Insurance is a necessity for any type of business. E-commerce companies face unique challenges, such as the transmission of viruses and loss due to computer fraud. This overview of e-commerce insurance basics helps online retailers choose a policy designed to suit the needs of their type of business.
Weigh the benefits and inclusions of the policy against the coverage amount and monthly premium to find an e-commerce insurance solution designed to offer maximum protection for online retailers. Consider the following types of coverage when comparing policies.
E-Commerce Insurance to Protect Against Property Losses
The property owned by an e-commerce retailer may include a physical building, such as a warehouse, as well as:
- Building content
- Computer equipment and media
- Employee personal property
- Packaging material and equipment
- Paper records
An e-commerce insurance policy may include, or offer for an additional fee, coverage for sales samples, emergency personnel service charges, debris removal or disaster clean-up, and more.
Business Interruption Insurance for E-Commerce Retailers
Downtime means lost revenue for e-commerce companies. Understand what the insurance policy will or will not cover. For example, the business could lose thousands of dollars in sales if the server fails and the e-commerce storefront is down for any length of time. However, e-commerce insurance may not cover the loss if the merchant forgot to pay the hosting bill, resulting in the suspension of service by the hosting company.
Read the policy carefully and ask questions to understand how the company is protected against business interruption.
Protection Against Crime, Hacking, or Compromised Data in an E-Commerce Insurance Policy
In a 2009 survey, payment management solutions provider CyberSource determined e-commerce companies lost a total of $4 billion in revenue to online fraud during the 2008 calendar year.
E-commerce insurance may help cover losses from fraudulent money orders, employee dishonesty, or depositor's forgery. However, insurance companies want to know what e-commerce retailers are doing to prevent fraudulent transactions. To learn more about reducing online payment fraud, see 5 Ways to Prevent Fraudulent Credit Card Use.
Liability Insurance for E-Commerce Businesses
An e-commerce insurance policy should protect the online retailer against claims of copyright or trademark infringement, internet advertising injury, blanket contractual liability, and more, depending on how the business operates.
Online retailers need more than broad liability coverage, which may not cover sensitive data interference or the transmission of a computer virus. Seek professional liability coverage designed with e-commerce companies in mind.
How to Choose Insurance Coverage for E-Commerce Companies
The insurance requirements of each online retailer varies. To find the right coverage, choose an insurance agent or broker experienced in e-commerce and able to understand the unique needs of the business.
Get several quotes and consult the company's legal and accounting representatives to ensure adequate coverage.
Just getting started? See E-Commerce Business Planning Benefits for advice on business planning for online companies.
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