E-Commerce insurance – cost and types of policies

Whenever you budget the expenses of your business, E-Commerce insurance must be high on the list because you can’t always know exactly what can happen in the future.

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With the protection provided by liability insurance and all the other sorts of insurance we will tell you about, you can protect your business and yourself in case something unexpected happens.

Like any business owner, for your E-Commerce enterprise, you must consider how much financial risk you are taking on.

If your E-Commerce business runs without proper insurance, you are taking a giant chance not just of losing some money but of a complete wipe-out.

This is because the laws in every state are very strict in enforcing liability on the owners of businesses for the results of their actions. 

E-Commerce Insurance

In this article, we are giving very general guidelines for startup businesses to explain what the main kinds of insurance that you need are, and where we can, a rough guide to how much you can expect to pay.

The question is, can you afford to NOT have insurance for your E-Commerce business?

What this means, for any E-Commerce business owner, is that if some customer claims that your actions caused them some physical or economic damage, a court can award damages far beyond the total size of your business.

Your E-Commerce business is not harbored by laws in the same way as states are, where legislation can place a “cap” on the maximum level of liability.

In some states, like Montana, there are specific monetary levels that limit the amount a court can award in any case against the state.

In a court case, it’s purely the privilege of the jury to award whatever amount they deem appropriate, even sometimes giving a claimant more than they have sort.

When you are running your E-Commerce operations, you can’t deny responsibility for the results of your actions.

Even more importantly, unless you have spent beforehand the money necessary to have your business running as a limited liability company, all of that liability belongs to you alone.

What does E-Commerce insurance protect you from?

For your E-Commerce business, the most important types of insurance are intended to cover the risks to your business from accidents, from unexpected events, and from mistakes.

Also there are some legal kinds of insurance that various states require.

In the next few paragraphs, we will outline the most important points any E-Commerce business owner should know when negotiating the insurance needed.

The main headings of insurance for your E-Commerce businesses are liability insurance, commercial insurance, asset insurance and workers compensation insurance.

Liability insurance

General liability insurance

Any E-Commerce business is dealing directly with members of the public, and that means you generally have the danger that some accident can happen to them personally or else something of theirs can be ruined.

In such a case, they can demand compensation.

General liability insurance policy for your E-Commerce business protects you against claims coming from injury to clients or damage to their property.

It protects your E-Commerce business from the claims themselves and as well to any follow-on court costs and legal fees of the lawsuits.

In many cases, it should help you to qualify for extra business from city and state organizations, where contracts insist on proper liability insurance.

The normal level of general liability insurance for your E-Commerce business would be with a boundary of $1 million for a single event and a total of $2 million for the whole year.

See the table in the costing section below for average prices of general liability insurance for your E-Commerce insurance operations.

Professional liability insurance for your E-Commerce business

In the event where a buyer alleges some negligence, errors, or omissions in how you conducted your E-Commerce business for them, you can quickly be involved in a monetary claim.

Even if the lawsuit against you is ruled in your favor, the cost of defense can be large, and the impact on your reputation can be damaging.

Most small E-Commerce business should have enough professional liability insurance to cover a single claim of $25,000, with annual cover of $50,000.

See the table in the cost of E-Commerce insurance section below for average prices of professional liability insurance for your E-Commerce operations.

Product liability insurance

Whatever goods you sell or advice you give about the goods, you are running a risk that buyers may claim that what you delivered didn’t meet your description of function, or that your guidance was basically incorrect.

You need to be aware of the specific laws of product liability in your own state.

For example, in California, all businesses in the supply chain can be held culpable for damages caused by products claimed to be defective.

To cover yourself against any likely lawsuit, you need Product liability insurance for E-Commerce

Only you can determine exactly how much insurance you must have.

Best advice is to talk to experienced insurance agents, brokers or company representatives for help.

Commercial insurance

Commercial vehicle insurance for your E-Commerce business

Beware! – practically all policies for private vehicle insurance do not cover any happening like theft or accidental damage when the car is being used for business purposes.

The proper way to make sure that your vehicle is insured for both its own value, and the valuable contents, is by taking out a designated commercial vehicle insurance package.

Commercial truck policies cover the value of any vehicle in case of accident, malicious damage, fire, or theft.

Also, in case of any accident, the truck itself, the content and any legal bills, medical expenses, and property damage is insured if your car is involved in a crash.

Most states, other than Virginia and New Hampshire, insist on this type of insurance.

The necessary value of the insurance is calculated on the depreciated value of the vehicle, and your declared level of cover of contents. 

Tools and Equipment insurance

Since your E-Commerce business needs specialized and dedicated equipment, you will realize how much it can cost to replace it in case of any damage, loss, or theft.

The tools may be subject to malicious damage, deliberate fire, theft, other such unforeseen acts.

In addition, acts of nature like lightning strikes, hurricanes, earthquakes, and other highly damaging natural events can eliminate your whole business in one stroke.

Unless you can afford to immediately replace such specific gear quickly out of your own pocket, you should have full-level equipment insurance so that you can immediately buy any equipment needed to keep your E-Commerce business running.

It is impossible to advise how much equipment insurance you need – it’s essentially dependent on how much you have invested in your E-Commerce business’ equipment.

