RETAIL BUSINESS INSURANCE

Retail business insurance helps protect stores, boutiques and online retailers from property damage, customer injuries, cybercrime, theft and business interruption. Whether you own a small shop or operate multiple retail locations, the right insurance coverage can help reduce financial risk and keep your business running.

Though store owners have a lot of business risks — customer injuries, loss of inventory, damage to the shop, and employee workplace claims, for example — they also have many options to prevent problems and reduce financial losses through insurance coverage insurance. 

Retail store insurance can cover brick-and-mortar shops as well as online retailers for:

Damage to their buildings and equipment, 

• Theft,

• Harm to inventory,

• Customer injury and

• Business interruption. 

Workers compensation, commercial auto and product recall and product liability insurance can round out your protection. 

Property Insurance for Retail Businesses

As a retailer, your property may include a building, inventory, equipment, furnishings and signage. You should consider protecting against fire, water, storm and vandalism damage as well as theft and loss of income. 

You have many choices when it comes to business property insurance, including: 

• A business owners policy (BOP), which bundles commonly needed coverages for small retailers in one policy,

• A package policy for retailers, which is a compilation of multiple coverages,

• Program insurance, which is a highly specialized set of coverages tailored for a specific type of retailer, such as liquor store owners or franchises, or

• A set of stand-alone policies that can be endorsed with add-on protections targeted to your specific risks.

Common property coverages include:

Building Insurance

If you own your store’s building, you will want to insure it for damages from storms, fire, explosion, vandalism and broken pipes. Sewer and drain backup is also a smart addition to a commercial property policy. Consider also including ordinance and law coverage, because damage to one portion of your building could necessitate upgrades to the rest of the structure to comply with current zoning requirements or building codes. If you wish to insure outdoor signs or storefront glass, you may have to add that to your property policy, as many standard policies don’t automatically include those items.

Your insurance costs will be based on your location, size, building age and frame materials, special weather risks (tornado or storm frequency, for example), and total insurable value, among other factors. Assess your risk of flood damage, such as proximity to bodies of water or a dam and your elevation above stormwater pipes and drainage ditches. Flood insurance must be purchased separately from business property insurance. Similarly, earthquake and, in some locales, wildfires, are perils that have to be covered under a stand-alone policy. Your insurance agent can help you find this coverage.

Improvements

 You don’t need to insure your building if you lease (your landlord will do that), but you probably do need to insure improvements or betterments you make to the rented space. Even though the changes typically become the property of the landlord once you install them, you are still responsible for insuring for repair or replacement.

Building Contents Insurance

The list of items kept inside your store is pretty vast. It usually includes inventory, shelving, cash registers and other sales-facilitating equipment (like card readers), computers, valuable papers, cash and other securities, and furniture. Larger stores may also have mobile equipment, such as forklifts or skid steers. All of these items are insured in a different way. Some require additions to a standard commercial property policy (called endorsements), while others, such as mobile equipment, require totally separate insurance policies.

If you store contents away from your main address, talk to your agent about limits on coverage for those items since they might not receive the same protection your policy provides for on-premises possessions. If you have multiple retail locations, you may be able to get blanket protection for all of them, which reduces premiums. 

Equipment Breakdown Insurance

If your retail shop relies on heating, air conditioning, lifts, belts, refrigeration or other mechanical or computerized systems, consider the financial protections equipment breakdown insurance offers. It responds when a covered piece of machinery fails due to a named peril, such as a lightning strike, motor or compressor burnout, or mechanical failure. It helps pay for repair, replacement, business income loss resulting from business interruption, inventory spoilage and extra expenses, such as renting a new piece of equipment while you await repair or replacement. Coverage is usually added to your business property policy as an endorsement and can be tailored to your store’s specific needs.

Business Income Insurance 

Sometimes called business interruption insurance, this coverage is often included to some extent in a business owners policy and in equipment breakdown insurance. It can be added to any business property policy to cover lost revenue if a fire or other covered disaster shutters your store. You can also add extra expense coverage, which provides help with rent for a new storefront or other accommodations while your main premises are repaired.

Broader business income coverage is available for supply chain interruptions, utility failures and road closures. For example, if the property next to your building has a fire and the fire marshal declares that your block must be closed for public safety, an Overhead Expense Coverage endorsement can pay for your business overhead costs during the closure, even if your business property was not directly affected. Choosing policy specifics depends heavily on your vulnerability to different events. Your insurance agent can help you evaluate your risks and compare coverage options.

