Five Types of Insurance Online Sellers Should Consider Right Now
by November 1, 2020
This post is from our friends at NAS Insurance
There are many nuances to running a business. Some are fun, like creating a brand, building your team, and of course, seeing the fruits of your labor. Others, like buying insurance, can feel more like a chore that you end up putting off for as long as possible. It’s easy to think that selling products online means you won’t face the same exposures as a selling in brick and mortar store, but think again. Regardless of how or where you sell, your business will inevitably be exposed to certain liabilities. And without the proper protection, you could find your business–and your pocketbook–in hot water.
Understanding which insurance policies are worth the investment can be a fulltime job, and we know that you’ve got a business to run. That’s why we’ve compiled this essential list of insurance policies you should consider right now.
Commercial General Liability (CGL)
Whether you sell widgets or gadgets, you should consider carrying a CGL policy. Commercial General Liability is a standard insurance policy that can protect you and your business from liabilities involving bodily injury, property damage, or personal and advertising injury. Your policy can also include product liability coverage, to protect you from claims that results from the use of your product(s). But don’t be mistaken, this coverage is not just for manufacturers. As a seller, you can be brought into a lawsuit as well.
At the time of this writing, Amazon requires its sellers to carry Commercial General Liability insurance if their gross proceeds from transactions exceed $10,000 (United States) each month for three consecutive months. Insurance limits must be at least $1,000,000 per occurrence and in the aggregate (United States), and must include product liability, products/completed operations, bodily injury, broad form property damage and broad form contractual coverage. Amazon and its assignees must also be named as additional insureds on the policy. Remember, requirements may vary by country.
While the core coverages remain similar across CGL policies, it is important to confirm that your policy satisfies Amazon’s requirements before you purchase coverage.
Seller Suspension Insurance
If you sell on a marketplace like Amazon, your business can be shut down at a moment’s notice. Seller Suspension Insurance is a low-cost insurance that can do wonders for your peace of mind. Think of it this way: If you had a brick and mortar store and a pipe burst, water damage might cause you to temporarily close your store. While your store was closed, your business insurance policy would kick in to cover the repairs and loss of income, helping ease the financial burden of this unforeseen setback.
As an online seller you may not be worried about floods or fires, but you still can’t afford to be shut down. Seller suspension insurance eases the burden of an account suspension by providing you with the resources and financial support you need to tackle an account suspension head-on and get back to business.
What’s that you say? You follow Amazon’s rules and have exceptional performance metrics? Doesn’t matter. Amazon’s loyalty is to its buyers, and their philosophy is: react first, ask questions later. Any issue or claim—real or fake—can trigger a suspension, causing you to miss out on sales and leaving you with a sticky situation to deal with.
A seller suspension insurance policy can provide coverage for suspension-related costs like hiring a reinstatement specialist to help with your appeal, and reimbursement for the financial losses incurred during the time your account is suspended. In addition, some suspension insurance policies, like Momentum™, cover tax audit expenses to pay for a tax practitioner in case you get audited.
Seller suspension insurance can be purchased for a low annual rate compared to many other insurance policies, and is a no-brainer for anyone who earns the bulk of their income selling online.
Worker’s Compensation
While you may only need a computer to sell your products on Amazon, you probably still need to employ real people to help you run the rest of your business (unless you’re robot-enabled, in which case, we commend you).
If you do have employees there’s no doubt that you work hard to keep them out of harm’s way, but the reality is that accidents happen. Whether an employee slips and falls in the office or gets injured moving heavy boxes, your business could be held financially responsible. With a worker’s compensation policy, your employees will have coverage for any injury or illness that occurs on the job, in addition to any time off needed to recover. If an employee sues your company for a work-related injury, this policy may also cover legal expenses associated with the lawsuit.
While worker’s compensation insurance requirements vary from state to state, it’s smart to familiarize yourself with your state’s laws and consider whether this insurance could be beneficial for both your business and your employees.
Employment Practices Liability (EPLI)
If your business is growing, you’ll probably want to hire some help to take the load off. And while employees can be your best asset, they can also become your biggest liability. That’s where EPLI comes in. Employment Practices Liability insurance can cover you against claims made by employees alleging wrongful termination, discrimination, harassment, or other employment-related issues.
You may think you’re safe if you only have one employee, but EPLI claims can be made against any size business in any industry. Claims can drag out for lengthy periods, which can be a painstaking, emotional, and costly process. Not only can your business face financial losses, but a claim may also damage your reputation, tarnish your company culture, and derail your business objectives. And the worst part is, you can be sued without being at fault.
Employment Practices Liability insurance is essential to any company with employees. Make sure you are covered today to protect your business and reputation.
Cyber Liability
Cyber breaches have become ubiquitous, filling news headlines with tales of stolen data, leaked information, and complex hacking schemes that trick even the savviest of businesses into revealing confidential information. But hackers aren’t the only way your business can fall victim to a cyber-attack. Simple mistakes such as a misplaced laptop or misfiled paperwork can expose valuable employee or client information and put your business at risk.
Recovering from breaches can be costly and time-consuming, not to mention harmful to your reputation. Luckily, there are many insurance products on the market that can tailor their policies to address cyber exposures for small and large businesses alike. With a cyber policy, your business can be covered for everything from ransomware expenses and computer restoration to breach notification and business interruption costs. Many policies even build in coverages for reputation management, like hiring a public relations firm or attorney to protect your business from false or damaging allegations.
While every business will face a different set of risks depending on size and scope, arming yourself with these essential coverages can help you avoid situations that drain your resources and take your focus away from your business. If you need help getting started, find a reputable insurance agent in your area and work together to find the solutions that work for you. You’ll be happy you did—trust us.
About the Author
Costa Kleoni is Manager of Program Development for NAS Insurance, based in Los Angeles. He is responsible for managing, underwriting, and developing the Momentum™ product. He has a bachelor’s degree in Economics from the University of California Santa Barbara, and is a former Amazon seller.Please note: This blog is for informational purposes only. Be advised that sales tax rules and laws are subject to change at any time. For specific sales tax advice regarding your business, contact a tax advisor.
