Selling products through an e-commerce business is an attractive option with reduced overhead and the opportunity to reach customers across the globe. The popularity of online marketplace platforms like Amazon, Shopify and Etsy has made starting an online business easy and accessible. Like with anything new and revolutionary that occurs, there are risks and exposures that may not have existed in the past. Online businesses can present unique challenges like increased cyber security risks, importer liability and data and privacy regulations.
If you have developed a revenue stream from the products or services you sell, you should consider business insurance. As your business grows, you may be faced with contract obligations from a wholesaler or fulfillment center that requires you to hold a certain amount of insurance. It is important to have the right coverage in place in order to set your business up for success now and in the long run.
Being informed about e-commerce insurance can help you to avoid pitfalls early on. It will also help you familiarize yourself with what policies you’ll need in order to properly protect your business.
What your insurance broker wants you to know about e-commerce insurance:
Will a homeowners policy cover you If you are running a business out of your home?
If you conduct business out of your home, whether you are selling products or providing services, you may not be fully covered in the event of a claim. Your e-commerce business must be disclosed to the broker of your homeowners or tenant insurance policy. The extension of coverage you will receive is likely to be minimal. If you need additional coverage, talk to us about what other policies you may need such as a Small Business Policy and Errors & Omissions (E&O) insurance.
The type of products you sell will be taken into consideration when finding your insurance coverage
When it comes to choosing what products to sell, you often want to find something unique in order to stand out in a crowded market. Unfortunately, some of these products fall into categories that can be considered risky. Choosing products from these high-risk categories as well as mixing product categories can make your business harder to insure and can be confusing to insurance companies.
Where you source your products from can leave you exposed to liability risks
Many online business owners fail to recognize that even if you are not manufacturing the products you sell, you can still be held liable for them and exposed to claims. If you import products from outside of North America, you are responsible and can be held directly liable for all aspects of those products, even if you sell your products through a third-party distributor such as Amazon, Walmart, Best Buy or Shopify. Leaning on your manufacturer for liability coverage is unlikely, so it is important to obtain your own coverage for your products and business. The main reasons you can be held liable for you products stem from manufacturing defects, design defects and incorrect product labelling and warnings.
Product liability claims can be mitigated by providing detailed and accurate instructions, warnings, and labeling for the products you are selling, and of course by also having a solid product liability insurance policy. If you work with a distribution chain of manufacturers and suppliers, it is a good idea to confirm that they are also adequately insured, and that you are listed as an additional insured on their policies.
You could be exposed to data breaches and security threats
As an online seller, you are often storing sensitive customer information such as credit card information, mailing addresses, emails, usernames and passwords. This can leave your company vulnerable to cybersecurity threats such as phishing, malware and distributed denial of service (DDoS), which can quickly wreak havoc on your business. There are many ways to safeguard your company and make sure your information is secure. One of those ways is by obtaining cyber and/or technology errors and omissions insurance to help aid in recovery costs, business interruptions, third part liability and even ransom costs.
What types of insurance coverages should you consider as an e-commerce company?
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Commercial property insurance
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Commercial general liability
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Commercial auto – if you do any personal transportation of products for your business
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Cyber Liability
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Product Liability
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Errors and Omissions (E&O)
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Business Interruption
Keeping up with technology and regulations can be a challenging process, but it is not impossible. This is why it is important to work with an insurance broker that understands the Canadian e-commerce industry and specializes in working with online businesses. Whether you are an online retailer, manufacture your own products or own a drop shipping company, the experts at Fuse Insurance are ready to help. Get started today by filling out our online quote application or giving us a call at 1-866-387-FUSE (3873).
