Insurance for your online business: How to protect your e-commerce store
Do you have a physical storefront, but some of your sales have moved online? You’re not alone in choosing to maintain both a physical and digital presence—many other Canadian small business owners are doing the same. Maybe, like them, you’re also wondering whether your business is properly insured for online sales. In this article, we’ll cover what an online business is, what risks come with doing business online, which insurance options are available and how to shop for the right insurance.
What’s an online business for insurance purposes?
In insurance, an online business is any business that sells products directly to consumers. Online businesses can make their own products or buy them from a wholesaler or manufacturer, but in both cases, they have a store inventory, which is one major way they differ from professional services.
Whether you run an online or in-store business, you still need the same types of coverage. That’s because the primary risks remain the same no matter how you sell your products—you need coverage for your store’s contents and inventory and protection against liability lawsuits. But doing business online does introduce another risk: personal data protection for your consumers.
An online business can take many forms: electronics stores with websites, specialty food stores that offer online purchasing or neighbourhood pharmacies that take online orders. No matter your business model, your insurance policy should cover everything your business does, both in person and online.
Do I need online insurance for my business?
While there’s no legal requirement to carry business insurance specifically to sell online, depending on where you sell, some platforms may require you to provide proof of insurance. Your business needs are specific, and therefore, your commercial insurance needs should be too! Contact an insurance provider to learn how to get coverage that’s tailored to your needs.
Did you know?
Your certificate of insurance is the official document used to prove you have insurance. Online sales platforms frequently ask for your certificate of insurance to make sure you’re insured.
Which insurance protections are recommended for online businesses?
Commercial general liability insurance
One of the key protections for online business insurance is commercial general liability insurance. It helps protect you if your business or products accidentally injures someone or causes them property damage. Imagine that a client orders a light from your website and gets hurt installing it due to a manufacturing issue. Even if you didn’t make the product, you could be held liable. Commercial general liability may also cover the costs of legal claims if the issue gets taken to court.
Commercial property insurance
Your physical assets deserve to be protected. A commercial property insurance policy helps protect your inventory, storefront and equipment against risks such as theft, breakdown, fire and water damage. To make your life a little easier, we don’t require you to submit a complete inventory when make a property damage claim. Plus, if something happens (say a fire breaks out and you’re forced to shut down temporarily), your insurance could help cover income lost due to the business interruption until you’re able to reopen.
Property in transit
Even on the go, your products still need to be insured. This type of property coverage helps protect merchandise you own while it’s being transported. For example, it can help cover losses if one of your vehicles carrying inventory gets in an accident.
Please note that, with us, this coverage only applies in Canada and the continental United States. It excludes shipments to other international destinations. If you already have business insurance, it’s a good idea to check with your insurer to confirm your coverage territory.
What to look for in a delivery service provider
If you decide to contract out delivery and transportation of your business property, make sure your service provider carries insurance for your property, as subcontractors won’t be covered by your business insurance.
Product withdrawal costs
When a product poses a danger to public health and safety, the government can order a preventive recall. That’s when it’s handy to have coverage for the costs you incur recalling it. Costs may include creating product recall notices, transporting merchandise to your warehouse and safely disposing of the product. For example, you import electronic devices that turn out to have a safety issue. Your insurance could cover the logistical and communication expenses involved in recalling the product.
What if your e-commerce store experiences a cyber incident?
The next protection is essential for your business: cyber risk insurance, or cybersecurity insurance. This coverage helps businesses limit financial losses caused by cyber incidents such as data breaches (internal or external), cyberattacks with or without ransom demands, and certain types of fraud.
Say your online business suffers a ransomware attack after an employee clicks on a fraudulent link. Your whole network is paralyzed, and a ransom’s demanded.
Would you know what to do in case of a cyber incident? Our CyberSuite Plus Insurance gives you access to expert support to respond quickly to an incident and minimize financial and reputational impacts on your business. It helps cover, among other things, data breaches, cyberattacks, cyber extortion and certain types of fraud. Every minute counts during a cyber incident.
How much is online insurance for a business?
The cost of a commercial insurance policy really all depends on multiple factors related to your business, such as your sales volume, store inventory, whether you have a brick-and-mortar establishment and which specific protections you choose. There’s no one price that works for all businesses. To learn more about the factors at play, check out our in-depth article on how much small business insurance costs.
How to choose insurance for your online business
When looking for the right business insurance for your shop, you’ll want to start by comparing your needs to the coverage available.
You’ll also want to find out if an insurer asks for an exhaustive inventory of your property to take out an insurance policy. That can be a big administrative burden for you, depending on your situation.
Lastly, make sure they provide a certificate of insurance that you can use as official proof of insurance for online sales platforms and suppliers.
All this can help you find commercial insurance that offers worry-free, reliable protection for your business. Want to learn more about our business insurance? Reach out and request a quote today.
Insurance for your online business: FAQ
While there is no legal requirement to carry insurance specifically to sell online, depending on where you sell, some platforms may require you to provide proof of insurance.
Your existing home insurance won’t cover your online sales. Home insurance excludes all types of business.
Product liability insurance helps protect you if customers have any product issues with their purchases that result in damage. For example, if you sell an electronic device that catches on fire and hurts someone, you may be liable for their injury. Product liability can be essential for online businesses that sell physical merchandise.
Yes, your commercial insurance can cover merchandise that’s been damaged during delivery if you’ve got coverage for property in transit. This type of insurance can cover merchandise you own that is lost or damaged during transportation in Canada and the continental United States. For example, if there’s an accident that damages inventory during delivery, your losses could be covered. However, international shipments outside of Canada and the continental US are typically not covered.
While not required, cyber risk insurance is recommended. When you do business online, sensitive data is vulnerable to cyber attacks and data breaches, so you’ve got to protect it, but your liability insurance won’t cover digital risks. That means cyber risk insurance is a vital add-on to any online business insurance, as it could cover a range of expenses, including, but not limited to, the costs associated with restoring your systems, handling ransom demands and notifying customers.
Every insurer has their own name for their products, which can make navigating the business insurance market confusing! Some insurance providers offer a product called e-commerce insurance, but we like to keep things simple. Our commercial insurance can help cover you whether you do business in stores, online or both.
This means you don’t have to take out two separate policies or double check to see if your online business is covered. Plus, our business solution is designed for both in-person businesses and e-commerce stores. No matter how your customers purchase your products, your business is protected by a single, seamless solution based on what you need.
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Certain conditions, exclusions and limitations may apply. The terms and conditions of the coverages described are set out in the insurance policy, which always prevails. These tips are provided for information and prevention purposes only. They are general in nature, and Desjardins Insurance cannot be held liable for them. We recommend using caution and consulting a certified insurance agent for comprehensive, tailored advice.