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As an online retailer, not having a bricks-and-mortar premises or floor staff can mean reduced overheads and potentially less exposure to accidents, injury, or disaster.
But don’t be fooled into thinking that selling online is risk free for your business – online retailer insurance is a cost you may not want to skimp on.
Your customers could still be injured by your products or their property could be damaged by faulty goods you’ve sold them. In this case, you could find yourself legally liable – even if you’re not the manufacturer.
Your stock, meanwhile, is still vulnerable to loss, theft or damage when in storage or in transit.
Thankfully, you can protect yourself and your business from unforeseen events and potential compensation claims from customers by taking out online retail insurance.
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What is online retailer insurance?
Online retailer insurance, also known as ecommerce business insurance, is not one specific product, but rather an umbrella term for a range of insurance policies that can cover the compensation costs and legal fees of a claim made against you and your business.
It might include cover for claims by a customer if they are injured or their property is damaged by one of your products, for claims from employees if they become injured or ill as a result of their work, or for loss or damage to your stock and property.
You should know that whether you are the manufacturer or a supplier, if a product you’ve sold online causes damage due to a defect you could be liable because of the duty of care you have to your customers.
Product liability insurance could cover your business if a customer takes you to court demanding compensation because one of your products hurt them or damaged their property.
Similarly, if a supplier (or, indeed, any member of the public) is involved in an accident while visiting your office or warehouse, your business may also find itself legally responsible. Public liability insurance would cover you in this instance.
If you employ any staff, meanwhile, you are legally required to have employers’ liability insurance. The only exceptions are if your staff are family members or based abroad.
If you outsource your order fulfilment to a third party to process, your order fulfilment provider is responsible for its own warehouse employees. However, if an accident or injury is caused by a defect in one of your products, you may be liable – this would then fall under product liability.
Finally, stock cover will ensure you are compensated if stock is stolen or damaged – for example, by a flood or a fire.
Be aware that home contents insurance policies generally can’t be used for commercial claims.
Having goods in transit insurance may also help if your stock is damaged, lost or stolen when it’s being delivered to your premises or to a customer.
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Do I need online retailer insurance?
Aside from your legal obligation to have employers’ liability insurance of at least £5 million if you employ staff outside your family who work in the UK, small businesses aren’t mandated to take out any other kinds of insurance.
However, that doesn’t mean you should ignore insurance for your ecommerce business.
When you consider how ruinous a lawsuit could be for your business, it’s worth considering a strong retail business insurance policy to protect you and your business from the financial cost of things going badly wrong.
Because running a digital business doesn’t make you immune to real-world threats. A warehouse fire, a flooded house, an exploding battery in one of your products, illness suspected to have been caused by a food product you sell… any one of these scenarios could land you with a massive bill which your insurance might otherwise have covered.
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What does online retailer insurance cover?
What online retail insurance covers will depend on what you decide to include in your policy.
Product liability is at the core of many online retail policies and is designed to cover you for costs that might arise from a successful claim against you as a result of injury or damage caused by products you sell.
Public liability insurance can offer protection from legal and compensation costs for personal injury, theft or damage to property, and even death – for example, if a client was injured by stock falling off a shelf while visiting your premises.
Stock insurance, on the other hand, is designed to provide compensation to you for loss or damage to your stock, property or belongings – if there was a flood, for instance.
As with many types of business insurance, your cover will depend on the types of cover you choose to include in your package.
What is usually included in online retailer insurance?
As well as the above, online retailer insurance might include, but is not limited to:
- business interruption insurance
- business equipment insurance
- cyber insurance
- personal accident insurance
- business buildings and contents cover
- legal expenses insurance
Many providers allow you to pick and choose which combination of insurance types you want to include in your plan. Choosing what’s best for you will depend on how your business is organised.
What isn’t usually included in online retailer insurance?
What isn’t included in online retail insurance may come down to what you choose to pay for as part of your insurance package. Many providers allow you to pick and choose insurance options.
However, commercial vehicle insurance isn’t usually covered by retail insurance. But it is a legal requirement in the UK if you use your own vehicles for commercial purposes, such as making deliveries.
Online retail insurance may also not cover you in certain scenarios. For example, if stock is stolen from your warehouse, you may not be covered if you had not properly secured your goods.
As a rule, insurance will become invalid if you do not comply with the terms and conditions of your contract so it is important to do so.
How much does online retailer insurance cost?
A number of factors affect your online retailer insurance premium. Your insurer will take into account the risks associated with your products, what risks your employees face in your warehouse or other working environment, and your turnover and global reach (if you’re an exporter).
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Online Retailer Insurance FAQs
Unless you are legally required by law to have employer’s’ liability insurance then the answer is no. Having said this, even though your business might exist in the digital world, it still faces very real threats that could result in a costly claim.
Any business that sells products directly to consumers could be liable for accidents or damages. Taking out a comprehensive retail insurance policy can be a good way to minimise the risk to you and your business.
The only type of insurance an online retail business needs as a legal requirement is employer’s liability insurance, and that’s only if you employ someone outside your family who works in the UK.
However, that does not mean it isn’t important to look at other types of insurance for your ecommerce business.
Primarily, an online retailer should consider public liability insurance, product liability insurance, employers’ liability insurance, stock insurance and building and contents insurance.
Ecommerce is just another way of saying online retail. Therefore, an ecommerce business will require the same level of insurance as any other online retail business.
This means that an ecommerce business will legally require employer’s liability insurance if you employ anyone outside your family who works in the UK.
Beyond that, an ecommerce business may want to consider public liability insurance and product liability insurance, as well as stock and contents insurance, plus other optional extras such as personal accident insurance, business interruption insurance, cyber insurance and business equipment insurance.
Your insurance premium is dictated by the type of products sold from your online store – some are riskier than others – the number of employees you have, the level of risk posed to employees by your commercial premises, and the scale of your operation.
Product liability insurance is one of the most important types of insurance any retailer can have. It covers you for a claim if someone is injured or damage is caused by your goods.
Even if you didn’t manufacture the product that causes harm or damage, you may still be liable as the seller.
In order to sell items, you should consider having product liability insurance to insure you for any compensation that might need to be paid if someone is involved in an accident while using your products.
It’s also worth looking into public liability insurance to protect visitors to your business premises from injury or damage to their belongings.
You may also want to consider stock cover to protect your stock and business buildings and contents insurance to protect your belongings and your business premises.
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