Insuring an E-Commerce Shop Versus a Brick-and-Mortar Store
Dan Levenson September 21, 2017
E-commerce is booming, with nearly 1.6 billion online shoppers making purchases in 2016 alone. For most traditional brick-and-mortar stores to survive these days, a complementary e-commerce site is often a necessity. It is also not unheard of for e-commerce sites to become so successful, they can expand to a physical location.
But are the business insurance needs the same online as they are for a physical location?
For retailers both online and on the ground, here’s what you need to know about insuring your company.
Brick-And-Mortar General Liability Insurance
There is an array of risks attached to having a physical location that is open to the public for browsing and shopping. But insurance protection is not just for a retailer’s clientele—a policy also provides coverage for employees, vendors, or service providers when they are on-site.
In addition, insurance can provide certain protections for the business owner’s investment in stock, fixtures, equipment, and even structural elements of a site’s building.
General liability insurance coverage, also called comprehensive commercial liability, covers it all: bodily injury, physical injury, property damage, and theft. Even if a retailer engaged in business-to-business activities experiences an accident at a client’s site, they can rest easy knowing that they are covered.
Retailers also need protection from fraudulent claims—for example, the old slip-and-fall scam. To understand just how important insurance is for your store, consider all the things that can go wrong:
- Failed delivery
- Fraudulent injury claims
So, if you’ve been thinking you can’t afford general liability insurance for your business, the reality is that you can’t afford NOT to be covered.
But what about your e-commerce site?
Cyber Liability Insurance
Retailers who conduct business online may think that business insurance is not a necessary expense. After all, a virtual store means that no one can get injured at your place of business.
Or can they?
Cyber injury is a very real risk online retailers expose their customers to, as well as themselves. Loss of important personal and financial data, such as credit card information, is a cyber injury that has the potential to affect a person for a lifetime.
Cyber liability insurance provides retailers with the protection they need should they experience a data breach. The cost to resolve the fallout of breach can really add up. Not only will the business owner need to invest time and money to clean up the problems caused by the breach, they could also be responsible for certain fines and penalties attached to the failure to properly regulate the personal data of the customers.
Here’s how cyber liability insurance can protect your e-commerce business:
- Coverage for investigating data breaches
- Manage remediation tasks, such as credit checks and notifications of affected clients
- Legal costs and regulatory fines and penalties
- Third-party damages, such as intellectual property rights infringement
- Extortion coverage, such as being denied access by a third-party network provider
- Theft of data
Cyber liability insurance is designed for the unique risks that arise for e-commerce businesses. Even if a retailer has general liability insurance for their brick-and-mortar store, they need the specific protection provided by cyber liability insurance to protect their digital store.
How Much Coverage?
Once a retailer recognizes how important it is to protect their physical store as well as their virtual store, the next question is usually related to how much coverage they need. There is no one-size-fits-all policy. Every business is different.
How, then, does a business owner know if they have adequate protection, too little, or too much?
A policy should be tailored to protect a company’s particular risks. Knowing the right questions and numbers will help a business owner determine what their coverage needs are.
- What are your gross annual sales?
- What is the value of your inventory?
- What is the structural value of your building, equipment, and store fixtures?
- What would be the estimated loss for a daily closure of your business?
- How much, on average, is your retail store’s loss due to theft?
- Is there a business vehicle in use?
- How many workers are employed by your business?
Security is fundamental for business success. Knowing that your company is protected on the ground and in cyberspace empowers you to continue moving forward—even if the worst happens!