Insurance can feel overwhelming when you’re starting an ecommerce business. The terminology seems complex, and the options can feel intimidating at first glance.
Yet, insurance is a critical tool for protecting your business. In the worst-case scenario, the right commercial insurance can be the difference between a manageable setback and a potential business-ending event.
Taking time to understand business insurance basics before meeting with an insurance professional can help you navigate the process more confidently. You know your business best, and understanding insurance is just another step in growing your company. Each insurance product is designed to address specific risks, and you can choose the coverage that makes sense for your unique store.
What is ecommerce business insurance?
Ecommerce business insurance is a specialized coverage designed to protect online retailers from potential financial risks. It helps safeguard your store against challenges like cyberattacks, data breaches, product liability issues, and shipping complications. The goal is to provide peace of mind so you can focus on what you do best: running and growing your business.
Best ecommerce insurance vendors
| Name | Best for | Price | AM Best rating |
|---|---|---|---|
| The Hartford | Overall ecommerce business coverage | $85/month | A+ |
| CNA | Medium to large ecommerce businesses | Request a quote | A |
| Farmers Life Insurance Co. | Established ecommerce businesses | Request a quote | B++ |
| NEXT Insurance | Amazon and Etsy Sellers | $30/month | A- |
| Nationwide | Omnichannel retailers | Request a quote | A+ |
| Thimble | Artisanal crafters and makers | $42/month | A |
The Hartford
Best for overall ecommerce business coverage
The Hartford stands out as a reliable insurance provider for online stores. With comprehensive coverage options and a 24/7 in-house claims department, it makes protecting your business straightforward.
Their insurance packages cover critical areas including:
- Property damage
- Liability protection
- Business interruption coverage
- Data breach safeguards
- International shipping insurance
An easy-to-use online portal and accessible agents help you manage your policies with minimal hassle.
Price: Averages $85 per month
AM Best rating: A+ (Superior)
CNA
Best for medium to large ecommerce businesses
CNA offers more than 300 coverage types designed for small and medium-sized ecommerce businesses. Its CNA Connect program provides flexible options to protect your store, including:
- Property liability
- General liability
- Business income protection
- Accounts receivable coverage
Price: Quote-based
AM Best rating: A (Excellent)
Farmers Life Insurance Co.
Best for established ecommerce businesses
With more than 90 years of experience, Farmers Life Insurance understands the unique challenges ecommerce businesses face. It specializes in creating custom policies that address specific business needs, offering protection for:
- Digital assets
- Cyber liability
- Shipping risks
Their experienced agents can help you build an insurance package that fits your store perfectly.
Price: Quote-based
AM Best rating: B++ (Good)
NEXT Insurance
Best for Amazon and Etsy Sellers
NEXT Insurance has quickly become a go-to for online marketplace sellers. It offers instant coverage that meets Amazon’s insurance requirements for Pro Merchants, including:
- $1 million general liability coverage
- Protection for injuries and damages
- Affordable rates for online sellers
Price range: $30 to $38 per month
AM Best rating: A- (Excellent)
Nationwide
Best for omnichannel retailers
Nationwide provides highly customizable insurance solutions for sellers with both online and physical stores. Their extensive experience and financial strength allow for comprehensive coverage that can grow with your business.
Price: Quote-based
AM Best rating: A+ (Superior)
Thimble
Best for artisanal crafters and makers
Perfect for Etsy sellers and small craft businesses, Thimble offers flexible insurance that protects your creative work. Key features include:
- Hourly coverage for craft shows
- $5,000 equipment protection
- Commercial property and general liability coverage
- Instant proof of insurance
- Mobile app policy management
Price: Starting at $42 per month
AM Best rating: A (Excellent)
Types of ecommerce business insurance
When you’re starting an ecommerce business, understanding business insurance can feel overwhelming. While your specific needs may vary, here are nine key types of insurance to consider. An experienced insurance broker can help you determine the right coverage for business.
