A guide to online business insurance
What insurance do you need if you're running an online business?
Insurance is an important consideration for online businesses, but the internet is littered with pleas for help from frustrated online business owners struggling to find cover. Here, Jade Wimbledon, of online business insurance broker Simply Business, discusses the types of insurance these businesses often need, digs down into the reasons why it's so difficult to secure online business insurance, and explores what can be done to help your company get covered.
Public and product liability insurance
As an online retailer, it's likely that most of your interaction with customers is virtual, meaning that your public liability risk is probably quite low. It's a different matter if your business has a warehouse or similar, as this could mean you or staff members have contact with members of the public, and could be held responsible for injuries.
Product liability cover, on the other hand, is usually a key part of online retail insurance, and is often sold as part of a public liability insurance policy. If you sell items online, such as jewellery, baby clothes, or antique furniture, you could be held responsible for any damage or injury the products cause.
Let's say, for example, you are an online retailer selling extravagant personalised cakes and delivering them to clients' doors. If someone blames you for food poisoning soon after eating one of your cakes, you could be liable to pay compensation claims. Or, let's say you sell electrical components online and someone blames the faulty component you supplied for a house fire. In this case, you may be liable to pay compensation for the damage caused.
Even if you haven't manufactured the items yourself, you could be liable for compensation claims if the products bear the name of your business; if you've repaired, refurbished or otherwise changed the product; or if the manufacturer can't be traced. The internet means that supply chains can often be long and international, with a lack of face-to-face interaction between the links. If you can't identify the manufacturer or if the manufacturer has gone out of business, you could be held responsible for any of their products sold by you.
Another important consideration in terms of online retail insurance is stock cover. As an online business, it's likely that you keep a fair amount of the products you sell in your home or another site before shipping them to customers. If this stock were damaged or stolen, stock insurance could cover the cost of replacement, based on the cost price.
Employers' liability insurance
You'll also be legally required to have employers' liability insurance if your online business has any employees. If the online service you offer is not retail, but something that includes giving professional advice, you may also want to consider professional indemnity insurance as part of your policy.
Why is specialist cover difficult to find?
So, why does it seem such a trying task to get e-commerce insurance or eBay sellers' insurance? Many insurance companies still refuse to insure online businesses, and most lack products designed for e-commerce. Reasons for this include the international implications of selling products online. Online businesses have often been categorised as high risk, as they often sell products that are imported or include parts that are imported from outside the EU, making liability very difficult to trace.
Tips for getting covered
You should be careful when you buy your policy; most insurers will need to know both what you do and how you do it. This means that, if you're an online gift card retailer, labelling yourself as simply a gift card retailer may mean you're not covered properly. You'll need to indicate that you both sell gift cards and that you sell them online.
Securing online retail insurance is possible though. If some of your sales take place offline, then this should make it much easier to get a quote. If you are predominantly an online retailer, but even a small amount of your turnover is generated from offline sales, brokers such as Simply Business can usually find a policy for you. You should arrange your policy over the phone so that your broker can make sure your online business is fully covered for the risks it faces, and has all the information needed to write your policy.
Jade Wimbledon is a writer for business insurance specialist Simply Business, which helps online businesses such as online retailers to find insurance cover, including product liability insurance.