As companies had to start participating more in e-commerce, they have found that their insurance coverage requirements changed. Businesses need less coverage for injuries and property damage and more coverage for loss shipments and cybersecurity.
If you are an online retailer looking to get e-commerce business insurance for the first time or to enhance your insurance coverage, you will need to know about the coverage options an e-commerce business may need and their costs. We discuss these options in detail.
Which insurance coverage e-commerce companies may need to have?
E-commerce companies may need several coverages to fully protect their businesses. Depending on the size, the nature of its operations, and other factors, different e-commerce businesses may need different coverages. Below are our guide for e-commerce businesses to determine the coverages that they may need:
- Sell, ship, and distribute products. Online sellers like Amazon will likely require you to have general liability insurance. Other e-commerce platforms may have similar requirements too. Learn more at Amazon sellers business insurance. If you can only afford one policy, many insurance experts would advise you to have general liability policy.
- Manufacture products and sell them online. It is likely that you will need product liability insurance. This will protect you if your customers suffer from using your products and decide to sue you.
- Collect payment from your customers online through their credit cards. You should have cyber liability insurance to protect yourself if your system is hacked and your customers’ sensitive information is stolen.
- Hire employees. Most states require businesses with employees to have workers’ compensation insurance, regardless if they are full-time or part-time.
- Drive a vehicle for your business purposes. You must have business vehicle insurance if you drive for work purposes, for instance, when transporting items to a shipper. Your personal auto insurance won’t cover you if you have an accident. Learn more at why small businesses need to have commercial auto insurance
- Purchase or rent business property. If you need to buy or rent a business location, for example, an office or warehouse, it’s likely your lender or landlord will require you to get business property insurance.
If you say yes to all the activities above, you may need to have all of these policies to fully protect your business. If you are unsure, your insurance agent or a representative at our recommended insurers can advise you on the coverage you need.
Is e-commerce business insurance required?
State law only requires e-commerce businesses to have commercial auto insurance if they drive a vehicle for their business purposes and workers comp insurance if they hire part-time or full-time employees. Without these 2 policies, you may be fined and cease your e-commerce operations until you get coverage.
However, if you rent a warehouse or an office, your landlord will require you to have commercial property or business renter insurance coverage.
General liability, product liability, and cyber liability are optional. However, as we discussed above, the risks from personal injuries caused by your products and from cyber attacks or data breaches are just too big that you may not want to skip these coverages.
E-commerce general liability insurance
General liability insurance is necessary coverage, especially if you sell on Amazon. It typically meets the platform’s insurance requirements. General liability insurance protects against a wide range of the risks e-commerce businesses face. It covers you if someone (non-employee) is injured on your business property or you damage property that doesn’t belong to you while conducting business. General Liability can help you pay for:
- Medical payments
- Property damage
- Legal fees and judgments.
Learn more at the best general liability insurance companies
Product liability insurance for online e-commerce shops
E-commerce businesses need product liability insurance to protect themselves from potential lawsuits that may arise if a customer is injured by a product they purchased from the business. Product liability insurance can help cover the costs of any legal fees and damages that may be awarded in a lawsuit against the business. This type of insurance can also help protect the businesses’ assets in the event that a lawsuit is successful.
Commercial vehicle insurance for e-commerce businesses
Commercial vehicle insurance covers you and those who work for you when driving for business. Most states require this coverage for business-owned vehicles. It helps pay for medical expenses, property damage, and other losses related to auto accidents, theft, and vandalism. Personal auto insurance usually won’t cover incidents that happen while driving for work reasons. Commercial vehicle insurance can help pay for:
- Medical expenses
- Collision repairs
- Rental reimbursement if you’re unable to use your vehicle.
If you already have a commercial auto insurance policy, it will also cover your occasional personal driving as well, so you don’t need to have both commercial and personal auto policies.
Learn more at the best commercial auto insurance companies
Workers’ compensation insurance for online stores
Workers’ comp insurance is typically required by state law for business owners who have employees. Workers’ compensation insurance can help pay for medical care and lost wages resulting from a workplace illness or injury, along with other benefits. It also helps lessen the possibility that you’ll be sued by an employee harmed while working, even if you’re found to be negligent. Workers’ comp helps cover:
- Medical expenses
- Lost wages
- Employer liability.
Cyber liability insurance for e-commerce businesses
Any business that handles consumer sensitive information such as personal information and credit card information should have cyber liability insurance. The coverage protects small businesses against expenses resulting from a data breach or cyber attack. It covers:
- Costs to notify customers and clients about an incident
- The expense to provide credit monitoring services for impacted parties
- Legal fees and settlements if you’re sued over a cybercrime
- Public relations costs to restore the reputation of your business.
