E-Commerce Business & Online Retailer Insurance

Business insurance helps you keep your business running by covering legal expenses, professional mistakes, and client disputes.

Why Do E-Commerce Businesses Need Insurance?

E-commerce businesses need insurance to cover the inherent risks associated with their job including safety hazards from their products, issues with unexpected business closures, legal liabilities, and of course maintaining client trust.

Some of the main reasons why e-commerce businesses need insurance are to protect against financial and legal risks associated with things like damage to inventory, contract disputes, supply chain disruptions, or product related injuries. E-commerce businesses, for example, can be held legally liable if their products cause injury but the right product liability insurance can protect against defective product claims.

Similarly, products can be damaged or stolen during transit or while in storage and the right commercial property insurance can cover those losses.

Add to that the fact that many platforms actually require insurance before allowing sellers to operate on their e-commerce platforms. If you’re an independent contractor, or you have a business with several contractors under your employ, having the right insurance helps you operate confidently, knowing you’re covered if something goes wrong.

What Insurance Do E-Commerce Companies Need?

E-Commerce businesses need protection against common risks like product loss, injuries or damage to the job site. To protect yourself and your business, here’s a breakdown of the most important insurance policies to consider.

General Liability Insurance

General liability insurance is the foundational insurance policy for most small businesses. It protects you from third-party claims of bodily injury, property damage, and personal injury. If someone gets hurt because of your work, general liability pays for legal fees, repairs, or medical bills.

Example: A customer claims they sustained an advertising injury and sues. General liability insurance can cover the cost of any repairs and any legal fees if a lawsuit follows.

Cyber Liability Insurance

Cyber insurance covers losses related to cyberattacks, data breaches, and other digital risks, particularly important if you store client info online. This covers legal costs, notification expenses, and credit monitoring for affected clients.

Example: Your bookkeeping software is hacked, and client addresses and payment details are leaked. Cyber liability helps manage the fallout.

Product Liability Insurance

This is a form of protection against any claims that the products or services you provide or sell online are defective or cause harm.

Example: You are sued when someone claims your products caused physical damage to their home. This would cover potential legal fees or settlement fees.

Professional Liability Insurance (Errors & Omissions)

Professional liability insurance is a form of protection against errors or omissions in the work your company does. If you make a mistake that causes damage while repairing or replacing a roof, this can protect you if you are sued for damages.

Example: You are sued over an error in your shipping services. This would cover the claims against errors in your work.

Workers’ Compensation Insurance

Workers’ compensation insurance covers your employees if they get injured or become ill as a result of their job. This covers medical bills, lost wages, rehabilitation, and even death benefits. It’s also required by law in most states if you have employees.

Example: One of your employees is burned by the hot tar. Workers’ comp pays for their ER visit and covers time off while they recover.

Workers’ compensation insurance is required for e-commerce businesses with employees in almost every state.

Inland Marine Insurance

Inland marine insurance, sometimes called transit insurance, is a form of protection for tools and products especially when being transported to and from a job site. This can provide coverage against things like theft, vandalism, or loss while your inventory is transported to customers.

Example: A large table was stolen while in transit to a customer. This would provide compensation for the lost inventory.

Business Interruption Insurance

This is a form of protection against lost income if there is a temporary closure because of an unforeseen event. If there is an unforeseen event that causes your business to temporarily close, this type of insurance can help cover the cost of lost income which can be especially important for operations that work primarily in the spring and summer.

Example: There is a significant storm with tornadoes in your area that leaves your business inventory ruined and forces a temporary closure. If you have to suspend your online operations, this type of insurance can cover part of the profits that might have been earned during the same time frame.

Commercial Auto Insurance

If you or your employees drive for business purposes, personal auto insurance likely won’t cover accidents. Commercial auto fills that gap. This covers vehicle damage, injuries, and liability if you’re involved in an accident while driving for work.

Example: One of your employees rear-ends a car while driving to your office in the company truck. Commercial auto covers the damages and medical costs.

Business Owner’s Policy (BOP)

A BOP bundles general liability and commercial property insurance into one policy, often at a lower cost than buying them separately. This covers property damage to your business location or equipment, along with liability protection.

Example: A fire in your office damages supplies and business records. A BOP helps you recover both the physical and financial losses.

Commercial Property Insurance

If you own or lease space for your business, this policy covers the physical building and the contents inside. Fire, vandalism, theft, weather damage, and more—anything that could physically impact your business premises or equipment stored there.

Example: A storm causes water damage to your office, ruining thousands of dollars’ worth of inventory and shipping supplies. Commercial property insurance helps you recover.

Business Personal Property (BPP) Insurance

BPP is a type of property insurance specifically for movable items like cleaning equipment, computers, and furniture used in your office. It covers repair or replacement of these items if they are damaged or destroyed due to fire, theft, or other covered events.

Example: A fire in your office destroys shipping and packing supplies. BPP helps cover the cost to replace those essential business items.

