What kind of insurance do I need for an online business?
Apr 4, 2017 2 minute read
According to Canada Post, 76 per cent of Canadian households shopped online in 2014. Businesses are seeing this trend and many are moving their operations online. For example, Etsy, an e-commerce site which sells homemade and factory-produced goods, has 1.6-million active sellers. Benefits to selling online include decreased overhead and the opportunity to reach a wide range of customers.
However, e-commerce can also create sticky situations. To avoid getting stuck, it’s important to have the right business insurance coverage. In order to help business owners who sell products through e-commerce sites such as Etsy or Amazon, here are some questions a broker will ask.
Six questions brokers ask to help protect online businesses
1. What product are you selling?
The type of product a business sells will determine specific risks for the business owner. For example, a business owner who sells slippers will have different risks than a business owner who sells silverware. A broker will take these risks into consideration when finding insurance coverage.
2. Where are you selling your products?
This is important, as some insurance companies will only cover domestic sales. To determine what insurance coverages are available for your online business, contact a BrokerLink broker.
3. Is your brand or label on the product you’re selling?
If a business owner puts their brand or label on a product, they can be held responsible for the operation of the product and for damages a customer receives because of the product. This information will help the broker assess the level of risk the business owner could face.
4. How are you storing your customer’s information?
This question pertains to cyber security. If an online business stores customers’ information on a server or cloud-based technology, cyber insurance should be considered. It’s also beneficial to ask an online store how payments are processed and if their software (which collects credit card information) is insured.
5. Do you have commercial general liability insurance?
Commercial general liability insurance protects business owners from scenarios where they could be sued. In particular, coverage for products liability and completed operations are an important aspect of the coverage for online businesses:
- Products liability: should a customer become harmed from a product purchased online, the customer could sue. Products liability could cover the costs should there be a lawsuit.
- Completed operations: if a customer decides to sue for damages after the warranty is expired, this coverage could cover legal expenses which may occur.
6. Do you have contingent business interruption insurance?
Contingent business interruption insurance covers financial losses to the business if there is an interruption(such as a delay or damages caused to the product) from a supplier. For example, if a business purchases supplies for their product from a manufacturer who can no longer operate because of an unexpected incident (such as a fire in the warehouse), this is an interruption for the online business. This interruption will cause a financial loss, which could be covered by Contingent Business Interruption insurance.
Safely sell products online by first calling a broker:
If you’re an owner of an online business, or are interested in launching an e-commerce store, contact a BrokerLink broker to learn more. Our experts guide businesses owners through the process of finding insurance that’s the best fit.