In 2020, a lot of businesses went online to amplify their revenue. Some sought survival in the midst of the pandemic. This opened new gateways and possibilities for businesses of all sizes. The eCommerce industry has significantly transformed since then, with more and more people preferring online shopping.
But there are challenges as well. For example, online payment fraud cost $41 billion in 2022 and is expected to cost $48 billion this year. Besides, faulty products are eCommerce sellers’ worst nightmare, and they can lead to expensive lawsuits.
Usually, large eCommerce firms have legal teams and cybersecurity wings, but small businesses often take a beating. To weather this storm and avoid fraud and potential business damage, eCommerce sellers require a high level of protection. The good thing is that there are numerous insurance policies available to help against these challenges.
Let us take a look at them below.
Product Liability Insurance
When a business is product-oriented, there is a product liability that can result in a significant loss if someone is injured/hurt/impacted after using/handling the product. For example, if a brand is in the skincare business and someone gets an allergic reaction to one of their products because of wrong information about the allergens, it can face a lawsuit.
Liability insurance can be a great way to avoid financial hardship or a bad reputation because of product-related damage. A legal claim that arises because of a product sold, used, or manufactured by a business can be addressed with product liability insurance. This includes repaying compensations, legal fees, and so on.
General Liability Insurance
A general liability insurance policy is different from a product liability insurance policy. As previously stated, product liability insurance covers claims arising only because of the products. When it comes to general liabilities, the concerns shift towards operational or human error.
If a small business is involved in a third-party or employee accident, general liability insurance can help pay for the claims. eCommerce businesses must ensure that they purchase workers’ compensation insurance so that any damage can be paid for without affecting the company’s cash flow. Any type of liability insurance is an excellent way to build a risk management portfolio for brands.
If you are an Amazon seller, you must definitely buy insurance (such as commercial general liability) to protect your brand against any lawsuit.
Cybersecurity insurance is one of the most important types of insurance for any eCommerce seller. According to reports, the majority of small business owners do not even consider this aspect. Over 92% of business owners are said to be unaware of cyber security. But there are numerous ways for an online business to be conned, including payment fraud, website or social media account hacking, etc.
Notably, small businesses must adhere to privacy laws while using customer data for business operations. In the event of a lawsuit allegedly brought about by a cyberattack, cyber security insurance can help pay for the legal costs.
Commercial Auto Insurance
To run businesses efficiently, eCommerce sellers must be using a commercial vehicle at some point during the operational value chain. This includes shipping orders, bringing in supplies, and so on.
If a small business uses a commercial vehicle, purchasing commercial auto insurance is critical. This helps to cover losses that may occur while on the road. Besides, issues such as product damage while shipping or transporting it to a warehouse can be compensated for with transit insurance.
Focusing on this aspect of vehicles and transportation is critical and should not be overlooked.
Business Interruption Insurance
Due to severe natural disasters in the United States, both online and offline sellers are struggling to keep up. Not to mention the economic volatility, which is causing most citizens to think twice before spending lavishly.
If a small business sells a premium product, there is a chance of a decline in sales, resulting in losses or temporary or even permanent closure. In such cases, purchasing business interruption insurance can be extremely beneficial. This insurance coverage assists owners in receiving income that has been interrupted due to a natural or man-made disaster.
Furthermore, if operations entirely stop due to operational constraints, moving to a temporary location as well as loan payments are covered by business interruption insurance.
Many times, businesses face circumstances that they have never encountered before. This can include an image website suing a business for using a copyrighted image. Such incidents are rare, but they can happen to anyone if attention is not paid to using and distributing content to promote the brand.
Scenarios could also transpire where a business unintentionally causes emotional harm to a community or ethnicity, leading to legal claims and lawsuits. Umbrella insurance is a wise policy to have and use in situations that otherwise do not qualify under any other policy.
In a Nutshell
eCommerce sellers must be aware of cyber-attacks and everything else their business requires protection from. As the holiday shopping season commences, it is critical to be alert and focused to remain profitable and avoid lawsuits.
At Gonzalez Insurance, we know the importance of understanding these minor but necessary aspects of doing business online. Get in touch with us if you are seeking a thorough portfolio analysis and appropriate insurance coverage.