E-commerce business? Here’s why you need insurance too
Product liability insurance can be crucial for e-commerce businesses. Jade Wimbledon from insurance provider Simply Business explains why.
If you sell products online, you may think that business insurance isn’t for you. After all, nobody’s going to sue you because they’ve tripped over a wet floor in your online shop. But in actual fact, most e-commerce businesses can still benefit from a good insurance policy, with product liability cover likely to be top of the list.
To explain this further, we need to take a quick look at product safety law. According to UK legislation, most of the responsibility for product safety lies with the manufacturer of the product. This means that if you make your own products to sell online you’re likely to be liable if they cause damage. But even if you sell products that are manufactured by someone else, you could be liable in certain situations. For example if the product bears your business name, if you’ve repaired or refurbished it, or if the manufacturer can’t be traced.
If you’re sued for damage or injury caused by a product and you’re found liable, you could face a compensation claim. For example, imagine you make and sell children’s high-chairs online, and a manufacturing fault means that a chair collapses and a child is injured by the fall. Or imagine that you sell an electrical product via your website, but faulty wiring means that the product catches light and your customer’s house is damaged by the fire. The compensation amount depends on the level of damage, and could include medical costs, loss of income, and repair and replacement costs. Remember that legal costs will be involved too.
This is where your e-commerce insurance comes in. Product liability cover can pay legal costs and compensation costs, up to the limit of your policy. This means that it can be a lifeline if your business faces a compensation claim, which can reach into the millions.
Although product liability insurance is likely to be at the centre of any e-commerce insurance policy, there are other important covers to consider too. Stock insurance can protect your stock if it’s damaged or stolen, and you can also choose to cover your goods while they’re in transit or your income in case an emergency means you have to stop trading.