My client Jerry is an online bookseller. He runs a small publishing company, and 95% of his orders flow through his website. One day, his website vanished. Hackers had assumed control and took the site down. Jerry was losing money every day until the site could be rebuilt and reconnected with his payment processor. It took two weeks to get the problem fixed.
Jerry only had bare-bones publisher’s liability insurance. Although Jerry got recommendations to increase his coverage to include ecommerce business insurance, he was convinced this basic protection would be enough.
If Jerry owned a traditional bookstore and thieves made off with most of his inventory, the case would have been open and shut. But digital sellers face unique risks that standard business policies sometimes don’t cover adequately — or at all.
Let’s take a look at business insurance specifically tailored to the needs of ecommerce organizations. You’ll understand why you need ecommerce business insurance and learn more about the components of a comprehensive plan.
What Is Ecommerce Business Insurance?
Ecommerce business insurance is built for retailers that conduct almost all of their sales online. Since Because there’s no walk-in location where fire or water could damage products, ecommerce business insurance focuses on the unique perils faced by companies that operate primarily in cyberspace.
A policy geared toward electronic retailers in a sense could be looked at as a standard business owner’s policy. However, it differs from the standard issue because it includes customized coverages designed to address online risks. A suitable online insurance program might package general liability coverage with cyber liability that protects you in the event of data breaches or hacking incidents. Just like the one that occurred with my pal Jerry the bookseller.
Many precarious situations for online resellers are caused by people with bad intentions. I have another client who sells handmade soap and bath products. She compiled an impressive email list. Scammers replicated her business email address so that outbound communication appeared as if it was being sent by my client. When recipients opened the emails, they were asked to provide personal information. She caught it before any damage was done, but scenarios like this are exactly why online retailers need specialized policies.
Why Online Retailers Need Insurance: The Legal and Financial Reality
Without identifying the specific risks they face, digital retailers might assume they don’t need ecommerce insurance. That is, until they experience an event that could wreak financial havoc.
Cyber attacks have become run-of-the-mill in the digital era. Ransomware incidents doubled from 2022 to 2024, according to a global study conducted by the Office of the Director of National Intelligence.
And these attacks can be costly. For example, my client Jerry lost about $2K–$3K in IT expenses and roughly $4K in projected sales. These were out of pocket expenses, as Jerry didn’t have the right insurance policies in place. Then there’s the time spent piecing everything back together — a soft cost that’s tough to quantify but substantial nonetheless.
While many of these attacks target large corporations, small businesses need to be especially wary because they don’t have the cybersecurity resources that large companies do. And it takes a whole lot less than billions in financial damage to threaten the existence of a sole proprietorship or small limited liability company.
Types of Coverage Ecommerce and Online Retailers Need
Let’s take a look at each essential coverage an e-retailer should have:
Professional liability insurance
Professional liability insurance is also referred to as errors and omissions insurance. It helps protect you from mistakes made on the operational side of your business.
Let’s say you provide e-commerce consulting services and advise a client to use a specific software platform that ultimately crashes their site, costing them sales. If they file claims against your business for poor advice, professional liability insurance can help cover your legal defense and potential settlements.
General liability insurance
Without a storefront, the slip-and-fall incidents and other accidents covered by general liability insurance are extremely rare. This type of insurance typically covers damage to the property of others or medical bills incurred by someone injured on your premises.
But general liability insurance is still essential. If you accidentally use a copyrighted image in your online advertising, general liability can typically help cover claims of advertising injury.
Product liability coverage
When you sell physical items for consumer or business use, there stands a chance the product could be defective or dangerous. This is when product liability insurance steps in to protect your business.
Perhaps you sell all-natural dog treats, and a batch gets tainted by an agent that could cause intestinal distress — or worse — in an animal that ingested it. Widespread pet illness could trigger claims. Product liability coverage can help pay damages and the cost to defend your business in court.
Cyber liability insurance
No online retailer operates their business without computers, handheld devices, and mobile phones. These devices can store large amounts of customer data. If this information falls into the wrong hands, it’s a serious situation.
Cyber risks are far more common in the online retailer realm. However, a comprehensive cyber insurance package considers all those electronic risks and can help protect your business accordingly.
Common Insurance Misconceptions
Perform your due diligence, because there are oceans of bad information around every corner. Consider these common misconceptions:
“My homeowners insurance has my home office operations covered.”
The amount of business coverage on a homeowners policy is incidental at best.
“My selling platform provides insurance.”
eBay or Etsy might resolve customer disputes, but they don’t provide the sweeping protections that an ecommerce policy does.
“My business is too small to get sued.”
And that’s the irony attached to “small” business ops. One large claim can put you out of business.
Insurance Costs and Coverage Limits
It’s valid to feel concerned about the cost of ecommerce business insurance, especially if you’re on a tight budget.
Policy costs partly hinge on factors like what you sell and how much of it you sell. For an online retail store, Simply Business customers pay a median price* of $27.08/mo for general liability insurance.
Naturally, you keep your eye on expenses. You may feel you don’t want to add to the pile. However, the annual cost of these policies is a fraction of what you might shell out if you suffer a data breach while running without insurance.
Getting Started: Your Ecommerce Insurance Checklist
Here are some guidelines to help you choose the optimal insurance plan:
- Understand your risks. Make a list of every person and platform your business connects to.
- Compile company data. Insurance carriers will want to understand your business and some of its numbers, such as annual revenue, how many marketplaces you work with, number of resellers.
- Shop around. Insurers that have been in the ecommerce business for decades may have some optimal and affordable solutions.
- Read your policy. You want to know what is covered and what is not — and whether your coverage limits equal or exceed your exposure in terms of dollars.
- Review coverages annually. You may grow or diversify your business. Inform your carrier of changes as they occur, and review your policies at least annually.
Protecting Your Ecommerce Career
Managing an online retail business probably means you’re still trying to figure some things out. But protecting your interests with ecommerce business insurance shouldn’t be one of those things waiting on you.
Your risks are different than sellers with physical locations. Professional liability, general liability, and especially cyber liability coverage should be part of any comprehensive insurance program.
Don’t wait any longer. Give your ecommerce business the greatest chance of long-term success. Start here by updating your current coverage or building a package from the ground up.
*1Data from Simply Business customers specializing as an “e-commerce business owner” who purchased a general liability insurance policy from July 1, 2025 to December 31, 2025. Reflected price tiers may not include purchase of all available policies on this page.