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​5 Insurance Policies That Need to be Considered by Retailers

Meta Description- Retailers can consider several insurance policies designed to safeguard their investments, assets, and business from accidents, dangers, and mishaps.
 
Retailers make huge investments not only in money but in manpower and time. So, retailers also need insurance. There are several types of insurance policies for retail businesses. The insurance policies are designed to safeguard their investments, assets, and business from accidents, dangers, and mishaps.
 
The extent of coverage depends on the policy. The policy might cover arson, vandalism, man-made destruction, and theft, to name a few. The policy might cover third-party liability if any accident at the retailer’s factory caused loss to another third party. There are policies to safeguard personnel as well. Governments mandate retailers to insure their workers so that the insurance policy covers the worker in case of an accident or mishap. 

Does every type of retail business need insurance?

A retailer is a business that sells goods, commodities, and services. Although the dynamics of business might change with every retailer, all retailers do business in more or less a similar way. Although operating a retail business is a rewarding experience, there could be ups and downs. This is true especially during the pandemic when retailers faced uncertain times. Those retailers with insurance policies to safeguard their businesses during such tough times could sustain themselves.
 
Retail businesses also change with the times. Therefore, the requirements of insurance also change as well. Newer types of insurance coverages might be required. Existing insurance policies might need modifications or changes. In such changing times, retailers must treat insurance as an investment, not a cost. There are several types of investment-laden insurance policies, combinational insurance policies, and policies with short-term redemptions. Insurance companies provide various options for retailers to ensure that retailers are adequately covered for all contingencies.

What are the common risks for retailers, and which insurance policies can they buy?

1.   Theft


A recent finding by the National Retail Federation revealed that retailers lost close to $62 billion in the 2017-2020 timeframe because of theft and fraud. While shoplifting has been the main issue for physical stores, online fraud has been the problem with online e-tailers. Even though there are security systems at physical stores, shoplifters seem to find ways to bypass these. Retailers have also invested in online security. But the cases of online data theft have also been on the rise.
 
Compromised customer data has led to dubious purchases on behalf of customers. Fingers always point at the retailer in such cases and the retailers end up shelling compensations to customers and also paying hefty fines.
 
Retailers can purchase commercial property insurance to safeguard their physical stores and inventory. This insurance covers on-premises equipment, machines, stocks, and all paraphernalia. Commercial property insurance applies for online e-tailers as well. All goods and services sold or retailed online are considered commercial property. Any dubious transaction that has not been initiated by a trusted stakeholder and which results in the loss of inventory is covered by commercial property insurance.
 
It has to be noted that even in commercial property insurance, there are several types of sub-insurance policies. Some of them are namely:

  • Liability insurance- It is a type of third-party insurance. If a person or entity sustained injuries or losses while at the retailer’s property or using the retailer’s goods/services. In effect, liability insurance covers the retailer and the compensation paid out to the third party in such cases. For example, if someone develops an allergy after using a product from the retailer, the product user might sue the retailer. Another example is when a child accidentally choked on a toy produced by the retailer or got injured by the toy. Even in this case, the child’s parents might sue the retailer. Many retailers opt for general liability insurance.
 
  • Property insurance -  This type of insurance covers inventory, stockpiles, and business property. There could be insurance policies with specific coverages for each of these assets. By working with an insurance provider, retailers can use time and judgment to craft their insurance strategy carefully. The pricing of property insurance may not be straightforward. Therefore, it takes good accounting and financial acumen to arrive at a figure.

2.   Cyberattacks 

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Although one would think that cyberattacks would classify as a type of theft retailed insurance policy, cyberattack insurance policies are broader. They normally require different types of clauses. Cyberattack insurance policies are applicable for retailers operating online stores. An Internet Crime Report released by the FBI in 2019 revealed that businesses lost $3.5 billion worth of sales, inventory, and opportunities because of cyberattacks and cyber fraud. 

One of the reasons why cybercrime is on the rise is because attackers can use various mechanisms to breach retailers' security systems. Although phishing and social engineering attacks are the common ones used by cyber attackers, they also use several other sophisticated methods, tools, and techniques. 
​Much of these attacks are at gullible customers who fail to recognize a phishing link or a dubious website. They enter their details into such websites and lose their money and, even worse - their confidential data.
 
In many cases, the retailers are not to blame. End-users download malware and unverified software. The malicious software records their keystrokes. The recorded data is used to login to their accounts and steal their information. End-users sue retailers for this. Although not fully justified, retailers have to deal with such situations. This is where a good cyberattack insurance policy can fend away such troubles.
 
A cyberattack policy should therefore cover first and third-party liabilities. First-party liability coverage protects the retail business from cyberattacks that resulted in restoration costs, PR expenses, process reengineering costs, and technology upgradation costs.

