Running an e-commerce business means you're juggling inventory, customer service, marketing, and a dozen other moving parts. Insurance probably isn't at the top of your to-do list—until something goes wrong. A customer claims your product caused an allergic reaction. Your website gets hit with a data breach. A warehouse fire destroys your inventory. Suddenly, insurance becomes the most important thing you never thought about.
Here's the good news: most e-commerce insurance is affordable and straightforward once you know what you need. The average online business pays around $65 per month for coverage, and you can get most policies set up in minutes online. This checklist walks you through exactly what coverage you need, what's optional, and when to add more protection as your business grows.
Essential Coverage Every E-commerce Business Needs
Let's start with the non-negotiables. These are the coverages that protect you from the most common and expensive risks in e-commerce.
General Liability Insurance
This is your foundational coverage. General liability protects you if someone gets hurt or their property gets damaged because of your business operations. For e-commerce businesses, the most critical part is product liability coverage—if a customer is injured by something you sold, you're covered even if you didn't manufacture it yourself. That's huge, especially if you're sourcing products from third-party suppliers.
Most e-commerce businesses pay around $42 per month (or $500 per year) for general liability insurance. Here's why you need it: if you sell on Amazon, they require proof of at least $1 million in coverage once you hit $10,000 in sales over three consecutive months. Walmart has similar requirements. Even if you only sell through your own website, this coverage protects you from lawsuits that could otherwise bankrupt your business.
Cyber Liability Insurance
You're storing customer credit card information, addresses, phone numbers, and email addresses. That makes you a target for cybercriminals. Cyber liability insurance covers the costs of a data breach—notifying customers, credit monitoring services, legal fees, and regulatory fines. E-commerce sites are considered high-risk targets, and attacks are getting more sophisticated every year.
The average cyber liability policy costs around $500 per year for smaller online retailers. Some states like California have strict data privacy laws that essentially make this coverage mandatory if you want to avoid crippling fines. Even if your state doesn't require it, this is one of those coverages that pays for itself the moment you need it.
Workers' Compensation Insurance
If you have employees—even just one part-time warehouse worker or customer service rep—workers' compensation insurance is legally required in most states. This coverage pays for medical bills and lost wages if an employee gets injured on the job. Online retailers typically pay around $86 per month for workers' comp, though costs vary widely based on what your employees actually do. Warehouse workers cost more to insure than remote customer service staff.
Optional Coverage Worth Considering
Beyond the essentials, there are several coverage types that make sense depending on how your business operates.
Business Owner's Policy (BOP)
A BOP bundles general liability insurance with commercial property coverage into one package, usually at a lower cost than buying them separately. This is ideal if you have physical inventory, office space, or equipment. The property coverage protects your inventory, computers, furniture, and other business property from damage or theft. It also typically includes business interruption coverage, which replaces lost income if you have to temporarily close due to a covered event like a fire or equipment breakdown.
E-commerce businesses pay an average of $95 per month for a BOP. If you're operating out of a home office with minimal inventory, you might not need this. But if you're holding significant product stock or have an actual warehouse or office space, this coverage is worth the investment.
Cargo Insurance
If you ship products directly to customers or distributors, cargo insurance protects you from physical loss while items are in transit or storage. Shipping carriers have limited liability—often just a few dollars per pound—so if a $2,000 shipment gets lost or damaged, you're eating most of that cost without cargo insurance. This coverage is especially important if you're shipping high-value items or dealing with international shipments.
Business Interruption Insurance
Sometimes called business income insurance, this coverage replaces lost revenue if your operations get disrupted by a covered event—equipment failure, cyberattacks, natural disasters, or other incidents that force you to shut down temporarily. For smaller online retailers, this averages around $800 annually. If your business has tight margins or you'd struggle to survive even a few weeks without income, business interruption insurance is worth serious consideration.
When to Add Coverage
Your insurance needs change as your business grows. Here are the key triggers that should prompt you to add or increase coverage:
When you start selling on Amazon or Walmart. Both platforms require proof of insurance once you hit their sales thresholds. Upload your certificate of insurance to your seller portal before you hit those limits to avoid account holds.
When you hire your first employee. Workers' comp becomes legally required in most states the moment you bring someone on payroll. Don't wait—get this set up before their first day.
When you start holding significant inventory. If losing your inventory to theft, fire, or water damage would be a major financial hit, it's time for commercial property coverage.
When you expand to new states. Some states have specific insurance requirements or higher liability risks. Review your coverage whenever you start actively marketing to or fulfilling orders in new states.
When you add higher-risk products. Products that go on or near the body, electronics, children's items, and consumables all carry higher liability risks. If you're expanding your product line into these categories, talk to your insurance agent about whether you need higher coverage limits.
Annual Review Checklist
Set a calendar reminder 60 days before your policy renewal date to review these items:
Has your revenue increased significantly? Your coverage limits should grow with your business. If you've doubled your sales but still have the same $1 million policy limit, you're underinsured.
Have you added or changed product lines? Different products carry different liability risks. Make sure your insurer knows what you're actually selling.
Has your inventory value changed? If you're holding more stock, your property coverage should reflect that.
Have you added employees or contractors? Update your workers' comp coverage and make sure any contractors have their own insurance.
Do you have updated certificates of insurance on file? Marketplace platforms, payment processors, and landlords all need current proof of coverage. Don't let your accounts get frozen because your certificate expired.
Getting Started
The easiest way to get e-commerce insurance is through online platforms that specialize in small business coverage. Companies like NEXT, Thimble, and CoverWallet let you get quotes and purchase policies entirely online, often in under 10 minutes. You'll answer a few questions about your business, choose your coverage levels, and get instant proof of insurance.
Start with the essentials—general liability and cyber liability are your foundation. If you have employees, add workers' comp. If you hold inventory, consider a BOP. You can always add coverage later as your business grows. The important thing is to get basic protection in place now, before you need it. Because once something goes wrong, it's too late to buy insurance for that incident.