1. General liability insurance
General liability insurance is your first line of defense against potential business risks. It provides protection in three critical areas:
- Bodily injury claims from customers or people interacting with your business
- Property damage claims related to your business activities
- Claims of slander, libel, or copyright infringement
This coverage protects you from unexpected scenarios, such as:
- A child choking on a component of a toy you sell
- An allergic reaction to a material in your clothing
- Skin irritation from makeup components
Don’t assume your products are risk-free. Even if a claim seems unfounded, you’ll still need to cover legal fees. Liability insurance is typically priced based on your sales volume and product types. Higher-risk products like fireworks will have higher premiums. The average price for a plan is around $42 per month.
2. Product liability insurance
Product liability insurance goes a step further, covering compensation for injuries caused by design or manufacturing flaws in your products. For instance, if a customer becomes ill from food processed in your commercial kitchen, this insurance can protect your business.
Coverage typically includes:
- Medical bills for customer injuries
- Legal fees and trial costs
- Potential settlements
This insurance addresses risks like:
- Defective product design
- Hidden product defects
- Inadequate usage warnings
You can purchase product liability insurance as a standalone policy or as an add-on to your general liability coverage.
3. Business property insurance
If you sell physical products, protecting your inventory is crucial. Business property insurance covers theft, loss, or damage to your business property and inventory.
Imagine a scenario where your home—which doubles as your business storage—burns down. Without proper insurance, you’d face devastating financial losses. This insurance covers:
- Inventory replacement
- Emergency restoration or replacement
Important note: Your homeowners policy likely won’t cover business-related items. If you run your business from home, you’ll need separate coverage to protect your professional assets.
Your insurance premium depends on the total value of insured property. You’ll pay less to cover $5,000 of inventory compared to $50,000.
4. Workers’ compensation insurance
Workers’ compensation insurance provides essential protection for your team. It offers wage and medical benefits to employees injured on the job, including death benefits for their families if the worst should happen. This coverage applies only to work-related injuries.
Most states require businesses to have workers’ compensation insurance. Failing to comply can result in significant fines. Your state government determines the specific coverage, wage, and medical benefits.
Typical coverage includes:
- Medical expenses
- Lost wages
- Ongoing care
- Funeral costs
- Repetitive injury treatment
- Disability support
For example, if a warehouse employee strains their back while lifting a heavy box, your workers’ comp policy would cover their medical treatment. The average policy costs around $86 per month.
5. Transit insurance (Inland marine insurance)
Transit insurance becomes critical as your ecommerce business grows. This specialized coverage protects your inventory during shipping, especially for high-value or large batch shipments.
Inland marine insurance covers damage caused by:
- Theft
- Fire
- Water
- Wind
- Hail
- Shipping accidents
Typical protection includes:
- Goods in transit
- Electronics
- Computer and audio equipment
- Fine art and collectibles
- Medical diagnostic equipment
- Trade show exhibits
Imagine shipping a large inventory batch to a fulfillment warehouse, only to discover 75% of your products were damaged in transit. Without proper insurance, this could be a devastating financial blow.
When working with suppliers, warehouses, or distributors, carefully review contracts to understand existing insurance coverage. An experienced insurance broker can help you identify and manage potential risks.
6. Cybersecurity insurance
Digital security is a critical concern for every online store. Cyberattacks can compromise customer data, steal credit card information, or install malicious software. Small businesses are often more vulnerable to these threats than larger companies.
Cyber liability insurance provides crucial protection against:
- Lawsuits related to data breaches
- Legal penalties
- Customer settlements
- Investigative expenses
- Data recovery costs
Comprehensive coverage typically includes:
- Revenue loss from breaches
- Lost transferred funds
- Cyber extortion protection
- Data recovery expenses
- Public relations management
- Customer breach notifications
- Forensic consulting to prevent future attacks
Cyber insurance starts at an average of $57 per month.
7. Business interruption insurance
Business interruption insurance provides a financial safety net when unexpected events force your store to pause operations. This coverage reimburses you for income lost due to direct physical damage, such as natural disasters or fires, and helps cover the cost of rebuilding your business.
Typically this insurance covers:
- Lost profits
- Fixed operating costs
- Employee training expenses
- Wages
- Tax obligations
- Loan payments
Often sold as an extension of an existing policy, business interruption insurance helps ensure your business can survive unexpected challenges.
8. Professional liability insurance
Professional liability insurance, also known as errors and omissions (E&O) insurance, protects your business against claims of work-related negligence or misconduct. This is especially crucial for online service providers.
