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The Ultimate Guide to Retail Store Insurance​

Commonly Asked Questions

If you own a retail store and need to buy insurance, or you simply want to know what type of insurance you need to open a retail store, we will explain it all for you here. From thefts to damage to injuries in your store, not to mention the products and advice you provide, there are risks in every retail store, which means buying insurance for your store is key to protecting its future.

Quick References

The Different Types of Retail Insurance

Retail insurance comes in many different forms, and different insurance providers for retail store coverage will use different names and terms for the specific type of insurance they provide. Here is a quick guide to the different types of insurance you might want to consider buying for your retail business.

  1. General Liability Coverage

General liability for retail stores is probably the first type of insurance coverage a store will buy. It covers many of the most common risks faced. This could include any third-party claims that are made against you for injury to a person or property. It also provides coverage for advertising injuries and copyright violations, as well. Most standard general liability insurance policies will also cover a retailer for product liability too. However, it is important to check the amount you are covered for, as in some cases, the levels can be changed accordingly, depending on the products you sell, make, use, or distribute. 

A few practical examples of why a retail store needs to buy general liability coverage are below:

  • A customer incurs third-degree burns when an electrical product they bought in your store explodes in their hand.
  • A customer’s mobile phone goes missing from the staff room after a store assistant offers to charge it for them.

For issues such as these, buying general liability coverage will typically pay for any damaged property or the medical bills of the injured party. It may also provide coverage for your legal defense costs in the case of a lawsuit.

  1. Workers Compensation Coverage

Workers' compensation coverage is a legal requirement in most states, but the specifics will vary from one state to the next. It provides coverage for your staff should they incur an injury at work or illness as a result of their work. This type of insurance will usually pay the cost of any medical expenses and a partial amount of any lost wages. Most, but not all workers comp insurance policies will also cover any legal bills should an employee alleges your negligence caused their illness or injury.

The requirements differ between states, but any failure to adhere to the rules could result in severe financial penalties.

  1. Commercial Property Coverage

This is another fundamental type of insurance for retail shops. It can cover any physical assets, such as your inventory, the building itself, and your equipment. While each provider will offer different levels of commercial property insurance for retailers, it’s important to verify what is deemed to be a ‘covered event.’ The most common events that are covered include:

  • Fire
  • Windstorms
  • Theft
  • Vandalism
  • Hail
  1. Data Breach/Cyber Liability Insurance

Although this is considered to be a more modern type of insurance, it is extremely important for anyone who handles or stores personal information. This can cover you from data breaches or cyberattacks; it can help you handle the public relations costs, credit monitoring services, fines, legal defense services, and more.

If your retail shop stores any type of personal or financial information, or your eCommerce channel collects personal data or payment information, then you are going to need coverage to insure against these risks.

  1. Commercial Auto Insurance

If you are a retailer with company vehicles that are owned or leased, or either you or your staff use their vehicles for work-related purposes, then a commercial auto insurance policy will be required. Retailers can add-on additional coverage to a standard commercial auto insurance policy. Some o these add-ons include:

Collision – This can payout for damage to your car should it be involved in an accident with another vehicle.

Medical Payments – This can payout for the cost of any medical bills that relate to the injuries either you or your passengers incur following an accident.

Uninsured Motorist – This can pay for damage that is caused by any under-insured or uninsured motorists.

Because a personal auto insurance policy will not cover work-related errands or deliveries, it’s important to get the right coverage for your intended business use.

  1. Inland Marine Insurance

This is a specific type of property coverage that retail stores buy to cover goods in transit. It is ideally suited to retailers who need to ship products to their customers. It also provides coverage for customers' property that is under your care, and it can cover those big-ticket items that you will find are often excluded from standard retail property insurance, such as antiques, computers, medical equipment, or musical instruments.

For instance, a retailer could benefit from buying inland marine insurance should one of their shipments to a client get destroyed or damaged while in transit. Having inland marine coverage will pay to replace or repair any damaged property.

  1. Errors and Omissions Coverage for Retailers

Also referred to as E&O insurance, this type of insurance for retailers can cover any accusations of negligence by helping with the cost of hiring investigators and lawyers. It can also pay for any settlements or judgments up to a pre-set policy limit. Although the majority of retailers are only exposed minimally to such matters, there are many situations where buying coverage makes sense.

Here are a few examples of where errors and omissions insurance could apply.

