Online business

Guide to online business insurance

Member article

2021 has seen huge growth in independent retail, with an ever-growing list of companies starting to sell their physical products online. Inspired by the meteoric growth of companies like Gymshark, there has never been a more exciting time to join the movement, however, there is often too much information (and misinformation) that can disrupt the creation process. ‘a new e-commerce business. Often times, articles lack information on the legal and insurance requirements for your business, so we’ve made this handy guide below to give you some tips on where to start.

1. Do we have to set up a company?

If you are selling physical products online, there are some important advantages to being a limited liability company, and as the name suggests, the main advantage is limiting your liability. This level of protection is in place because the company becomes a fully-fledged legal person for the purposes of contractualization and liability, with an identity distinct from those who run or own it. So, for example, if you sell a scooter that turns out to be faulty and the owner crashes and gets injured, they have a legal right to sue your business (rather than you personally) for damages. This protects your personal assets, such as your home and retirement funds and your credit rating, from liability in such cases. It is therefore not surprising that limited liability companies now constitute the vast majority of UK businesses.

However, incorporation is not mandatory and for many, sole proprietorship works well for some entrepreneurs. It is important to speak to an accountant to assess which of the options is best suited to your personal situation. For example, it may be more difficult to raise certain types of financing as a sole proprietorship.

2. What are your obligations as a business owner?

The level of responsibility you take on varies depending on the types of products you sell. So, for example, posters and art reproductions are less likely to hurt your employees and customers than toys, scooters, or kitchen utensils. But nevertheless, strange accidents happen in the most unlikely places.

You should also pay attention to the fine print of the platforms you trade on. For example, Amazon’s professional merchant insurance requirements require professional merchants to purchase and maintain commercial liability insurance with a limit of at least $ 1 million per event and in total after exceeding $ 10,000 in gross sales proceeds in one month on Amazon, or if otherwise requested by Amazon. Policy should name “Amazon.com Services LLC., And its affiliates and assignees” as additional insureds.

3. What should you avoid or watch out for when purchasing insurance?

First of all, when looking for insurance, you need to make sure that the insurance is valid for your business needs. There is a big difference between retail arbitrage and private label online products when it comes to insurance valuation. Selling private label products classifies you as a manufacturer, with increased exposure to product liability. So this is something to discuss with your broker.

The products you sell are the main factors that determine how much annual premium you will pay, so what if you change your products and product categories every day or every month? Do you think about informing your insurance brokers of major changes?

Typical insurance application forms ask for details of historical, current, and future annual income, which can be difficult to provide when you are just starting out. apps and tools have, you have to extract your data and convert it into a form for insurance companies, which can be a slow and complicated process.

Then, if you have a loss and need to make a claim, this process can be time consuming, with a lot of paperwork and calls to resolve various issues before funds are released to your account.

4. What should you watch out for?

Look for specialist insurance brokers who are dedicated to meeting the needs of e-commerce businesses; they will have a better idea of ​​the things to watch out for.

There are also new insurance companies that have integrated solutions and online capabilities to help you have a much smoother onboarding experience.

Finally, the complaints process is often referred to as an “insurance showcase”; this is a great indicator of whether a policy is right for you. Before committing to a policy, make sure you understand the complaints process and how it works; especially taking into account the time it would typically take to process, as well as any excess needed.

This was posted in the Member News section of Bdaily by Anansi.


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