Understanding Ecommerce Business Insurance Risk
Have you ever stopped to wonder who would be responsible if a product you sold caused damaged to another human being or their property?
Did you know that many online selling platforms including Amazon actually require insurance as part of their selling terms and conditions (they often just fail to request proof)!
Online retailers, should strongly consider insurance for their business. Everyone needs to have a cover, in case something goes wrong.
There are various types of insurance you can have for your company. But when you decide to start your business often no one explains to you what the different types of insurances are.
In this article, I will detail some of the common types of business insurance which may be applicable for your business. Moreover, you'll learn who I ended up going with.
The Main Types of E-Commerce Insurance
This insurance essentially covers your stock in the event it gets damaged. It can be especially useful if you keep a lot of stock in warehouses or transport a lot of stock.
Regardless of how careful you are, your stock is not immune to damage. Incidents like fire and earthquakes can ruin your valuable items immediately. If you don't have a stock insurance, all your stock investment and business can go up in flames!
Public Liability Insurance
Public liability insurance covers the cost of claims made by members of the public for incidents that occur in connection with your business activities. Public liability insurance covers the cost of compensation for personal injuries, loss of, or damage to property.
Product liability Insurance
This is essentially insurance that protects you in the event that a product you sell causes damage to your customer! It is definitely something ALL sellers should strongly consider.f you sell products online you will be held responsible for any damage or injury resulting from their use, even if you sell on Third Party marketplace websites such as
As, if you sell products online you will be held responsible for any damage or injury resulting from their use, even if you sell on Third Party marketplace websites such as eBay or Amazon.
This is also generally the case even if you have not manufactured the items, your product bears the name of your business or if the manufacturer cannot be traced.
Employer Liability Insurance / Professional Indemnity Insurance
If your online business requires you to hire several employees, it is often a legal requirement in most Western Countries to get employer's liability insurance.
For businesses that are selling services instead of products, you should also consider getting a Professional Indemnity Insurance policy to protect yourself in the event of liability for services performed.
Why Getting Online Insurance is Difficult
When I started selling, I knew eventually that I wanted to get into private labelling (Check out my article here if you don't know what private labelling is). This basically means you import goods from China slap your brand on the product and then call it your own product.
The problem with this is most insurance companies HATE dealing with Chinese manufacturers. Why? Because often Chinese manufacturers take shortcuts or manufacture with inferior and poor quality products.
This can lead to your product causing damage to your customer and when this occurs, you then end up either having to make a claim through your product liability insurance policy or pay the customer compensation out of your own pocket.
If the insurance company pays, they then attempt to take legal action to recover damages from the manufacturer.The problem with this is that often insurance companies find it hard to deal with Asian manufacturer due to language, cultural, distance and different laws and regulations and get reimbursement for the money they have just forked out!
The problem with this is that often insurance companies find it hard to deal with Asian manufacturers due to language, cultural, distance and different laws and regulations in order to get reimbursement for the money they have just forked out!
Which Insurance Provider Do I use?
As a result, finding insurance can be a major pain in the a*se! I sure know it was for me!
Often a lot of insurance companies will simply not offer you insurance unless you can get some form of contractual assurance or right of indemnification from the manufacturer in the event of a claim.
This is often impossible – especially if you are only dealing in small quantities with Chinese manufacturers.
As a result, finding coverage was a struggle and almost caused me to kill my business idea before I had even started!
After much searching, I eventually managed to find a U.K. Insurance broker called Crendon Insurance, who offered me insurance for my online arbitrage business for items sourced in the U.K.
A limitation of going with Crendon was that they were not keen on insuring my business if I wanted to sell in the U.S. As this is one of the biggest markets in the world this was a big problem for me.However, as I was just starting out with selling in the U.K. I decided to proceed with Crendon.
However, as I was just starting out with selling in the U.K. I decided to proceed with Crendon.
For those of you who are looking for a more comprehensive product liability insurance policy that covers selling globally including the U.S. AND also provides coverage for products sourced from China. I would check out the team at Volidco Insurance who have recently pioneered a new ground breaking global product liability insurance policy.
I would definitely recommend listening to my brief 20ish minute podcast with Volidco Insurance to gain a better understanding of the risks faced when selling, as well as why insurance is so important.
Tips For Ensuring Your Premium Stays Low
Generally, as a rule of thumb, insurance premiums are calculated based on your gross estimated sales turnover AND based upon the type of products that you sell (i.e. the insurable risk).
Normally, ingestible items i.e. vitamins or things that can be placed on the human body will be more expensive to insure than items like a lemon peeler or a garlic press. (This can be a handy point to keep in mind when conducting your product selection).
If you want a lower insurance premium, try and avoid selling ingestible items or items like creams that are applied to the skin,
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