Online Retailers Insurance
No matter how big or small your operation is, there is always the potential for an incident to occur which could result in a catastrophic loss. That’s why all online retailers need to look into what insurance they need, based on the type of business they run, and how they source their products.
Online Retail Risks
Many online retailers think that the most important risk in starting or running a business is whether or not you’ll make enough money to survive. This is true as the survival of your business depends on bringing in sufficient cash and remaining profitable. However keeping the business profitable can prove problematic in the event of an unexpected incident.
The worst case scenario in this event would be that you lose all of the time, effort and money that you have invested into the business.
What happens if one of your customers is killed, seriously injured or suffers a serious illness as a result of one of the products you have sold?
You might think that would be the responsibility of the manufacturer or the wholesaler, but that is not always the case, especially if you are importing the goods yourself.
Another risk to consider is the damage or theft of your contents and stock, or damage to your property if you are operating your business from leased premises.
Here are some of the insurance policies that can help you protect against the various risks your online retailing business faces:
One of your products causes death or injury to a third party, or damage to their property:
- Products Liability: If you are found to be responsible for the product and the loss caused this insurance can cover the costs incurred.
Your business suffers a privacy breach, hacking or cyber extortion attack:
- Cyber Liability Insurance: This policy provide you access to a crisis management team, who will guide you through the process of getting your business back on track, and defend a claim against you for liability arising from the data breach.
Theft of contents or stock:
- Property Covers: This can cover contents and stock for a variety of perils including fire, theft and accidental damage.
These are the core polices required as an online retailer, however there is a variety of additional insurances that your retail business may want to consider:
- Product Recall
- Goods In Transit Cover/ Marine Cargo Insurance
- Deterioration of Stock - if any of your products are refrigerated or frozen.
- Employee Dishonesty - if you have employees responsible for company funds
- Business Interruption - to protect your income in the event of a property claim
- Directors' & Officers' Insurance - to protect you against claims where you are held personally liable for decisions made as the business owner.
- Commercial Legal Expenses - to help cover legal costs in the event of a variety of disputes including contract disputes and health and safety disputes.
Earlier in this guide we mentioned that you may have additional responsibilities if you are importing goods yourself.
If you are the importer of a product, depending on the particular chain of supply you may be unable to pass any claim onto a negligent manufacturer, especially if they are based overseas. This means that if a product you have imported results in the death, illness or injury of another person, you could be held liable.
Such an event could lead to a claim against you for potentially thousands of pounds, especially in the event of death or permanent disablement.
All retail businesses needs to ensure they have product liability insurance in place, to protect against any possible legal action.
Another area to address when insuring your imported goods is whilst they are in transit. A marine transit policy will cover your goods whilst they are on their way to your business.
Sourcing products direct from the manufacturer or wholesaler
Retail business owners often believe that they do not need their own product liability insurance as the manufacturer or wholesaler should be responsible.
Whilst ultimately this may be the case, smaller retailer are often initially dragged into costly court cases and legal action as the third parties legal team will often take action against all parties involved, including the manufacturer, the wholesaler and the retailer.
Even if the court eventually finds that it was the manufacturer at fault, and you are found to have no financial liability, the case itself can still be very costly, and without insurance these legal costs could massively impact the profit margins in your business, and potentially bankrupt your business, regardless of the outcome of the legal action.
This is one of the great benefits of public and product liability insurance, as your policy can cover these legal defence costs regardless of whether you are found to be liable or not.
Working from Home
Many online retail businesses start their lives in the family home. A common mistake made by many home based businesses is thinking that their home insurance will cover them, or simply that they don’t need insurance at all.
A home insurance policy may provide limited cover for your business, however the covers are normally limited to property and do not extend to protecting the business from a public or products liability basis.
Irrespective of whether or not you take out a separate business insurance policy, it is essential that you inform your home insurance provider that you are running a business from home.
Mitchell Charlesworth Insurance Solutions can talk you through your online retail business insurance needs and source a suitable policy for you. We work with a number of insurers who specialise in online retailer covers and offer competitive premiums with fair terms.
To download our Online Retailers Insurance guide click the link to the right of the page.
Contact a member of our Insurance Team below
Director of Insurance0151 4237500Widnes
Mitchell Charlesworth Insurance Solutions Ltd is registered in England and Wales no. 7002662 and is authorised and regulated by the Financial Conduct Authority.