Shopify is a true Canadian success story for the e-commerce age. Thanks to its one-stop-shop, ultra-user-friendly offering, the Ottawa-based platform has helped countless retailers and service providers transition from an idea on paper to startup reality. It has also helped established retailers with one or multiple bricks-and-mortar locations streamline digital marketing, inventory, POS and CRM functions into one customizable interface.
As a startup business that is looking to scale up, an established operation that is also taking the next step, possibly as a supplier to a big-box chain, or a major retailer using the Shopify platform as your e-commerce solution, there are risks that need to be mitigated. So whether you’re looking to establish your business’s reputation or you’re already a household name, ALIGNED is your source for risk-management resources and solutions so that you can focus on expanding and unifying your physical- and e-commerce activities through Shopify.
Shopify Retailer Insurance Recommendations
At this time, Shopify does not offer its own insurance to retailers on its platform. When it comes to protecting any business, multiple insurance coverages are needed to manage your risks.
In this Shopify blog post, the author, a product marketing manager at Shopify, suggests the following insurance coverages for Shopify retailers:
As business insurance specialists, and e-commerce insurance specialists, the experts at ALIGNED have identified other important coverages that are crucial to the protection of your Shopify retail business. They include:
- Product Liability Insurance
- Product Recall Insurance
- Errors and Omissions / Professional Liability Insurance
- Cyber Liability Insurance
- Employee Theft Insurance
- Commercial Auto Insurance
ALIGNED Shopify Retailer Insurance Coverages
When it comes to protecting your Shopify business with an ALIGNED broker, we look at the specifics of your business and the percentage of business done on Shopify. Based on our discussions, we work with you to customize a Shopify Retailer Insurance plan with coverages tailored to your specific business. That package will generally include personalized coverages from the following insurance products:
Commercial General Liability Insurance
As any business 101 courses will tell you, risk management means protecting your business from any potential source of loss or bankruptcy. One of those sources is litigation. Personal injury is a multi-million-dollar-a-year industry with personal injury lawyers spending millions of dollars themselves on TV, radio, billboard and online advertising to find clients who were victims of slip and falls or unsafe products.
As a Shopify retailer that is fully invested in your business, a General Liability Insurance policy should be a cornerstone of your risk-management strategy. And, in fact, if you are looking to work with a major retailer, they will insist that you carry a specified amount of general liability coverage.
A basic CGL policy is meant to shield your business from lawsuits alleging that your products or business practices caused personal injury or property damaged or were falsely advertised. Whether those lawsuits have merit or not, the costs of defending them alone can be a nightmare. A CGL policy protects your Shopify retailer business by insuring it against the legal costs, settlements and awards for damages arising from claims that someone was injured on your commercial property, by your products, that their property was damaged by your business practices or that your advertising was misleading.
Product Liability Insurance
As mentioned above, a Commercial General Liability Insurance policy will protect your Shopify retailer business from lawsuits alleging that your products caused injury or property damage. A CGL policy, because it is a general policy, will usually have a limit to the amount of coverage it will provide for product liability. If your business is selling products as a Shopify retailer, you may need to bump up the coverage on your product liability aspect. Consider the following examples:
- Selling children’s toys or baby products
- Selling health and fitness products
- Selling makeup and beauty supplies
- Selling clothing made with materials that could possibly irritate the skin
These retailers are generally at a higher risk for accusations of injury or harm but every manufacturer and retailer needs to be intimately familiar with the ingredients and components of their products, the way they’re designed and the manufacturing process.
As a Shopify retailer, you have a duty to:
- Ensure that there are no toxic or unsafe chemicals in your products
- Ensure there aren’t any design flaws in your product that could cause injury or property damage
- Provide proper warnings and instructions to consumers of your products
Failure to do any of the above could also result in a mass of lawsuits. Mistakes and unforeseen circumstances happen however, which is why if your company is using a Shopify retailer account to sell physical goods, Product Liability Insurance is an important protection.
Product Recall Insurance
If you realize that products that have already sold, whether through your Shopify site or your physical retail location, have the potential of causing harm or property damage, you must recall those products to mitigate any potential damage. Besides being the right thing to do, the costs of not issuing a recall are much greater than doing so. That’s why, depending on what you sell, you may want to seriously consider Product Recall Insurance.
