory loss while in storage or transit.

Cargo insurance can be helpful if your business:

  • Has a warehouse
  • Relies on a third party to store your products
  • Ships your products to your customers and distributors

An online business insurance policy gives your company comprehensive protection. 

To know the best insurance for your online business, you need to understand your company’s needs. This will help you get the best insurance coverage for your e-commerce firm. 


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