Business Insurance - Do You Need It? | Chris Malta's EBiz Insider Podcast

Chris Malta's EBiz Insider Podcast

I often get this question in my EBiz Insider Workshops: Do I need business insurance for my ECommerce business?

Well, if you ask an insurance salesperson, the answer will always be a resounding YES!...because you're talking to an insurance salesperson. In reality, things are a bit different.

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EPISODE TRANSCRIPT

Business Insurance - Do You Need It?

Welcome to Chris Malta's EBiz Insider Podcast, where there's no such thing as too much truth!

I often get this question in my EBiz Insider Workshops: Do I need business insurance for my ECommerce business?

Well, if you ask an insurance salesperson, the answer will always be a resounding YES!...because you're talking to an insurance salesperson. In reality, things are a bit different.

Keep in mind that I'm not a legal professional, so this isn't meant to be legal advice. If you want legal advice, talk to an attorney. My advice in this area comes from more than 40 years of actually owning and running businesses, and is my PERSONAL OPINION, from me to you.

There are times when I've had business insurance, and times when I haven't. It depends on the circumstances.

The most common type of business insurance is Liability Insurance. An insurance salesperson will tell you that you need this in case somebody gets sick or is injured by something you sell, or somebody is injured on your business premises.

In MY businesses, I've had offices where my employees work and where potential customers and other people come to meet with us. I have ALWAYS had Liability Insurance for any office space I've ever had where other people work or visit.

On the other hand, if you own a Home-based business, in my opinion you can rule out Liability Insurance for your business premises. You will NOT have your internet-based customers traipsing in and out of your home. They'll be buying from you online, and won't even know where you LIVE. So the chances of one of your customers being injured on your business premises by tripping over your cat or slipping on a patch of ice on your front porch is NIL. Won't happen.

Another potential liability is one of your customers getting sick or being injured by something you sell. When it comes to that scenario, follow these simple rules:

1. NEVER sell anything that people eat, drink, put on their skin or feed to their pets.

2. Never sell anything that EXPLODES.

I've never carried Liability Insurance on any of the sites I've had where I've sold physical products online, because I've always followed those rules.

Is it possible that someone could hurt themselves with other products you sell? Sure. There are a lot of idiots out there. If you sell clothing irons, and some guy tries to flatten the hair on his arms using a hot iron, that's gonna hurt.

If somebody has a knot in their shoelace that they can't untie and tries to cut through it with a Skil Saw that you sold them, THAT's gonna hurt. So you really can't protect yourself all the time against every stupid human trick that the species can conceive of, and there are a LOT of them.

However, it's also very unlikely that anybody would try to sue over something like that, or ever be successful if they tried.

Let's look at more likely scenarios. A lot of the products that are sold in the US these days are made in China. With such lax regulation in Chinese manufacturing, there's always the possiblity of lead paint, cheap, brittle plastic that breaks easily and can hurt someone, or any number of other product problems that relate to largely unregulated manufacturing processes.

This is yet another reason in a long list of reasons NOT to buy products directly from China. Forget importing directly from China, forget using ridiculous systems like AliExpress or Oberlo, etc. Check out my other Blog Posts and Podcasts for more info on all the reasons that those are such bad ideas.

The point here is if you're going to sell products online and you (a) want to deliver safe, quality products to your customers and (b) greatly minimize any need for Liability Insurance, ALWAYS buy from reputable US-based Wholesale Suppliers that are licensed by the products' manufacturers.

Generally speaking, even if products are MADE in China, reputable US Wholesale Suppliers do NOT import the cheap, dangerous stuff. THEY don't want that liability either!

Also, if somebody DOES get hurt using a product you sold them and YOU bought it from a reputable US source, any legal action is much more likely to go after that SOURCE instead of your home-based business.

Liability lawsuit attorneys look for the people with the mega-deep pockets, like the Manufacturers and Suppliers. In all the time I've been in this business I've never known or heard of a home-based business owner who was sued over a product liability issue.

The only exception that I'd caution you about is if a product you sell is suddenly subject to a product safety RECALL, and you keep selling it ANYWAY...that would be a problem. Your Supplier will notify you if any of their products that you sell are ever hit by a safety recall. If that ever happens, remove the product from your site IMMEDIATELY.

When it comes to wondering if you need Liability Insurance, the question you're asking is related to RISK. If you pay attention to what I've told you here, you have a MUCH LOWER level of risk than the insurance salespeople want you to THINK you have.

This is obviously a decision you have to make for yourself. I'm not telling you to ignore risk factors in your business, or to ignore legal or insurance professionals. I'm just warning you to be careful about falling victim to to hysterical sales practices that are designed to make you THINK that you need something more than you actually do.

Again, just my humble opinion after 40 plus years in business.

I also mentioned that there are other reasons to carry business insurance. Specifically, there are two other types of insurance that businesses use regularly.

The first is Property Insurance. Let's say you're selling on eBay or Amazon and you have $20,000 worth of wholesale product sitting in your garage, along with your shipping materials, postal scale, etc. Suddenly there's an electrical fire or a flood or some other disaster that destroys your property.

FIRST, allow me to mention that you should not be in this situation in the first place, because you should NOT be selling on eBay or Amazon. Both those platforms have miserable profit margins, are extremely difficult to work with, etc. More on that in my other Blog Posts and Podcasts.

Second, if you ARE in that situation, your Homeowners Insurance will cover your home and personal property, but may not cover your business property.

So that IS a reason to consider business Property Insurance. Or you could just get away from eBay and Amazon and build your own website, like you really should be doing.

The second other type of insurance is Transit Insurance. This again relates to your actually handling bulk wholesale products yourself. If you're buying loads of wholesale products locally and shipping them to a fulfillment center, for example, insurance companies offer Transit Insurance in case those products get lost or damaged in transit.

Of course, UPS, FedEx and USPS offer insurance for exactly the same thing, and in my opinion I would take advantage of that instead of buying blanket Transit Insurance coverage.

Again, just my opinion!

Just remember that a Business Insurance salesperson is always going to try to scare you into buying as much coverage as they can, whether you need it or not. While you might opt for some type of insurance for your business if you really feel the need to, you can't bubble-wrap your whole life, so don't go overboard.

For much more tremendously insightful ECommerce information, check out my FREE EBiz Insider Video Series at ChrisMalta.com.

Thanks for listening, and I'll catch you next time!