Hired And Non-Owned Auto (HNOA) Insurance

This policy covers liability if you or your employees use personal or rented vehicles for business purposes. If an employee causes an accident while using their personal car for a work errand, HNOA provides liability coverage where personal auto insurance might fall short.

Example: You send an employee to pick up spare ink for your office label printer in their own car, and they cause a fender bender. HNOA helps with the liability claim.

Umbrella Insurance

Umbrella coverage provides extra protection beyond the limits of your existing policies, like general liability and commercial auto. Once a claim exceeds the limits of your underlying policy, umbrella insurance kicks in to cover the remaining amount.

Example: You’re sued for $1 million after a client claims your product caused significant injury. Your general liability policy caps at $500,000. Umbrella insurance can cover the remaining $500,000.

Together, these policies form a comprehensive insurance plan for all e-commerce companies. While not every business needs all of them, understanding your risks and matching them with the right coverage ensures your operation stays protected, whether you’re a solo contractor or manage a growing team.

E-Commerce & Online Retailer Insurance Requirements

E-commerce companies are generally not mandated by federal law to carry specific insurance policies. However, certain types of insurance may be required depending on state laws, local regulations, and the nature of your business operations.

Moreover, many online platforms require proof of insurance before allowing sellers to operate.

Workers’ Compensation Insurance: In most states, if you have employees, you’re required to carry workers’ compensation insurance to cover medical expenses and lost wages for work-related injuries or illnesses. However, Texas does not mandate this coverage for private employers, though it’s still highly recommended to protect both your employees and your business.

Cyber Insurance: If your business operates entirely online, it is generally a good idea to invest heavily in cybersecurity measures to protect inventory and client data.

General Liability Insurance: While not legally required, general liability insurance is often necessary to secure contracts and is highly recommended to protect against claims of property damage or bodily injury. Some clients may require proof of this coverage before doing business with you.

It’s important to check with your local city or county government to understand specific licensing and insurance requirements applicable to your area.

How Much Does E-Commerce Business Insurance Cost?

E-commerce companies pay an average of $57 per month for general liability insurance. Several factors influence the cost of business coverage, including your business location, the number of employees, the types of items you sell, the records you keep, your claims history, and whether you have a large sales volume.

Insurers also consider the amount of coverage you choose and whether you package policies together. While it may be tempting to go with the cheapest option, it’s important to choose a plan that truly protects your business from its most likely risks.

How Is Your E-Commerce Insurance Cost Calculated?

Insurance underwriters calculate your business insurance premium based on several key risk factors unique to your business.

One of the biggest considerations for Insurance Underwriters are the products that you sell. Certain products like beauty products or fireworks are considered higher risk so they typically cost more especially for product liability insurance. The higher your sales volume the higher your risk exposure as well.

Another factor in the way your costs are calculated has to do with the size of your business as higher annual revenue and higher employees can increase your costs.

Underwriters also look at your claims history—if you’ve filed previous insurance claims, you could be seen as a higher risk. The value of your tools, whether you own or lease business vehicles, and the type and amount of coverage you choose all factor into the cost as well. Even your business structure (LLC vs. sole proprietor) can affect how your policy is priced.

Tips To Lower Your E-Commerce Business Insurance Costs

Insurance costs can add up quickly for e-commerce companies, but there are practical ways to keep your premiums manageable without skimping on coverage. The key is to understand which factors you can control and take proactive steps to minimize risk.

• Mitigate risks. Proactively mitigate risks like data breaches, supply chain issues, or product liability and if you handle any customer data make sure that you have cyber security measures implemented.
• Streamline operations. Work to optimize your operations through Inventory management and improved customer service so that you can minimize your risk of returns and potential losses or claims.
• Bundle your policies. Combine general liability, property insurance, and other coverages into a Business Owner’s Policy (BOP) to qualify for a multi-policy discount.
• Consider Hired and Non-Owned Auto (HNOA) coverage. If you or your employees use personal vehicles for work, HNOA can be more cost-effective than a full commercial auto policy.
• Keep a clean claims history. Avoiding claims through proper training and safety procedures can lower your risk profile and lead to reduced premiums over time.
• Invest in workplace safety. Implementing safety protocols and training for employees helps reduce the chances of injury claims and can lower workers’ compensation costs, especially ongoing training for your employees. Many insurance companies offer discounts for comprehensive safety protocols.
• Raise your deductible. Opting for a higher deductible can lower your monthly premium, but be sure your business can absorb the extra out-of-pocket cost in case of a claim.
• Review your coverage annually. Adjust your policies as your business evolves to avoid paying for coverage you no longer need.
• Compare quotes from multiple insurers. Rates vary widely, so shopping through Insuranceopedia can help you find the best deal for your current needs.

Taking a strategic approach to your insurance planning can make a real difference in your bottom line. With a little research and regular review, you can stay protected and cost-efficient at the same time.

Following these steps helps ensure you’re properly insured and set up to handle risks confidently and professionally.