Commercial property insurance for online shops
Commercial property insurance is often purchased by owners who own or rent physical business locations. Commercial property insurance can help protect your business equipment, inventory, and the building itself, whether you own or rent it. If your business property is harmed because of a covered event, such as a burst water pipe, fire, theft, or vandalism, property insurance can help pay replacement and repair costs as well as business income lost because you can’t operate your e-commerce operation while you get back up and running. Commercial property coverage can help pay for:
- Damaged equipment and inventory
- Lost income
- Operating expenses.
These are just some of the most common coverages purchased by the owners of e-commerce businesses. An experienced business insurance agent or company representative can advise you on the specific coverage you need.
How much does e-commerce business insurance cost?
The most common policy that most small e-commerce businesses get is general liability.
The average cost of a general liability insurance policy for a small e-commerce business is $28 per month, or $336 a year. This is for $1M coverage limit and $500 deductible. Most e-commerce businesses pay from $14 to $65 per month for a $1M general liability insurance policy.
Adding more coverages will cost you more. Below are the average costs of different insurance coverage for e-commerce businesses:
|E-commerce business insurance coverage||Average costs|
|General liability insurance||$28 per month|
|Product liability insurance||$25 per month|
|Cyber liability insurance||$67 per month|
|Commercial auto insurance||$92 per month|
|Workers comp insurance||$52 per month per employee|
|Commercial property insurance||$113 per month|
These are just the averages. Your rates will be different. Be sure to shop around with a few companies or work with a good broker like InsurePro, Simply Business, or CoverWallet to compare several quotes to find the cheapest one for you.
Ecommerce product liability insurance cost
The cost of product liability insurance for e-commerce businesses can vary depending on the size of the business, the amount of coverage purchased, and the types of products being sold. However, on average, product liability insurance costs $25 per month or $300 per year. Most e-commerce businesses pay between $500 and $1,000 per year for their product liability policies.
Many e-commerce businesses often combine their product liability coverage in their general liability policies. This can help them save money on the two policies.
Ecommerce cyber liability insurance cost
Similar to e-commerce product liability insurance cost, the cost of cyber liability insurance for e-commerce businesses can vary depending on the size of the business, the amount of coverage needed, and other factors. However, on average, businesses can expect to pay an average of $67 per month or $804 per year for cyber liability insurance. Most e-commerce businesses pay between $500 to $3,000 per year for their cyber liability policies.
What affects the cost of e-commerce business insurance?
Many factors affect e-commerce business insurance costs, below are the main ones:
- The kinds of products you sell
- The business property you own or lease
- Where your inventory or supplies are located
- Number of employees and what they do
- The types of vehicles you use for work
- The types and levels of coverage you buy
- Your deductibles
How to find cheap e-commerce business insurance?
The good news is that many insurance companies offer e-commerce business insurance. That helps with your comparison shopping to find the cheapest rates.
The only way to make sure you are not overpaying for your insurance is to shop around with a few companies or work with a good broker to compare several quotes to find the cheapest one for you. Working with NEXT, Simply Business, CoverWallet, or InsurePro is a good way to compare several quotes in one place. They all offer fast and easy online quotes.
In addition, be sure to evaluate your coverage needs. Only get the coverage that you need. The more coverage you get, the more expensive your policies are.
Lastly, be thoughtful with your policy’s details. Decreasing coverage limits and increasing deductibles will decrease your premiums.
Best e-commerce business insurance companies
We have done intensive research on the companies offering e-commerce business insurance. Here are our recommendations of the best providers of e-commerce business insurance for your consideration:
- Simply Business: Best for ecommerce businesses to compare and find the cheapest coverage online
- CoverWallet: Best for finding affordable e-commerce business insurance from reputable insurance companies
- NEXT: Best online buying experience for online business owners
- Progressive: Best for discounted e-commerce business insurance, especially for commercial auto coverage
- The Hartford: Best for buying e-commerce business coverage through an agent
- Hiscox: Best for coverage from a small-business-focused insurance company
Ecommerce insurance is a collection of policies designed to protect online retailers. These policies vary depending on the retailer’s needs but can include general liability, product liability, business interruption, and cybersecurity insurance. Some insurance companies also offer business owner’s policies that combine types of coverage like general liability and product liability and commercial property coverage in one bundled policy.