What ALL Online Merchants Need to Know About Insurance
Congratulations on taking your first steps to setting up your business selling physical products online. Third party seller platforms are exploding with activity, so we’re sure you’re keen to get in there as fast as possible. However, it is important that you choose the right insurance policies to help give you peace of mind as you start to scale your online business.
What is commercial insurance?
Whatever your products are, accidents can happen. If someone gets hurt, they could end up suing your business for a huge compensation claim. By taking the time to seek an adequate insurance policy for your business, even if you are just starting out, you can ensure that you don’t risk losing everything you worked so hard for due to an unforeseen accident.
Does this apply to me if I am not incorporated?
Whether you are formally incorporated as a company or not, if you start selling products online, your “Shopify” “Amazon” or “eBay” store is considered a business. It is worth becoming incorporated to protect yourself from some of the risks of doing business.
Why do online merchants need insurance?
The law requires it
The exact insurance policies that you are legally required to have will depend on your location and the nature of your business, e.g., whether you have employees or not.
Retail platforms require it
Many retail platforms require third party sellers to have insurance to protect their own reputations, for example Amazon stipulates that Professional Sellers have commercial and general liability insurance of up to $1m and that the policy covers Amazon.com.
“Smooth out” costs
Paying a small monthly insurance premium, helps you to smooth out costs that could come in the future, if you are faced by unexpected events.
What are the minimum types of insurance policies that online merchants should consider?
As an online seller, your business will interact with many members of the public so there is a risk of losses from injuries, negligence, and any other accidents that could occur. General liability insurance covers you for financial obligations resulting from any bodily injuries, property damage, legal fees, judgments and any settlements that could be awarded if you are successfully sued.
Even if you sell, what you consider to be low risk products, if an accident were to happen the cost of a potential lawsuit, plus the cost of hiring legal counsel could run up to hundreds of thousands, if not into the millions. Product Liability policies cover sellers for bodily injuries or property damage caused by manufacturing flaws, design defects or even defective instructions.
Cyber breaches, stolen data, leaked information and complex hacking schemes are ubiquitous in today’s news. Any business storing or using electronic information could potentially be sued for a data breach or other cybercrimes in addition to paying legal fees, judgements and settlements. Cyber liability policies exist to cover these threats.
If you suffer an unexpected event - such as a fire which destroys your goods - which is insured, business interruption insurance covers the loss of income that your business may experience as a result of the event, for example if you are not able to sell or some weeks following the fire, as your goods are replenished. This would be in addition to the claim for the direct losses from the fire.
What will it cost?
This depends on the nature of your business, the exact type of insurance policies you need, and the level of cover that you choose for those risks. However, typically the annual premium (the amount you pay for your insurance) for a startup e-commerce business ranges from £500 to £2,500 each year.
Why do so many online merchants find e-commerce insurance so complicated?
The products that you sell are the main factors behind how much annual premium you will pay. But what happens if you change your product and product categories each day or month? Do you remember to tell your insurers about major changes?
Hard to estimate financials
Typical insurance application forms request details on historical, current and future annual revenue, which can be hard to provide when you’re just starting out.
What’s the right rating?
You may have an active general liability policy, but is it rated correctly? When seeking insurance, there is a big difference between a retail arbitrage and private label strategy. Selling private label products class you as a manufacturer, with an increased product liability exposure.
What are we going to do differently?
At Anansi, we’re building insurance products for online merchants designed by online merchants. We’ve been there and know what it takes to get an online business up and running. Protecting your growing e-commerce business with an insurance policy is critical to its continued success.
For merchants trading on third party platforms
The initial policies that we will offer are designed for online merchants trading on major third-party sales platforms, initially Shopify. We will add further platforms over time.
One-click integration for flexible coverage
Through our one-click integration directly to a merchant’s store, we can track the evolution of your risk exposure as you add new products and categories as you grow your business, in order to suggest the cover required to meet your needs as they change over time.
You will be able to administer your policy, ask questions and make claims online so that you can feel confident that you have a safety net that grows with your e-commerce business.
Check out the Offcourse cover website and see how much easier and simpler it is to make sure your parcels get delivered.
Have you insured your parcels?
Let us know in the comments below.