3.   Lawsuits on products

Another problem that retailers can fend off is lawsuits against products by customers. These products are not produced or manufactured by the retailer. The customer might have found the product defective, lodged a complaint, or initiated a lawsuit against the retailer. Although product lawsuits may be covered under commercial property insurance, the nature of these lawsuits requires a separate insurance policy.
 
A comprehensive product liability insurance policy will cover a retailer against all lawsuits related to defective products, malfunctioning products, and even products with no or poor quality usage instructions or guidance.

4.   Lawsuits related to employment practices

All retail businesses need employees. There are no or very few retail businesses that operate on auto-pilot mode. Any retail business with more than ten employees will need employment practices insurance policy coverage. This is true, especially if the employees are interacting with each other regularly.
 
Lawsuits can be filed against employers. Issues such as gender discrimination, sexual harassment, religious discrimination, and wrongful conduct may trigger lawsuits. There are instances where employees might name board members in their lawsuits. This could trigger a change of procedure within the retail organization. The charged members may not be able to resume their duties until the court grants permission. It could unnecessarily hamper the daily functioning of the retail organization.
 
However, it is common for retail organizations to take a management liability insurance policy to protect the company against lawsuits directed at key board members. On the other hand, employment practices liability insurance policy offers protection on issues related to suing the retail company on common employee issues, as described in the above paragraph.

5.   Closure of the business temporarily

Property insurance can protect the business against man-made or natural disasters. But a business might need capital to reopen its business after a temporary interruption in its business. A business interruption insurance policy provides the capital for such situations. The retail company gets the required capital to reopen its business. The amount of capital required depends on the retailer’s needs and the terms of the policy.
 
Most retailers want the money that can enable them to restore their business in the same situation that existed before the temporary closure. Some other businesses want to restore their businesses to a more profitable and stable status. In such cases, the amount of capital needed might be more, which affects the insurance policy's cost and the associated collateral.
 
A business interruption insurance policy covers losses in revenue, unpaid rent, unpaid wages, loans, relocation expenses, inventory restocking costs, and staffing costs, to name a few. Smaller retailers with less than a hundred employees buy Business Owners Insurance Policy. This type of policy is similar to Business Interruption Insurance Policy but is geared more toward small business owners. Another significant difference is that this policy is cheaper. All coverages come bundled, unlike buying them separately, like in a business interruption insurance policy.

Final Thoughts

General liability insurance is a type of insurance that offers broad coverage against many types of retailer risks. Retailers consider this a better option than buying separate insurance policies to cover various risks. The cost of general liability insurance depends on the extent of coverage sought, the nature of the retail business, and the current status of the business.
 
The insurer assesses the coverage amount based on this and several other criteria. Whatever the case, general liability insurance is often the first consideration for many retailers.
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About Author-

Fatema Aliasgar is a writer and editor based in Mumbai, India. She has 7 years of experience writing blogs and articles.

She likes to read non-fiction and play board games with her kids during her free time. 
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  • HOME
    • Home Furnishings "STUFF"
    • About Us
    • Commitment To Our Veterans
    • Free Marketing Analysis - No Strings-No Sales Pitch
  • Social Platforms
  • Technologies
  • Marketing Integration
    • Free Marketing Analysis - No Strings-No Sales Pitch
    • How Social Media is Changing Brand Building & Retail
    • Brick & Mortar Retail Touch Points Exposed
    • The Secret to a Good Mobile Website for Retailers
    • U.S. Newspaper Revenues Hit 50-Year Low in 2012
    • Future Retail Trends-2015
    • The Power Of Gen Y in Today’s And Tomorrow's Workplace [INFOGRAPHIC]
    • Brick And Mortar Retailers May Become Extinct If They Do Not Embrace The New Economy >
      • A Retailer's Guide to Webrooming
      • INFOGRAPHIC - Do men and women shop differently online?
    • How Big Is Amazon {INFOGRAPHIC}
    • Why retailers must excel in the 4 Cs instead of just the 4 Ps
    • E-tailers: Tips, Trends, and Reasons E-Commerce is About to Boom
    • Is Texting The New Marketing Engagement Frontier
    • Which Social Network's Users Make the Most Money? [INFOGRAPHIC]
    • 120 Awesome Marketing Charts, Graphs and Statistics
    • What It Costs A Business To Do Social Marketing
    • The NEW Retail Demographics
    • More Shoppers Reach for Mobile to Browse, Buy >
      • Online Reviews Influence Shoppers Most, but Print Catalogs Trump Social Networks
      • How Shoppers Use Smartphones to Save Money
      • Age, Gender Determine 'Go-To' Devices
  • MY RETAIL RANTS BLOG
  • CONTACT US
    • free marketing help desk