If a client believes they’ve suffered a loss due to your work—even if it’s just a perceived mistake—they might take legal action. Your professional liability insurance shields you from these potential costs. For instance, a realtor who overlooks a significant issue like mold could face substantial damages.
Insurance requirements vary by state and industry. Some states mandate specific coverage for certain professions, so consult a local insurance broker to understand your exact needs.
9. Business owners policy (BOP)
A business owners policy, or BOP, combines several types of business insurance into a single bundled policy. This typically includes:
- General liability insurance
- Commercial property protection
- Business interruption coverage
BOPs are particularly attractive for small and medium-sized businesses looking for customized, cost-effective protection. According to Insureon, the average BOP costs around $95 per month, which is often less expensive than purchasing each type of coverage separately.
Why online retailers need small business insurance
Running an online store comes with unique risks. Business insurance is your safety net, protecting you financially and legally against unexpected challenges. It helps safeguard your inventory, employees, and business from worst-case scenarios like supply chain issues or workplace injuries.
At its core, insurance is about minimizing business risks. Many potential threats aren’t covered by personal insurance policies. For example, your homeowner’s policy won’t protect inventory stored in your home office or garage.
As a bonus, business insurance can be a small business tax deduction, helping lower your overall tax liability.
Key reasons you might need business insurance:
- Protect customers and employees from potential product-related injuries
- Shield your business from cyberattacks and data breaches
- Defend against potential lawsuits from contract disputes
- Mitigate risks during supply chain disruptions
- Secure coverage for lost, broken, or stolen inventory
Some business relationships will require specific insurance coverage. Fulfillment centers and major retailers like Amazon often mandate liability and property insurance as a condition of doing business. You might need to provide proof of specific insurance coverage to work with certain partners.
When you’re ready to explore business insurance options, focus on finding coverage that matches your store’s unique needs. An experienced insurance broker can help you navigate the process and find the right protection for your business.
Ecommerce business insurance costs
Business insurance costs typically range from $600 to $1,200 per month, though the exact cost varies widely. Your specific pricing depends on several key factors:
- Potential business risks
- Business location
- Previous claim history
- Product types
- Number of employees
- Annual business income
- Business assets
The number of policies you need will also impact your total cost. A new online store might start with basic coverage, while a larger business with a warehouse and multiple employees might require more comprehensive protection. For instance, if you offer local delivery, you’ll need commercial auto insurance.
Simply put: Higher risk means more coverage, which translates to higher costs.
Working with an insurance broker
Finding the right insurance broker takes some research. While brokers may charge additional broker fees, they must clearly disclose their commission structure in writing.
To find the best insurance broker for you:
- Ask small business owners and mentors in your field for recommendations. When seeking advice, focus on people who have been through a similar stage of business and work in a similar line of business. If you can’t find an exact match, expand to your broader network of business owners for insights.
- Find companies that specialize in commercial insurance. Ideally, you want someone who truly understands the products and scope of what you need. The person who sold you personal insurance, like your car insurance, likely isn’t the best fit for your ecommerce business.
- Ask key questions during broker interviews. Determine if they’ve worked with and understand the needs of ecommerce businesses. Find out whether they can sell products from multiple companies. You’ll find the best options if your broker can provide quotes from various insurers, not just one or two.
Search on a marketplace
A broker may not be the right solution for every business. Using an online insurance marketplace might be a better approach, especially if you need coverage quickly.
Online insurance exchanges partner with top companies and provide quotes from multiple providers, saving you the trouble of contacting each individually. These marketplace typically require basic information about your business and insurance needs, then generate quotes from their partner providers.
Two top online insurance marketplaces include CoverWallet and Simply Business.
Compare policies
Always compare quotes carefully to find the policy and provider that works best for your business. Review each quote thoroughly, ask questions, and consider consulting with your advisers.
When comparing quotes, consider:
- Policy coverage details
- Limits of liability
- Premium and deductible amounts
- Payment terms
- Provider rating and reviews
- Quality of customer service
Your ultimate goal is finding a business insurance policy from a reputable carrier that provides the coverage you need at a reasonable price.
