Here’s the 100% truth about insurance for your small, at-home eCommerce business:
Most people think if they pay for “renters insurance” or “homeowners insurance” that this covers their inventory for their at-home eCommerce business… but this is 100% false. This means that if your apartment is flooded by the upstairs neighbor, a hurricane, or maybe you live in a home and the city sewer system backed up and flooded your basement or, God forbid, your teenage daughter accidentally left the curling iron on or a candle burning and it all goes up in flames… absolutely $0 worth of your inventory or equipment is covered. With that being said, there are some insurance policies that may cover a very, very small (nearly worthless) percentage of your inventory or computers / equipment... like literally, the few policies that do cover stuff like this cover as little as $50 and as much as a couple hundred. So, if your online company has reached the point of being valuable, you definitely want to insure it!
WHEN TO INSURE
My personal advice would be; "If you don't have enough money in your bank account to easily replace it all; INSURE IT!" For example, if the grand total cost of your inventory is $500 and the computer, desk, chair and label printer you have was all purchased used or off Amazon and is only worth $500; your grand-total investment is only $1,000. Personally, I would NEVER insure this amount. I believe I took out my first insurance policy when my assets stored in my home hit $20,000 value... and honestly, I truly believe I waited too long because my basement DID flood and I DID lose a large amount of investment and our Home Owners essentially laughed at me even wanting to consider trying to claim this on my policy when they had no prior knowledge of me running an online store out of my home... and yes, this was my first time in my life ever trying to file a claim... I learned the hard way.
HOW MUCH IS INSURANCE?
Just like with auto insurance, you will find a variety of prices and offerings, so it is difficult to say what the exact cost is. However, what I can tell you is that every business insurance company I have worked with charges by the month and each “policy” runs for 6-months. Some companies give a discount if you pay the 6-month policy upfront.
The more valuable your assets are, the more expensive the policy will be. You can insure a half million dollars worth of products and equipment for around $300-$350 a month, depending on your needs. So, obviously, if your goal is to insure $50,000 worth of stuff your policy will cost a fraction of the price; perhaps even as low as $30 per month, but there are tons of variables such as:
- Do you live in a "bad area" that has a high rate of crime / break-ins? Areas with low crime will have lesser rates than high crime areas
- What do you sell? Surprisingly, WHAT you sell can change the cost more than HOW MUCH you store!
- Do you have a history of problems? Just like with auto-insurance, if you are a "high risk customer" you can expect higher rates
- If I recall correctly, the rates are less if you own your home versus rent.
- AN ALARM! Seriously, if your home has an alarm you will save money every month! I think our monthly savings on our warehouse policy (with an alarm and camera system) is over $35! If you want a camera system with NO MONTHLY COST, you can get a nice little "4-track" (that means 4 cameras) system like this:
As far as alarms, SimpliSafe is incredible but my BFF and sis-in-law both swear by the Ring Doorbell. Either way, it's a win-win because you are protecting yourself / family, protecting your assets and also saving money on your insurance!
One of my earlier business insurance policies was with a popular company that I would later find out essentially took advantage of me by including a bunch of bullsh*t I never needed into the policy, thus resulting in extra money paid out every month for literally nothing. Here’s a couple examples of garbage they padded into the policy:
Sign Insurance: This provided coverage for exterior signage, meaning if my online company had some kind of billboard or lightbox sign and a kid threw a rock at it and broke it or a Michigan tornado ripped it down, the insurance company would cover the cost.
Customer Liability: If you sell online and work from home you absolutely do not need to pay for customers slipping and falling or getting injured on your property.
Excessive Equipment Coverage: If your computer and printer retail for under $1,000 total you do not need to pay monthly to insure it. It will ultimately cost MORE to insure it every month than to just buy a new unit. Fast forward 15 years: My business has several computers that cost thousands of dollars and I have invested in a high end printer, scanners, thermal printers and more. All of these electronics add up to 10k+ so it is worth the extra couple buck to insure it monthly.
Over-Insurance: Your insurance should be based on the COST of the merchandise you store. For example, let’s say your stock consists of 1,000 Calvin Klein shirts that cost you $10 per piece. This means you have $10,000 worth of shirts. Do not let the insurance company convince you to insure the merchandise for the FULL RETAIL VALUE. If these shirts each retail for $80; the insurance company may try to get you to sign a policy for $80,000 worth of merchandise… but this isn’t reality. Insure your merchandise for your cost, excluding profit potential or retail value.
Depreciation: Let's say you went all-out and bought a higher-end camera 4 years ago for $900. There's currently no reason you should be insuring that camera for $900 because it's probably only worth $400 now due to electronics depreciating quickly. This also applies to computers, printers, scanners, etc.
Other Add-Ons: There’s endless additional policies the insurer may try to sell you on. If you make YouTube videos you may want to pay for a policy that protects you against lawsuits based on words / phrases / things you say in your videos that may be deemed offensive or harmful to a watcher, but if you don’t make videos or podcast, this isn’t an add-on you need to pay for.
Get 3 quotes. Try a couple big companies like State Farm and AllState then try a small local company. You will be surprised at how much different the prices are.
Consider your Deductible. A higher deductible should result in a lesser payment. Personally, I would rather have a $1,000 deductible and save $75 a month in payments versus having a $0 deductible and paying an additional $75 every month. I say this because $75 a month ends up equaling almost $1,000 per year, so, being that I have never had to file a business insurance claim, I have saved over $13,000 by opting for a $1,000 deductible.
DO NOT GO UNINSURED. Things happen. Life happens. Insurance protects your livelihood. If you drive a nice car, you want to insure it. If you buy a brand new furniture set, you probably paid the extra $100 to buy the warranty. Heck, even Amazon offers insurance policies... and I, personally, have utilized them many, many times for my cameras, lighting and more. INSURE YOUR INVENTORY. With that being said, IT IS OFTEN CHEAPER TO BUY AN OUTSIDE INSURANCE POLICY! For example, my $800 camera I bought through Amazon had a 3-year SquareTrade policy available for $50 or so. This is absolutely cheaper than paying every single month via my business insurance... especially considering that the camera isn't going to last more than 3 years because it is used all day, every day. If I indefinitely paid on this via my business insurance it isn't worth the money. I tend to keep my business insurance to inventory, shelving units and such.
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