Coverage And Costs – Forbes Advisor

Running a retail store can be fulfilling, but it’s not always a stroll through the mall. To keep your shop open and thriving, it’s important to have the right insurance to cover your investment from the unexpected.

For example, you might discover that one of your employees stole thousands of dollars of merchandise. Or a cyber attack shut down your online shop for weeks, resulting in lost income and angry customers. Retail insurance is like a custom-fit suit for your business. It is designed to cover your store’s unique risks and needs, allowing you to concentrate on your customers.

What Is Retail Insurance?

Retail insurance covers your business from financial losses due to accidents and common risks that retailers face. Like a carefully curated inventory tailored to meet your customers’ unique needs, retail insurance combines different policies to cover your business against the risks of being a merchant.

Retail insurance can cover theft, vandalism, property damage and lawsuits. For example, if your online fishing gear shop gets hacked, retail insurance can help cover expenses like computer repairs, data recovery and legal fees.

What Types of Business Insurance Does a Retail Business Need?

Every retailer has distinct needs that may require a combination of coverages. Here are a few key types of small business insurance.

Business Owners Policy (BOP)

Retailers can benefit from starting with a business owners policy (BOP). A BOP bundles three key coverages into one plan. In addition, buying a BOP may help you save money since it’s usually less expensive to bundle coverages than buying each policy.

Here’s what a BOP includes:

General Liability Insurance

Also called business liability insurance, this covers accidental property damage and injuries to people other than your employees. If someone sues you, it can also pay for legal fees, court costs, and settlements. For example, if a display shelf collapses and injures a customer, this coverage can pay for the customer’s medical bills and legal costs if they sue you.

Commercial Property Insurance

As a retailer, you’ll likely have business property or assets like inventory, furniture, equipment or a physical store. Commercial property insurance, or business property insurance, covers these items’ damage, destruction, or theft. For example, if a small fire destroys two boxes of inventory, this insurance can pay to replace or repair them.

Business Income Insurance

This type of insurance can replace lost income if you have to temporarily close your shop due to a problem covered in your policy, like a fire or falling objects. For example, if a tree falls through your front window and you can’t operate your business, this insurance can cover your lost earnings and moving costs if you need to relocate.

It’s also called business interruption insurance.

Other Types of Retail Business Insurance

Other types of retail insurance you may need to add to your BOP include:

Commercial Auto Insurance

When you use a car, truck or other vehicle for your business, you need commercial auto insurance. It covers property damage and accidental injuries caused to others, as well as repair and replacement costs for your vehicles if they are in an accident or damaged by theft or vandalism. It’s worth noting that your personal auto policy won’t cover vehicles used for your business operations.

Commercial Umbrella Insurance

Commercial umbrella insurance offers extra coverage beyond your standard business liability policy limits. For example, if a neighboring business sues you for $1 million after a fire spreads from your store to theirs, and your general liability policy only covers up to $500,000, commercial umbrella insurance can pay out for the remaining $500,000.

Cyber Liability Insurance

Getting cyber liability insurance is a good idea if you run an online store and handle customer info like credit card numbers. This insurance covers expenses from a data breach or cyber attack, such as data recovery, investigative services and legal fees if someone sues you for damages.

Directors and Officers (D&O) Insurance

Directors and Officers (D&O) insurance covers your company’s leaders, like executives and board members, if they get sued. For example, if one of your investors claims that an executive mismanaged money and caused them a loss, and they sue your company, this insurance can cover the legal expenses and any settlement costs.

Product Liability Insurance

This type of insurance covers store owners and retailers if someone claims that their products caused harm or property damage to them. For example, if a customer claims your new skincare line caused a severe allergic reaction, your product liability insurance can pay for your legal costs, judgments and settlements.

Workers’ Compensation Insurance

By law, most states typically require retailers with employees to have workers’ compensation insurance, even if they have just one team member. This insurance covers employees if they become ill or injured while performing work duties. It can pay for expenses like medical bills, disability benefits and lost wages.

How Much Does Retail Insurance Cost?

On average, retailers pay $65 per month for a BOP, according to Insureon. What you pay for coverage is typically determined by several factors, including:

• Business size and income
• Coverage types
• Industry
• Policy limits
• Property value
• The location of your business

How to Get Retail Insurance

Here’s how to get the best small business insurance for your shop:

• Identify Your Needs. Start by determining which coverage you need to cover you and your business against the specific risks in your industry. This might include general liability, property insurance, loss of income insurance and product liability.
• Shop Around. Don’t just settle for the first policy you come across. Compare different insurance companies and their offerings to find the best coverage and rates to fit your business. It’s worth taking the time to get quotes from multiple insurers to ensure you find the most suitable policy for your business.
• Review Annually. Your business needs can change over time, so revisiting your coverages each year is a good idea. Check to see if your current coverage still meets your needs and adjust as necessary to stay protected.

Why is Retail Insurance Important?

Here are a few reasons why retail insurance is important:

• Following the law. State laws often require retailers to carry certain types of business insurance to cover themselves, their company, and their workers. For example, most states require workers’ compensation insurance if they have employees.
• Covering your business against loss. One thing is certain about owning a retail business: unexpected events can pop up at any time. From a shoplifter stealing your summer jewelry collection to an employee getting injured on the job, retail insurance can help cover the costs involved.
• Keeping your business running. When a natural disaster or other unforeseen event forces you to pause operations, retail insurance can help keep things moving. It can replace lost income and cover moving expenses if you need to operate from another location.

Retail Insurance Frequently Asked Questions (FAQs)