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?

Running an online store comes with a unique set of hazards, from digital data breaches to lost shipments. You need the right safety net to keep your operation running smoothly. Here is a guide to the most critical business insurance policies for e-commerce businesses.

Cyber Liability Insurance

This is arguably the most critical coverage for online sellers. Cyber liability protects your business against the high costs associated with data breaches and cyberattacks. Since you store customer data and credit card information, you are a prime target. This policy helps pay for legal fees, customer notification costs, and credit monitoring services.

Example: A hacker breaches your payment gateway and steals credit card numbers from 500 customers. Cyber liability insurance helps cover the costs of notifying those customers and managing the legal aftermath.

Product Liability Insurance

When you sell goods online, there is always a risk that a product could be defective or cause harm to a buyer. Product liability insurance protects you against claims that a product you sold caused bodily injury or property damage.

Example: You sell a generic phone charger that overheats and causes a small fire in a customer’s home. They sue you for damages. This policy helps cover the settlement costs.

Inland Marine Insurance

Do not let the name fool you. This policy is essential for e-commerce because it covers products and inventory while they are in transit. If you ship goods to customers or transport inventory between warehouses, this insurance covers losses from theft or damage during transport.

Example: A delivery truck carrying a large shipment of your inventory is involved in an accident, destroying the goods. Inland marine insurance provides compensation for lost stock.

General Liability Insurance

This is the standard policy for small businesses. It protects you against third-party claims of bodily injury, personal injury, and property damage. For online businesses, this also covers advertising injuries, such as copyright infringement in your marketing.

Example: A competitor sues you, claiming your new logo looks too much like theirs. General liability can help pay for the legal defense fees.

Workers’ Compensation Insurance

If you have staff helping you pack boxes, manage the website, or handle customer service, you likely need workers’ compensation. It covers medical bills and lost wages if an employee gets hurt or sick because of their job. Most states legally require this as soon as you hire your first employee.

Example: An employee in your fulfillment center trips over a stack of boxes and breaks their wrist. Workers’ comp covers their emergency room visit and physical therapy.

Business Owner’s Policy (BOP)

A BOP is a cost-effective way to get broad coverage. It usually bundles general liability and commercial property insurance into one package. This is often cheaper than buying the policies separately and covers your business assets and liability risks simultaneously.

Example: A pipe bursts in your home office and ruins your inventory while destroying your carpet. A BOP helps you pay for the inventory loss and the property repairs.

Professional Liability Insurance (Errors & Omissions)

Professional liability insurance protects you if a client claims your professional advice or service caused them a financial loss. It is crucial for B2B e-commerce companies or consultants. It covers legal defense if you are sued for negligence or making a mistake in your work.

Example: A client claims a glitch in the software subscription you sold them caused their website to crash on Black Friday, resulting in lost sales. They sue you for the revenue loss. This policy helps cover the claim.

Business Interruption Insurance

If a disaster forces you to pause operations, this insurance helps replace your lost income. It can pay for ongoing expenses like payroll and rent while your business is unable to operate due to a covered event.

Example: A severe storm knocks out power and internet at your main distribution center for a week, making it impossible to fulfill orders. Business interruption insurance helps cover the income you lost during that downtime.

Commercial Property Insurance

Whether you own a large warehouse or rent a small office, this policy protects your physical space and the contents inside. It covers damages from fire, theft, vandalism, and weather events.

Example: Vandals break into your storage unit and damage your shelving and equipment. Commercial property insurance pays for the repairs and replacements.

Business Personal Property (BPP) Insurance

BPP focuses on the movable items you use to run your business. This includes computers, packing tables, cameras for product photography, and office furniture. It covers the cost to repair or replace these items if they are stolen or damaged.

Example: Someone steals the laptops and label printers from your office. BPP helps cover the cost of buying new equipment so you can get back to work.

Hired And Non-Owned Auto (HNOA) Insurance

If you or your staff use personal vehicles for work tasks, personal auto policies may not cover accidents that happen on the clock. HNOA provides liability coverage for vehicles your business uses but does not own.

Example: You send an employee to the post office to drop off packages in their personal sedan. On the way, they rear-end another car. HNOA helps cover the liability costs for the damage to the other driver.

Commercial Auto Insurance

If your business owns a delivery van or a dedicated company car, you need a commercial auto policy. Personal insurance will not cover vehicles owned by a business. This covers medical costs and property damage if the business vehicle is involved in a crash.

Example: You are driving the company-owned van to a trade show and accidentally back into a luxury car. Commercial auto insurance covers the repair costs for the other vehicle.

Umbrella Insurance

This provides a safety net that sits on top of your other liability policies. If a massive lawsuit exceeds the limits of your general liability or auto policy, umbrella insurance pays the difference.

Example: You are sued for $1.5 million after a severe product liability incident. Your primary policy only covers up to $1 million. Umbrella insurance kicks in to cover the remaining $500,000.

Cheapest E-Commerce Product Liability Insurance

The cheapest carrier identified for Product Liability coverage is Hiscox, with an average annual cost of $873.

Note: These estimates are based on averages for a small e-commerce business that sells its own branded products, for which product liability is a primary risk. Actual premiums will vary based on the specific products sold, sales volume, manufacturing origin, and claims history.

Cheapest E-Commerce General Liability Insurance

The cheapest carrier for General Liability coverage is The Hartford, with an average annual cost of $726.

Note: These estimates are based on averages for a small online retailer with low public-facing risk (e.g., a dropshipper or a business with no physical storefront). Actual premiums will vary based on your annual revenue, business location, and policy limits.

Cheapest E-Commerce Business Owner’s Policy

The cheapest option for a Business Owner’s Policy (BOP) is The Hartford, with average annual premiums around $780.

Note: These estimates are based on averages for a small e-commerce business bundling general liability with commercial property insurance to cover inventory and business equipment (like computers). Actual premiums will vary based on the value of your inventory, property location, and desired coverage limits.

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.

Note: These estimates are based on averages for small U.S.-based e-commerce and online retail businesses. The actual premium for any business will vary significantly based on several factors, including: annual revenue, value of business property and inventory, number of employees, policy limits, deductibles selected, and claims history.

How Is Your E-Commerce Insurance Cost Calculated?

Insurance underwriters look at specific details to decide the cost of your premium. They analyze the unique risks associated with running your online store.

The actual products you sell are a primary factor. Selling risky items like heavy electronics or skincare usually leads to higher costs for product liability coverage. Your financial scope matters too. Higher annual revenue and a larger number of employees generally result in increased premiums because there is more at stake.

Providers also review your track record. If you have filed claims in the past, insurers may view your business as a higher risk. The total value of your inventory and equipment also plays a role. Even your legal structure affects the price. For example, a corporation might have a different rate than a sole proprietorship. Finally, the specific coverage limits you select will directly impact your final price.