Insurance Considerations For E-commerce Startups
The e-commerce industry has revolutionised the way we shop, making it easier than ever to buy and sell all manner of goods and services online. However, this land of opportunity also brings with it new unique risks and dangers previously un-faced by business owners.
What’s more, though your e-commerce startup may allow you to reach customers across the globe, this also increases the number of threats posed to your business. And as the industry continues to grow rapidly, so do the risk factors. Some of the unique challenges you could find yourself facing include:
Product liability issues
Professional liability concerns
Intellectual property infringement
The good news is, as more and more people have decided to start their own e-commerce business, insurance providers have responded in kind by creating new and improved insurance policies tailored directly to e-commerce brands.
So, whether you’ve already established your e-commerce startup or you’re almost ready to get started, here are some of the insurance considerations you should take on board to help you protect your business in the future.
General liability insurance
Let’s start by looking at general liability insurance, as this is often recognised as the foundation for any business’ risk management strategy. It might seem a little strange as general liability insurance typically covers any third party for bodily injury and property damages, which is why it is often not something that e-commerce startups think about.
However, if you’re planning on opening a small office, you have a warehouse or storage facility, or even if you’re working from home, this will cover your legal obligations and expenses should someone visiting for work purposes suffer an injury or damage to their property.
It’s also worth pointing out at this stage that even if you work from home and have a homeowners insurance policy, these often have restrictions and exclusions when it comes to business activities. Therefore, you should never just assume you’re covered.
Product liability insurance
If your e-commerce business is based on selling goods rather than services, then you need to cover yourself with product liability insurance. Unfortunately, every product you sell could be a potential lawsuit if a customer is injured while using that product.
For example, manufacturing defects, design flaws or inaccurate (or non-existent) instructions can all lead to potentially harmful situations that you as a provider could be responsible for.
So, by purchasing product liability insurance, you can cover yourself should a situation arise. However, it’s worth noting that the cost of your policy will vary hugely depending on how risky or potentially harmful your product is deemed to be. This does not mean you shouldn’t’ get cover – not doing so could be far more costly further down the line.
One of the biggest and most important insurance considerations for an e-commerce business is going to be cyber insurance and covering yourself against hackers and cybercriminals. After all, today’s cybercriminals are becoming increasingly sophisticated and always finding new ways to access online systems and databases.
And as your business will be dealing with a lot of personal information from customers and vendors, including payment details, this makes you a prime target for these hackers. By ensuring you have the appropriate cyber insurance cover, you will be covered for any potential lawsuits, fines, penalties or settlements that arise as a result of a cyberattack or data breach.
Next on the list is cargo insurance. Again, this is something that you must concern yourself with if you’re selling goods via your e-commerce website. This is particularly true if you rely on a warehouse or third party to store your goods or package and ship your products.
Having cargo insurance will protect you from the physical loss of any inventory, whether that’s when it is in storage in the warehouse or when it is out being delivered. This can be really helpful when you’re not there to deal with your inventory at every stage of the journey, and you rely on others to do this for you.
Technology errors and omissions insurance
If you run a service-based e-commerce business, you need to consider technology errors and omissions insurance. This covers you for any claims arising as a result of failure or negligent acts in the performance of your technology and professional services.
Whether this issue originates from your business or whether it is indirectly related to your operations and technology, you could be liable to cover the costs and damages. Therefore, it’s important to cover yourself just in case.
Employment practices liability insurance
Do you already have people working for you, or are you considering hiring some employees as your startup expands? If so, you need to make sure you have employment practices liability insurance. This covers your company against any claims made that are related to workplace harassment, discrimination, wrongfully being dismissed, or any similar employee issues that could come up.
Business interruption insurance
When your business operates online, even the smallest mistake or issue can cost you. For example, if a power cut wipes out your electricity for a few hours and you cannot update your website or fill orders, this could cost you income and damage your reputation.
As such, business interruption insurance covers you for any loss of income during these periods when you cannot go about business as usual due to an unexpected event that is not your fault.
Have you got all the right insurance in place?
As you can see, there are lots of insurance policies you need to consider for your startup, depending on the nature of your business and whether you are selling goods or services. In some cases, there may be a little bit of overlap, but this does not mean you should ever just assume that you’re covered by a policy or accept the bare minimum.
Instead, it is always best to ensure you have strong insurance policies in place that cover you for product or service liability, cyber insurance, employment practices and any other policies relevant to your e-commerce startup. This is the best way to protect yourself should an issue or claim ever arise.