A Product Recall policy can protect your business by covering:
- Recall expenses such as product testing, disposal fees, extra payroll costs and public safety messages
- Replacement costs to purchase new inventory
- Lost profits on the products being recalled and the inventory that needs to be disposed
- Brand rehabilitation costs for PR and advertising fees
- Extra costs to rush new product to the market and offer promotions
Errors & Omissions (E&O) / Professional Liability / Indemnity Insurance
If your Shopify retailer account is for services instead of products, especially if those services are in an advisory or fiduciary capacity, having Professional Liability coverage is crucial for your business. Mistakes happen. Whether your license requires you to carry this type of coverage or not, Professional Liability coverage is the only way to protect your company from lawsuits that claim your errors or omissions harmed your clients. The following list of professionals could either benefit or are mandated to carry some sort of Professional Liability coverage:
- Aerospace Consultants
- Accountants and Bookkeepers
- Business Consultants
- Energy Conservation Consultants
- Environmental Consultants
- Computer Consultants
- Employee Benefits Brokers
- Food Safety and Hygiene Consultants
- Investment Advisors
- Real Estate Agents
- IT Professionals
- Mortgage Brokers
- Building Inspectors
- HR Professionals
- Web & Software Developers
- Management Consultants
- Marketing & Advertising Agencies
- Social Media Companies
Commercial Property Insurance
Depending on the size of your Shopify retail business and the products or services you sell, you may have a dedicated office, an office and warehouse or shared office space and a third-party warehousing service. No matter where your office equipment and inventory are housed, they need to be insured. Fires, floods, sewage backups, gas explosions, windstorms, electrical storms and burglaries are just a few of the perils that could damage or destroy your commercial property. That property could include:
- Buildings and other structures (leased or owned)
- Furniture, office equipment and supplies
- Computers, tablets, phones
- Money and securities
- Business records
- Manufacturing equipment and machinery
- Signs, fences and other outdoor property not directly attached to the building
Without Commercial Property Insurance, your entire Shopify retail operation is completely unprotected. You may also want to consider Business Interruption Insurance so that if your business is affected by an insured peril, you can continue paying your business expenses and Extra Expense Insurance so that you have the resources to keep your Shopify retail business running and your customers happy while you rebuild.
One of the unique selling features of the Shopify platform is its convenience of being able to take care of almost every aspect of your e-commerce business in one place. Obviously for an e-retailer shipping is one of the most important functions. Insuring your shipments may be required when dealing with other businesses and it certainly gives you and your customers peace of mind.
Depending on which company, or which combination of companies, you choose to ship your goods with, you have to go over their shipping policy with a fine-tooth comb to ensure that your packages are insured for the duration of the shipment, what they are insured against, how much they are insured for and how their insurance works.
Having your own Cargo Insurance, however, has the following advantages:
- Your shipments can be covered worldwide
- You can get coverage for your packages while they are in storage
- You can protect your shipments if they are rejected by a governmental authority
- You can protect your company from liability due to losses caused by the shipper and other third-party logistical companies and their staff
- Coverage is available that covers any costs due to shipping delays
- You can insure the entire value of your shipments including profits
- In case of a loss, you have a local broker to work with
Cyber Liability Insurance
Despite boasting one the world’s biggest and most secure online retail platforms, a flaw in one of the Shopify apps exposed thousands of merchants’ revenue and traffic data last year. And while your Shopify retail business is most likely secure on the platform, several other entry points leave your e-commerce business vulnerable to cyber-attack.
Your colleagues’ and your business and personal emails and devices and the company’s network are all fair game to hackers and cyber-criminals looking to exploit them to their financial gain through:
- Social engineering attacks
- Denial of service attacks
- Viruses and Trojans
As a Shopify retail business, your company is an appealing target and having Cyber Liability Insurance is a standard business practice that comes with the e-commerce territory. Cyber Liability protects your Shopify business by covering:
- Income lost due to a cyber-breach
- Costs to repair or replace data and equipment
- Extortion costs
- Damages to third-party systems
- Customer notification costs for exposed personal information
- Legal costs
Employee Theft Insurance
One of the features of the Shopify platform is its POS service that allows employees in physical retail stores to serve customers anywhere in the store. This includes ordering products for customers online if the location they’re in is currently out of stock of that product. While this is great for increasing sales and customer loyalty, unfortunately, the reality is that almost every retailer experiences loss due to employee theft and fraud and increasing employee access to cash and inventory systems may lead to increased losses.
Employee Theft Insurance can protect both online-only and blended online and physical retailers by covering:
- Customer losses resulting from employee theft, fraud or dishonesty
- Computer fraud perpetrated by an employee
- Counterfeit currency fraud
- Credit card fraud
- Employee theft including money, securities, inventory and other commercial property.
- Expenses to investigate losses and thefts.
- Losses stemming from funds fraudulently drawn from business accounts by an employee.
- Losses if an employee fraudulently transfers money to a third-party account.
- In-transit theft that includes destruction or disappearance of money and securities while they are en route to a financial institution or somewhere else and in the care and control of an employee.
Commercial Auto Insurance
As you well know, having auto insurance is the law in every province and territory in Canada. Depending on where your Shopify retail business is based, you will either be required to purchase a policy run by the province or a private insurer.
Whether you have dedicated work vehicles for transporting products for your Shopify business or you are using personal vehicles for business purposes, you must have Commercial Auto coverage. If you use your personal vehicle for your Shopify retail business without it, you are facing the potential of being uninsured for a motor vehicle collision.
Commercial Auto Insurance coverage can include:
- Third-party bodily injury coverage
- Third-party property damage coverage
- Accident benefits
Why ALIGNED is the Right Broker for your Shopify Retailer Insurance
Our ALIGNED brokers are business insurance experts. We work with bricks-and-mortar businesses and e-commerce businesses of all sizes. We use that expertise to get your business the exact coverage it needs and advocate on your behalf to get you the best rates for that coverage. Curious about how much Shopify Retailer Insurance would cost for your business? Contact us now for a free quote.