Buy and review annually
After selecting your policy, take these important steps:
- Learn payment due dates
- Understand how to claim refunds
- Know how to contact customer service
Most insurance companies now offer online management of your policy, allowing you to pay, file claims, contact support, add additional insureds, or request insurance certificates .
Make sure to review your policy periodically and adjust coverage as your business evolves.
Understanding the claims process for ecommerce insurance
When something goes wrong, knowing how to navigate the claims process can save you time and reduce stress.
Filing a claim
If an incident occurs—like a damaged package or a customer lawsuit—contact your insurance company immediately. Don’t delay, because insurers have strict deadlines for filing claims.
Here’s what to do:
- Call your insurance company right away.
- Explain what happened, when it occurred, and who was involved.
- Follow the insurer’s instructions carefully.
- Complete any required forms or speak with claims representatives.
- Provide all requested documentation.
Pro tip: Depending on the incident, you might need to file claims under different policies. A product injury might fall under product liability, while damaged inventory would use commercial property coverage.
Required documents
Insurance companies need comprehensive proof to process claims. Having the right paperwork can significantly speed up the process. Be prepared to provide:
- Receipts showing business-related purchases
- Photographs of any damage
- Police reports for theft or fire incidents
- Customer communication about product issues
Common claim denials
Even with coverage, insurers might deny claims for various reasons:
- Policy exclusions: Many property policies don’t pay for flood or earthquake damage.
- Late reporting: If you don’t tell the insurance company about the problem quickly enough, they may not pay.
- Lack of documentation: Without solid proof of damages and costs, insurers might say no.
- Material misrepresentation: If you provided incorrect or misleading information on your application or claim form, insurance companies might refuse to pay.
Claims processing time
Claim settlement times vary:
- Simple claims might be resolved in weeks, such as your delivery driver denting a bumper in a minor parking lot incident.
- Complex claims, like serious customer injuries, can take months or even years.
The more the insurance company needs to investigate, the longer your claim will likely take. If a claim seems delayed, contact your insurance company directly. Keep detailed records of all communications.
Tips for success
Managing your claims properly can make the difference between getting paid or facing denied claims. Follow these best practices to improve your chances of success:
- Know your policy: Understand what’s covered so you can file claims correctly and avoid surprises.
- Document everything: Keep photos, receipts, and customer messages. Good records speed up claims and help you get paid faster.
- Communicate promptly: Respond quickly when your insurer asks for information. Delays will slow down the process.
- Ask for help: If you’re confused or overwhelmed, lean on your insurance broker or agent. They deal with claims regularly and can advocate for you.
- Consider legal advice: For serious problems, especially lawsuits, you might need to talk to a lawyer.
Finding the best ecommerce insurance for your online store
Running a business always involves risks, but identifying and mitigating them is part of being an entrepreneur. Working with an informed broker can help you discover and manage potential risks you might not have initially considered, ultimately taking those worries off your plate.
There’s a significant difference between a business not working out despite your best efforts and closing your doors because of a preventable issue like damaged inventory.
This post is for informational purposes only and does not constitute legal or financial advice.
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Ecommerce business insurance FAQ
Can you legally run a business without insurance?
In most states, you can legally operate certain types of businesses without insurance, though workers’ compensation is mandatory if you have employees. However, going without proper insurance is risky and could potentially bankrupt your business if something goes wrong.
What kind of insurance do I need for an ecommerce business?
Product liability insurance is arguably the most important insurance for ecommerce businesses. Since products are the core of your operation, something can always go wrong, making product liability insurance a smart protection strategy.
How much is ecommerce insurance?
Insurance costs vary widely based on factors like business size, product types, sales volume, and business risks. Ecommerce companies typically spend between a few hundred and a few thousand dollars on insurance annually.
Do you need business insurance for a Shopify store?
Shopify store owners aren’t required to get business insurance, but it’s highly recommended. Business insurance covers numerous risks, including product liability, cyber threats, and business interruptions. The need for insurance depends on your store’s value and specific characteristics.
How much is Amazon business insurance?
Amazon requires sellers to obtain commercial insurance when they reach a certain sales threshold ($10,000 for three consecutive months). The cost depends on products sold, sales volume, and specific risks, ranging from a few hundred to several thousand dollars per year.