Crime Insurance

A first-party fidelity bond protects your business against theft of corporate money or assets by an employee. You can buy coverage for a small set of employees who have high-level access to your money, or you can opt for a blanket policy that covers theft by a broad group of employees. For non-employee theft, you will need commercial crime insurance.

Parametric Insurance 

If you operate in a disaster-prone region and would benefit from an immediate flow of cash after a disaster while you await your insurance settlement, you might wish to look at parametric options. These are insurance products that are tied to preset parameters, such as wind speeds at your location during a storm. They pay out automatically when measurements are met, without going through a lengthy adjustment process. But, keep in mind that it pays a set dollar amount rather than reimbursing you for the actual damage your business suffered. 

Liability Insurance for Retail Businesses

General Liability Insurance

This policy covers the most common liability claims for a retail business, such as customer injuries due to movement of equipment, shelving or inventory, and slips, trips and falls. 

Product Liability Insurance

When products you sell harm a customer, the injured party may seek compensation for medical bills, lost income and pain and suffering. You can be drawn into a lawsuit despite having no knowledge that a product was defective or mislabeled. In fact, you might be sued even if there was no problem with the product and the lawsuit is frivolous. In all these circumstances, product liability insurance will step in to defray legal bills, investigative costs and compensation you may be required to pay.

Cyber Liability Insurance

Retailers have a large exposure to cybercrime, including the leak of customer personal data and loss of vendor financial or proprietary data. Hacker attempts to breach networks are almost incessant, and costs to respond to a cyber failure that results in a data breach, erroneous payment transfer, or scam shipment of inventory can be exorbitant. Cyber liability insurance that is added as an endorsement to a general liability policy can help with claims. However, this coverage generally has a policy limit to tens of thousands of dollars. For protection that covers larger cost incidents, you will need a stand-alone cyber policy.

Employment Practices Liability 

All retail businesses that have employees should consider insurance to protect against financial loss due to workforce complaints. These include harassment, discrimination, hostile workplace and wrongful firing or hiring. Complaint trends are highly volatile, influenced by plaintiff bar advertisements, cultural movements and social media trends. Even businesses that try to follow government and industry guidelines are finding themselves on the defendant’s end of lawsuits. Employment practices liability insurance (EPLI) for retailers can help pay for legal defense and court awards.

Excess Liability and Umbrella Insurance

Depending on your industry, customer base, legal jurisdiction and business size, you may be a target for liability claims. If your potential frequency or severity of liability claims exceeds the limits of liability insurance in your primary policies, you should investigate the value of excess liability or umbrella insurance for retailers. Excess liability insurance adds dollar value to a single underlying policy, such as product liability or EPLI. Umbrella coverage adds dollar value to multiple primary liability policies at the same time. Both are efficient ways to improve your financial protection when your primary insurance policy can’t cover as much liability risk as you feel you have.

Commercial Auto Insurance for Retail Businesses

If you deliver products or have employees run business errands using their own vehicles, you need commercial auto insurance. It can be written to help pay for damage to your business trucks or cars as well as the vehicles your employees own and use for work. It can also cover your payments to non-employees for their injuries, lost income or damage to their property incurred in an accident. Lastly, you can insure your company vehicles for damage that occurs from non-collision accidents, such as flood and falling or flying debris. You can insure a single vehicle or a whole fleet. 

Workers Compensation Insurance for Retail Businesses

Almost all states require employers to carry workers compensation insurance, even for part-time and family-member employees. Part A pays for injured employees’ medical bills, rehab and lost income, among other benefits, depending on the nature of the work-related event. Part B is the section that protects your business from personal injury lawsuits filed by covered employees. It adds to your overall liability insurance protection. Businesses need to comply with both federal and state workers compensation requirements for every state where they have an employee. 

Product Recall Insurance for Retail Businesses

A product recall can be very expensive. But who bears those costs? If you make and sell a product, you consider investing in product recall insurance, which helps defray the expenses associated with customer notification, collecting the product and replacing the product. Some insurers offer crisis consulting services as part of the policy, and you can often enhance your coverage to include loss of profit. 

If you don’t manufacture anything you sell, check your contracts with suppliers for a tight product recall clause that covers defects in manufacture, design, labeling and packaging and holds the supplier liable for the costs of necessary product recall actions. Consult your legal counsel to devise suitable contract wording, and allow your insurance agent to review the contracts and look for possible gaps they may create in your coverage.