Commercial Property insurance

Any E-Commerce business that owns or rents space in a building needs a commercial property insurance policy.

If you own the building, you probably have a substantial capital investment, along with a big liability if there’s a mortgage.

Any physical building location must carry insurance coverage for the value of the premises and contents against accidental occurrences like fire and storms, and against criminal damages like theft and vandalism.

If your E-Commerce business operates in areas of high risk, like Florida or Georgia, supplementary coverage may be needed for earthquakes and hurricanes or tornadoes.

In other states like Illinois, where intense cold snaps can cause damage to outer coverings of E-Commerce business premises, there is a need for more extra cover than in warmer climes.

Although the level of cover depends mainly on the value of the property, it’s not possible to say what cover your need, but we have been able in the table in the cost of E-Commerce insurance section below to give some estimate of the average prices per million dollars of property insurance for your E-Commerce business.

Temporary insurance by month, week or day for your E-Commerce business

Is your E-Commerce business working part-time or casually, or is the level of business seasonal?

Using short-term insurance makes good sense. Business insurance by the month, day, or week – temporary insurance for E-Commerce – are special policies where you can cover a designated period when you want to be covered.

By only paying for that period of cover, you will save by having lower premiums but still having adequate risk cover.

The essential feature of short-term insurance is that you buy the cover for a defined period – a nominated date, or a week or month starting on a specific date, for example for 30 days beginning on the specified date.

When you are expecting periods of higher business activity, get the existing cover raised.

Talk to your insurance agent, broker or the company’s representatives to see what options you have.

Business Owners Policy BOP for your E-Commerce business

You have the chance to combine most of the important kinds of small business insurance in one policy that is known as the business owner’s policy – BOP.

A BOP merges commercial property and public liability insurance by packaging these coverages into one insurance policy, which can save you money.

BOP insurance will cover you if any claims of injury or property damage are made.

It is often the right choice for small and medium-sized E-Commerce businesses, such as yours.

There are some limits that will dictate whether BOP is suitable for your own business.

BOPs will not cover your professional liability or commercial vehicle risks.

Also, the size of your business will determine whether you are eligible to take out BOP cover.

The typical business that is eligible for a BOP policy must have fewer than one hundred employees, and under five million dollars in annual sales.

In addition, you must separately take out the mandated worker’s compensation, health and disability insurance as determined for your state.

Workers Compensation insurance for your E-Commerce business employees

In many states, it is mandatory to have workers compensation insurance when your E-Commerce business has one or more employees.

Workers compensation insurance covers the enterprise against any costs that arise if any hired hand experiences an injury or becomes sick as a result of work.

The benefits provide for medical expenses, death benefits, lost wages, and vocational rehabilitation.

Failure to meet a state’s laws in this regard can leave you as the employer required to pay penalties levied by the states.

Some states, such as North Dakota, Ohio, Washington, West Virginia, and Wyoming only allow coverage from the government-run monopoly state funds.

In these states, you may not take out your workers compensation obligations from private insurance corporations.

Workers compensation premiums are calculated based on the employee’s pay, and usually come out at around $1.00 per $100 per month.

However, you must refer to the relevant authorities in your state.

Average costs of these types of insurance

Although every E-Commerce insurance level is unique, there are enough examples of usual quotes from insurance companies for us to give approximate guidelines, including what are the cheapest rates offered.

Of course, you should always check with an agent what’s relevant for your business.

The list below is of annual premiums we have researched for the main types of insurance your E-Commerce businesses needs.

Types of insurance Price range
Commercial insurance $814 – $2560
Public liability insurance $255 – $550
General liability insurance $754 – $964
Commercial vehicle insurance $1636 – $2974
Product liability insurance $256 – $830
Equipment insurance $420 – $1284

Cost of insurance for your E-Commerce operations depends on many different factors.

We have reckoned these figures for small freelance E-Commerce businesses.

In larger states like California, premiums are generally about 20%-30% higher than national averages, while in smaller states like New Mexico, they will be about 20%-30% less.

The location and size and type of your E-Commerce business can have a big effect on the cost of different policies.

You should consult with professional insurance agents and brokers, or insurance company representatives.

In addition you can let the internet do the work for you by looking for insurance companies near where your business is located.

Another good source of information is the local Better Business Bureau in your town.

FAQ

What is small business insurance for E-Commerce operations?

This is a wide term used to describe common insurance policies designed to protect E-Commerce business owners from risks like bodily injury, property damage, claims of negligence.

Does my E-Commerce business have to have insurance?

Some of the types of insurance are not mandatory for you to run your business, but they can protect you from risks in your business operations.

Some other forms are required by state law, such as workers compensation and vehicle insurance.

What does a small E-Commerce business insurance policy cover?

Liability insurance provides protection against lawsuits or claims filed by a customer for bodily injury, property damage, or negligence.

The specific cover will vary based on your own operations.

See the table in the costing section above for average prices of the most common policies for E-Commerce insurance.

How much will E-Commerce business insurance cost?

In addition to the size of the business, several other factors, such as location and claims history, are used to determine your policy’s cost.

You should talk to professional insurance agents and brokers, or insurance company representatives.

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