Insurance · 23 October 2015

Insurance in action – Should you cover your online business trade?

Business is moving online, and micro businesses need to make sure protection is in place
Business is moving online, and micro businesses need to make sure protection is in place

According to recent ONS study, 76 per cent of British adults use the Internet everyday, with some 74 per cent buying goods or services online at some stage in 2014. Consumers are shifting behind their screens and as result online retail is rising, with sales expected to reach £52.25bn by the end of the year.

Against this backdrop an online presence is becoming a retail essential, however, it’s important to be aware of the risks that online selling brings. Let’s start with some instances where a claim might arise, and then highlight how online retail insurance could protect you.


A master baker with the skills of Mary Berry, you decide to start selling personalised cakes online. Everything is going great until one day a customer gets ill – a dodgy cake has slipped through the net and you’ve dished out food poisoning instead. A compensation claim ensues, and you’re left liable for the damages.

Sparks might fly

You’re an ambitious importer and exporter selling electrical components online. You’re posting a profit and pleasing customers when one unexpectedly experiences a fire – you’ve sold them a faulty component and evidence shows that it’s the cause. They chase a compensation claim for their fire-damaged property.

Even if you haven’t manufactured the items yourself then you could be liable for compensation claims. Liability could be yours if the products bear the name of your business, or if you’ve repaired, refurbished or otherwise changed the product. Elsewhere, you could also be at risk if the original manufacturer can’t be traced.

The nature of internet trading means that supply chains can be long and international, with a lack of face-to-face interaction between all the disparate links. If you can’t identify the manufacturer or if the manufacturer has gone out of business, you could be held responsible for any of their products sold by you.

So, what covers can protect you?

Product liability insurance

As an online retailer, it’s likely that most of your interaction with customers is virtual, meaning that your public liability risk is probably quite low. It’s a different matter if your business has a warehouse or similar, as this could mean you or staff members have contact with members of the public, and could be held responsible for injuries.

Product liability cover, on the other hand, is usually a key part of online retail insurance, and is often sold as part of a public liability insurance policy. If you sell items online, such as jewellery, baby clothes, or antique furniture, you could be held responsible for any damage or injury the products cause. As such, it’s wise to put this cover in place.

Stock cover

Another important consideration in terms of online retail insurance is stock cover. As an online business, it’s likely that you keep a fair amount of the products you sell in your home or another site before shipping them to customers. If this stock were damaged or stolen, stock insurance could cover the cost of replacement, based on the cost price.

Employers’ liability insurance

You’ll also be legally required to have employers’ liability insurance if your online business has any employees. If the online service you offer is not retail, but something that includes giving professional advice, you may also want to consider professional indemnity insurance as part of your policy.

These are the central covers for your average online retailer, however, all circumstances are different and they’ll dictate what you need. Your best bet is to talk to a broker like us directly, so we understand the complexities of your online business.

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Keith Lynn is a senior product manager at Simply Business, with almost ten years of experience – both working and studying – in the insurance industry. He has been with the company for four years as part of the products team. Much of his time is spent working with numerous insurers to improve the products they offer through Simply Business. Prior to his current role, he obtained a BA in International Insurance and European Studies at the University of Limerick.