What insurance do I need as an online retailer?
If you sell goods online, it’s important to have the right financial protection in place. Even if you don’t have a physical ‘bricks and mortar’ shop, things can still go wrong.
- Your stock is damaged or stolen?
- One of your products is faulty and harms a member of the public?
- A buyer makes a compensation claim against your business?
- Your website is targeted in a cyber-attack?
- You lose profits because your online business is unable to operate for a period of time?
These are common scenarios that could easily happen to any e-commerce business. Having the right insurance in place could help protect you against these and the other potential risks of running an online shop.
No two businesses are the same, whether a high street shop, a virtual one or both. What’s great about business insurance is that it can be tailored specifically for your unique business needs. Simply pick the cover that best suits your business and rest easy knowing that your online shop is protected.
Who needs e-commerce insurance?
E-commerce insurance, also known as online retailer insurance, can protect your UK-based business, whether you sell locally or to customers worldwide.
If you’re a retailer who sells goods online, you should consider e-commerce insurance, no matter how small your business.
For example, if:
- you’re an Amazon, Etsy or eBay seller
- you have your own online shop
- you make your own products
- you sell items from third-party suppliers.
Also, be aware that if you employ anyone to help run your online store, you must have employers’ liability insurance by law. If this is the case, you can include it in your e-commerce insurance policy.
What does online retailer insurance cover?
You can choose different types of cover to tailor your policy, so it best suits the individual needs of your online business.
Typical cover includes:
Protects you if a faulty product you sell causes injury to someone or damages their property. It can cover legal fees and compensation costs if someone makes a claim against you.
- A customer has a severe allergic reaction to a beauty product you sold them.
- A plug-in product you sell has an electrical fault that causes a fire in a customer’s home.
- A person gets food poisoning from one of the products in a gift hamper you produced.
Be aware that even if you didn’t manufacture items and you only sell them online, you could still be liable for compensation costs if something goes wrong.
Covers any claims against you if someone is injured or their property damaged because of your business activities.
- A courier visiting your home or warehouse to collect goods slips on a wet floor and breaks their leg.
- You sell your goods at a local farmers’ market and the display counter collapses, injuring a customer.
If you employ anyone who isn’t a direct member of your family - even if it’s just one person - temporary or part-time, you’re legally required to have employers’ liability insurance. This protects you against legal fees and compensation costs if your employee is hurt or becomes ill as a result of working for you.
- You employ a part-time kitchen assistant for your online cake delivery business and they’re badly burned when a pan handle breaks off while making caramel sauce.
Covers equipment and furniture that are essential to your business – like computers, printers, shelving and office furniture – if they’re damaged or lost because of fire, theft or flood.
This covers your stock if it’s damaged or stolen.
- There’s a break-in at the warehouse where your stock is stored and it’s vandalised or stolen.
- Your goods are damaged when being loaded into a van.
- You store your stock at home and a burst pipe leaves your entire inventory water-damaged.
If you keep your stock at home, it’s unlikely that it will be covered by your home insurance as most policies exclude business use. In this case, it makes sense to take out e-commerce insurance with stock cover to make sure your goods are properly protected.
Some policies will also cover your goods when they’re in transit if you’re delivering them yourself. When comparing stock insurance, check whether this option is included as standard or if you’ll need to pay more for the extra cover.
If your website has been hacked, cyber insurance can help cover the costs of technical assistance to retrieve your data and restore your systems and website. It can also cover compensation and regulator investigation costs if a customer’s personal data is stolen. Unfortunately, Compare the Market doesn’t currently offer cyber insurance.
If any of the above examples happen, your business may be forced to close for a period of time. That means you’ll be losing precious profits and revenue. Business interruption cover can protect you against lost sales and the costs of getting your online business up and running again.
Be aware that it might not cover disruption to your business caused by COVID-19. Find out more about business interruption insurance and coronavirus.
How much does online retailer insurance cost?
The cost of online retailer insurance can depend on what you want covered and the size and type of your online business.
For example, if you’re a sole trader you won’t need employers’ liability insurance, meaning your premium could be cheaper than a limited company owner with two or three members of staff.
It might also depend on the value of your stock. For example, expensive, hand-crafted jewellery will need a higher cover limit than costume jewellery and accessories, so will typically cost more to insure.