  • If you are a retailer with a specialist field of knowledge, such as a health food store or a pharmacy.
  • If you are a retailer who offers value-add services, such as an electronics store, which also provides a repair service.
  • If your store deals with special orders, such as those who provide dresses, suits or tailoring for weddings.
  1. Jeweler’s Block Insurance Coverage

This is a type of inland marine insurance that is purposed for jewelry retail store insurance needs. Not only does it provide insurance for the high-value inventory of a jewelry store, but it also covers any customer property, raw materials, and any jewelry which may have been loaned to the store as well. Because of the nature of this coverage, it can also protect and insure goods in transit as well. In some cases, you will find that a jeweler’s block insurance company could also cover the cost of security guards if the alarm system on your store was to fail.

This type of insurance is ideally suited to pawnbrokers and jewelers alike; this is mostly due to the fact that a standard insurance policy will not provide coverage for high-value gemstones, jewelry or precious metals.

  1. Commercial Umbrella Insurance

This type of insurance policy is considered to be a secondary policy to the above retail insurance types. Essentially, it can extend the limits set out in a standard policy. For instance, if your general liability coverage limits are capped at $250,000, but the total cost of medical expenses and legal fees comes to $400,000; should you have a commercial umbrella insurance policy for your retail store in place, it would pay the difference.

For busy retailers or those with larger storefronts, there are often requirements set in place by a commercial landlord, which determines a need to have general liability coverage of up to $1 million. Because most standard general liability policies won’t offer this level of coverage as standard, an umbrella policy can fill that gap with ease, and usually at a much lower cost than trying to increase your limits on your standard liability policies.

  1. Spoilage and Temperature Change Coverage

If your retail store sells or stores perishable stock, then buying this type of insurance coverage can help you recover the costs of replacing that stock when a covered event occurs. It will typically only apply to stock that is stored on the premises, and in some cases, you might also get a payment to cover any lost income too.

When you buy commercial property insurance for your retail outlet, this is typically offered as an additional product you can bolt-on to your core insurance product. Here are the most common causes of loss that are covered by this policy addition.

  • If there is a power outage that causes a change in the humidity or temperature, this could be either a partial or complete power interruption.
  • If there is contamination by the refrigerant.
  • If there is a mechanical breakdown or failure of the equipment or the humidity control system that causes a change to the humidity or temperature.

A standard retailer commercial insurance policy will not typically cover these events. This type of insurance is typically bought by retailers with perishable stock, such as grocery stores, florists, and pharmacies.

How Retail Insurance Works

Retail Insurance is an overall term given to describe a group of insurance policies that retail shops might need to buy. Not every type of policy is relevant to every retailer. However, as all retail stores have customers and with either own or lease a property, the core needs for insurance can typically be covered with a business owner's policy, also known as a BOP.

A BOP makes it easy for a smaller retail store to administer and pay for insurance for their shop because it combines several types of insurance that retail stores need into one overall policy. Dealing with a single insurance provider and making one payment per year or per month saves time, hassle, and often money as well.

Most retail stores hire employees, and for this, workers' compensation coverage is also required in almost every state. Depending on the type of retail business, there will be other types of retail insurance the store will need to buy. For instance, commercial auto insurance, product liability, data leakage insurance, etc. These other types of retail insurance are usually purchased as standalone products or as additional coverage options for a retail insurance broker.

Tips for Buying Retail Insurance

If you are getting ready to buy retail business insurance, then it’s important to remember that all retailers have a unique set of needs. Talking to an expert retail business insurance broker can help you quickly understand the most important types of retail insurance you need to buy.

Understanding your business risks can help you get the best retail insurance in place. Here are a few tips to help you buy the right retail insurance for your individual needs.

  1. Be careful not to under-insure your retail store

The majority of business owners will want to find ways to make sure their insurance is cost-efficient. Saving money on operational expenditure is part and parcel of what you do. However, cutting costs by lowering your levels of insurance coverage could end up costing you much more in the long-run should an event occur.  When you buy insurance for your retail store, always consider the value rather than the cost. Do not risk underinsuring your business as this could leave you open to unexpected, unavoidable financial trauma in the future.

  1. Understand the risks your business faces

As we’ve already mentioned, there is no one-size-fits-all approach to buying retail insurance. Every business will have its own set of risks that need to be carefully considered before you buy retailers insurance. In retailing, some of the greatest risks include theft, property damage, and accidents in-store both by staff and by customers. The larger a store is, the greater the perceived risks, and the higher the levels of coverage that will be needed.

  1. Try to bundle your retail insurance together

This is where dealing with an expert retail insurance broker can really help. In order to get the best prices for retail insurance, and a more dedicated level of service, buying insurance as a bundle with a single provider can work out really well. Most retailers need to buy insurance for commercial property and general liability purposes. One of the more common ways to purchase these types of coverage is with a Business Owners Policy (BOP). It is often cheaper to buy BOP for a retail store than buying the insurance individually.

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