What Type of Insurance Does a Retail Business Need?
The retail industry specializes in keeping up with changing times, whether that means shifting from mass-produced to more local goods or switching from a brick-and-mortar model to an e-commerce one. One reason the retail industry can make these changes flawlessly is because of its eagerness to adopt innovative technologies.
The ever-changing nature of retail means businesses must adapt to new risks and meet the demands of different customers. In this article, we will talk about important insurance used to protect retail businesses and how technology can help Retailers manage risk.
Brick-and-Mortar vs. E-commerce: Who Needs Insurance?
Whether you run a brick-and-mortar or an e-commerce retail business, you need insurance. A brick-and-mortar store needs commercial liability insurance for protection against common risks like slips from wet floors, stolen goods, damaged property, injured customers, and any other risks a physical business must deal with.
On the other hand, e-commerce retailers do not worry about risks that involve bringing people into a store or keeping a storefront. For their business, they most commonly must deal with cyber-crimes, like stolen data or money. In this case, cyber liability insurance is the best choice for e-commerce retailers.
For both types of business, Commercial or Cyber Liability Insurance is a fundamental piece to cover financial losses.
Insurance Policies for Common Retail Risks
No matter what type of retail business you run, every owner must take note of the different types of risks and the Insurance Coverage for each one of them. Here you have the most common risks and the insurance policies to cover them:
Product Lawsuits
If a customer buys a product with a defect and is harmed, you can be held liable for selling them the product.
To protect your business from these types of lawsuits, the best solution is to have product liability insurance. As the digitally native business insurance company Embroker sums up, “This coverage protects businesses from lawsuits arising from damage, bodily harm, property damage, or any other mis happenings that may come from a defective product you sold.”
Employee Lawsuits
Whether your business is a storefront or e-commerce, it is a safe bet to have insurance for employee claims. Some common employee claims that come up include:
- Sexual harassment.
- Gender discrimination.
- Pregnancy discrimination.
- Religious discrimination.
- Wrongful termination.
- Ageism.
- Failure to promote.
Every business needs to avoid employee claims. But when these claims arise, the follow-up step is to look to upper-level management for resolution. This is why Managers need the most insurance protection. It is important to make sure you have Employee Practice Liability Insurance (EPLI) in place for your managers.
Temporary Business Closure
Business Interruption Insurance policies protect your business from any downtime. For example, if there is a fire that causes you to shut down for a few weeks, your property insurance covers the fire damage. When this happens, you still need to keep your business afloat while it is not operational.
This is where Business Interruption Insurance comes in. This type of policy covers you for any costs you incur while you cannot continue business as usual.
Property Damage
As mentioned before, property insurance protects your organization from things like fires and natural disasters. This is especially important for brick-and-mortar businesses that rely on their physical location to do business, but it is also important for e-commerce businesses.
If you run a small e-commerce business from your home, regular homeowners’ insurance will not cover losses related to your business. Therefore, you need to make sure you have commercial property insurance no matter where your business is situated geographically.
Theft
Theft has always been a problem in retail, and some businesses have gone to extremes to protect against this loss. For these cases, an Insurance Policy is the best solution. Most property insurance policies also protect inventory that you store at the protected location, so be sure to look for this detail in your policy.
Employees can also commit theft, fraud, and other dishonest practices that you need insurance coverage for. To protect against employees who engage in these activities, make sure you have a commercial crime policy in place.
According to one of the world’s leading insurance brokers and risk advisors, Marsh, “Commercial crime insurance provides protection from financial losses related to business-related crime, including theft by employees, forgery, robbery, and electronic crime. While strong internal business protocols can help a company avoid fraud, dishonest employees and external fraudsters can circumvent the security of even the most well-run companies and ones with the most robust controls, leading to potentially substantial financial losses.”
Cyberattacks
One of the fastest-growing risks faced by organizations today is cyberattacks. This is especially true for e-commerce businesses.
Cybercriminals looking to harm an organization will go to great lengths to hack into systems and steal data. Because of this, all retail businesses need to have cyber liability insurance in place.
E-commerce businesses need this coverage because the livelihood of their organization relies on secure online transactions. It is also important for brick-and-mortar businesses to carry cyber liability insurance because hackers can get into secure databases and steal information about your products or sales.
Franchises
If your retail business also happens to be franchised, there are some unique risks you will face that require insurance coverage. The most important is keeping a good brand name. Since franchises allow third parties to open up locations and run under their name and logo, there is a chance a franchise may decide not to follow guidelines put in place for them.
Situations like this can gain media attention quickly and could tarnish the name of your business. To protect against this, franchisors need Professional Liability Insurance. This coverage protects your business from any lawsuits brought up by customers as a result of something a franchisee did.
How Retailers can Benefit from Risk Management Technology
Retailers need many Insurance Policies to ensure protection for their business. They also need to make sure third parties and employees they work with have coverage too.
In this process, manually tracking Certificates of Insurance (COIs) and Compliance, are enormous tasks and minor mistakes can lead to an internal problem with your Liability Insurance. Without a software solution to help, you would have to hire employees just to keep up with all of the paperwork. But fortunately, there is a software solution to help you track compliance and remain secure every step of the way.
By using SmartCompliance, retailers can easily upload their insurance documents and make sure compliance is met, without having to hire extra help. Sign up for a free product demo today to see how SmartCompliance can help you save valuable resources.
