Do You Need Insurance for Your E-Commerce Products For Website

The reality of the e-commerce is every order won’t be perfect and every customer won’t be satisfied. Products can be damaged or defective and your bottom line will suffer from this over time. So, do you need insurance for your e-commerce products? That question could have different answers depending on your product line.

Value Impacts Insurance Decisions

If your e-commerce outlet sells products for small price tags, odds are your profit margins on each product are not too high. If you’re selling expensive products, then you have more at stake. Losing out on $2 profit versus losing out on $200 profit are two vastly different situations. Product insurance on something with a low profit margin will rarely pay off in the long run but protecting yourself against large losses is a shrewd move.

Many e-retailers don’t have an established reverse logistics process to handle damaged or defective products and this can lead to a profit-sucking black hole in your supply chain. Reverse logistics process management can improve profitability as well as help meet sustainability goals. If your e-business doesn’t have an established reverse logistics process an insurance policy is a must-have. Even if you do, insurance for your more expensive products is still in your best interest as it will insulate you from total product loss.

Poor Shipping Issues

Fulfillment is an area in which most e-retailers should protect themselves with insurance. The USPS, FedEx and UPS generally offer some form of coverage for a small fee for e-commerce businesses shipping smaller products. If your merchandise is low-value, the extra cost for product insurance may not be worth it. On the flip side, if your wares are small but expensive, insurance from the parcel carrier is a must. According to the USPS, you can purchase insurance coverage for your mail pieces for up to $5,000 in indemnity to protect against loss or damage.

The size of your products can limit your shipping options, so a parcel carrier may not be in the cards for your e-business. If you sell furniture online, you’re probably going to be shipping in a semi-truck. Whether you use a third-party logistics provider (3PL) or work directly with a trucking company, coverage will vary greatly, depending upon the quantity you ship.

Most 3PLs and trucking companies carry cargo insurance policies of up to $100,000. They can also purchase additional coverage if necessary. Shipping a single piece of furniture won’t fill up a truck, so some 3PLs or freight companies offer a certain amount of insurance per item with the ability to purchase more if necessary. Make sure you’re fully aware of the transportation insurance options before shipping your products; if you’re not fully covered, you could end up with a total loss and an unhappy customer.

Insurance and Product Warranties Show Transparency to Your Customers

Product insurance and warranties can be a win-win for you and your customers. A product warranty shows your customers you’re willing to protect them if the product doesn’t work as intended. While you never want your product to show up broken or defective, it’s an opportunity to build a relationship with your customer. The way you handle their return or product replacement process can determine if they buy from you again.

If you offer a product warranty, you’ll need to have a plan in place to cover yourself. In addition to losing profit, you could face a lawsuit if your product injures someone. Product liability insurance is helpful in these cases. Many people are quick to sue because they know they can make a quick buck. If you have the proper product liability insurance, your insurance companies will fight for you in court and pay any lawsuits.

There are many situations where an e-retailer can take advantage of insurance on their products and shipping. Yes, this entails additional costs but making sure your e-business is adequately covered should be your primary goal when considering insurance.

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