You could lower the cost of your premium by choosing to pay a higher voluntary excess – this is the amount you’ll have to pay towards an insurance claim. So, if your excess is £250 and you make a claim for £1,000, you’d have to pay the first £250 and your insurance payout would be £750.
To get the best price for your premium, only take out the cover you need and make sure you shop around and compare a range of quotes from different providers.
How much is the excess for online shop insurance?
As with any type of insurance, there are two types of excess:
- Compulsory excess – this is set by your insurance provider. The amount can vary between providers and types of cover.
- Voluntary excess – this is agreed by you and your provider at the beginning of your policy.
The size of compulsory excess can vary among providers. Excesses can also vary among the different types of cover you take out. For example, the excess for public liability may be higher than the excess for stock cover, whereas employers’ liability insurance doesn’t have any kind of excess at all.
Frequently asked questions
How much cover should I get for my stock?
When deciding how much cover to get for your stock, you’ll need to work out how much it would cost to replace the entire lot. This is the ‘trade’ value of your stock, not to be confused with the ‘retail’ value (how much you’re planning to sell it for).
If your stock increases in the run-up to Christmas, you might need to adjust the ‘insured amount’ during this time so you’re not under-insured. Check your policy, though, as some providers automatically include seasonal variations.
I run my online shop from home. Won’t my home insurance cover me?
No, it’s very unlikely your stock and business equipment will be covered by your home insurance; that’s because most policies won’t cover items for business use.
If you want to ensure your online business is properly covered, you’ll need to consider separate online retailer insurance on top of your standard home insurance.
Will my stock be covered while the goods are being delivered?
Most policies will only cover your goods in transit if they’re being delivered by you. They won’t cover deliveries by third-parties like a courier company or the Royal Mail. However, courier companies usually have their own insurance, so check what cover they have before using their services.
You should also be aware that e-commerce insurance doesn’t usually cover late or non-deliveries, or returns.
Does online retailer insurance cover me for faulty goods?
If you make or supply something that’s faulty, breaks or doesn’t do the job it’s intended for, you’ll be responsible for fixing or replacing it, or giving your customer a full refund. Online retailer insurance won’t cover you for these costs.
However, if a faulty item injures a customer or damages their property, product liability insurance can step in to cover legal fees and compensations costs you may need to pay.
I have an online shop but I also sell my products at local markets. Am I still covered?
Yes, you could still be covered for selling online and physically - just make sure you include public liability cover when taking out an e-commerce insurance policy. This will cover you against any injuries or damage to other people and their property when you’re out and about.
Imagine this very unfortunate scenario: you’re setting up your pop-up stall when one of the awning poles falls and dents a car parked nearby. Even if the car owner isn’t a customer, you’re still responsible for paying them for damages. Public liability cover included as part of your e-commerce insurance can protect you against these costs. Likewise, if someone is injured as a result of your pop-up stall collapsing.
Is it difficult to find insurance for online retailers?
It might have been difficult in the past to find the right type of cover for an online shop. But as online selling has grown across the world, it’s become far easier to find business insurance specifically tailored for online retailers.
When looking for a quote, you’ll be asked what you do and how you do it. So, if you’re an online bookseller, don’t just say you’re a ‘bookseller’ as you might not get the right type of cover for your online business. Be clear about what you do, so you can be sure that all associated risks for selling online are covered.
How can I compare online retailer insurance?
Use our search tool to find a business insurance quote that’s tailored to meet the needs of your online shop.
When asked about your trade/profession, you’ll find more 1,000 options to choose from including ‘online retailer’, ‘online shop’ and ‘online store’. You’ll also be asked to describe the type of goods you sell and if you have a secondary trade on top of your main business.
In a matter of minutes, you’ll have a list of suitable business insurance quotes to choose from.
What do I need to get a quote?
We’ll need a few details about you and your online business, including:
- Your business name, address and postcode
- How many years your business has been active
- How much you expect to earn in the next 12 months
- Any employees
- The type of cover you want
- Your claims history
Once we’ve got what we need, we’ll send you a list of competitive quotes to compare.Start a quote
Business insurance expert
What our expert says
"Even though you don’t have a bricks and mortar store, you still have responsibilities and risks. Online retailer insurance can ensure your e-commerce business runs smoothly even when the unexpected happens. Comparing quotes is a great way to find the right level of cover at a competitive price."