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Online retailer insurance

Business insurance for online retailers

Mehdi Punjwani
Written by  Mehdi Punjwani
5 min read
Updated: 02 Apr 2024

Ecommerce has been a growing part of the retail industry for years, with many individuals starting up their own online shops to sell goods and services. However, like with any other business it comes with certain risks - which is where business insurance for online retailers can be so helpful. Here’s how online retailer insurance works and how it can help you with your business.

What is online retailer insurance? 

Online retailer insurance is business cover designed specifically for ecommerce businesses - or those with an online presence where they sell their goods and/or services. It offers vital financial protection in unforeseen circumstances where things can sometimes go wrong. 

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Do I need business insurance as an online retailer? 

Online retailer insurance can be useful for self-employed workers and business owners in a number of situations, ranging from issues with stock that needs to be replaced to legal and liability issues, cyber-attacks and even loss of businesses. However, it isn’t compulsory to have any kind of business insurance in place unless you have employees - in which case the law requires you to have employers’ liability insurance

We’d recommend taking out online retailer insurance if you sell online, whether it’s your own products or something you sell from a third-party supplier, and whether it’s your own website or a third-party platform like Amazon or Etsy.  

Do I need cover if I sell on a third-party platform? 

Even if you sell your products on a third-party platform like Amazon, eBay or Etsy, you should still take out business insurance as you will still be liable for your products. These platforms won’t usually require you to take out business insurance in order to sell, but they won’t offer any automatic coverage either, so looking for cover is always a good idea. 

Will home insurance cover an online shop I run from my home? 

If you run an online shop from your own home, your home insurance is unlikely to extend coverage to things like office equipment or stock, as these will come under ‘business usage’. As such, you’ll need to look for business cover in order to ensure you’re sufficiently protected. 

What’s covered by online retailer insurance?  

The specifics of your online retailer insurance policy will depend on the type of cover you need, but generally speaking most insurers will offer the following: 

  • Public liability insurance: Public liability insurance covers you against the cost of claims and legal fees if your business causes damage to property or injury to another person. This might seem unnecessary if your business is online-only due to limited contact with customers, but it can still be useful for incidents at a warehouse, trade show or promotional event, damage to rented properties, or even damage occurring during delivery 

  • Product liability insurance: Product liability insurance is more straightforward, and offers protection in the event that your products cause injury or damage and you have to pay legal fees or compensation to the customer. For example, if you sell food or drink that causes food poisoning or electronics that malfunction and cause a fire or an explosion. Remember you could still be liable for products even if you don’t manufacture them yourself 

  • Employers’ liability insurance: Employers’ liability insurance is a legal requirement if you employ others, and offers cover if an employee falls ill or injures themselves due to the work they do for your business 

  • Business interruption insurance: Business interruption insurance can cover part of any lost income that results from unexpected circumstances, as well as the cost of getting operations back underway after the pause 

  • Cyber insurance: Cyber insurance offers protection in case your business is targeted by cyber criminals, covering legal costs and compensation as well as technical help with restoring operations 

  • Stock insurance: Stock insurance covers your business’s stock in case of theft or vandalism, damage in transit or damage in storage. Keep in mind transit cover may not be included as standard so be sure to check before taking out a policy 

  • Equipment/contents insurance: You might also consider contents cover for any office or business equipment you have, whether it’s kept at an office or at your own home - remember home insurance doesn’t cover items for business usage. You can also take out contents cover to protect items in your physical shop or premises if needed 

How much cover do I need for my stock? 

To work out how much cover you need for your stock, you should account for its ‘trade value’ - the cost of replacing it all - rather than the ‘retail value’, which is what you’ll sell it for. It’s also worth considering if you need to vary the amount of cover you have for different shopping seasons such as Christmas - some policies even include seasonal variations as standard. 

Do I need extra cover if I have a premises? 

If you have a physical premises as well as an online shop, you’ll likely need to take out extra cover for your shop’s contents, the building itself, and employers’ liability if you hire anyone else. 

How much does online retailer insurance cost? 

The cost of online retailer insurance can vary depending on the nature and size of your business - insurance providers are likely to factor in the following: 

  • The type of business: If your business involves the use of heavy or dangerous equipment or highly valuable materials then insurers will consider it to be a higher risk 

  • The size of your business, including employees and turnover: Likewise if you have a high turnover it can indicate valuable contracts or lots of clients - both of which increase your risk factor. Having staff also increases your overall risk, so will likely mean your insurance costs will be higher 

  • The cover you need: Different businesses have different cover requirements, and you’ll need to consider things like the amount and value of your stock as well as potential liability costs 

How much do I pay in excess for a claim on online retailer insurance? 

Excess payments are a part of pretty much all types of insurance, including online retailer cover - and as with other excess payments you’ll often be able to pay an extra ‘voluntary’ amount on top of the compulsory fee. Offering a higher voluntary excess fee can often bring your overall premiums down - just ensure you’re able to pay the amount in the event that you need to make a claim. 

Frequently asked questions

Is stock covered during delivery or transit?

It’s likely your stock is only covered if you’re delivering it yourself - if you use a third-party courier then you should check if they provide their own cover before signing up. Your policy also probably won’t cover you for late or failed deliveries as well as returns. 

Is faulty stock covered by insurance?

Your online retailer insurance policy is unlikely to cover faulty stock - so if you need to refund a customer or fix/replace any items it will be down to you. However, product liability insurance does cover the cost of compensation or legal fees you might face if faulty stock causes injuries or damage to property. 

Am I covered if I sell at market stalls or from a vehicle?

Yes, if you sell from a physical shop, even a market stall or a vehicle like a van, you can still get cover to protect you against public liability or product liability. This can ensure you’re protected in case someone is injured or their property is damaged as a result of your business and its physical premises.  

Is my cover affected if I change from sole trader to limited company?

If you change your business structure you should let your insurer know immediately so they can update your policy or offer you a new one as appropriate. If you don’t keep your insurer informed, they may refuse to cover you in the event that you need to make a claim. 

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