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No matter what kind of business you have, you’ll want to insure it against hazards common to the type of business you have. In general, virtually every eBay business can benefit from some form of property insurance. However, most eBay business probably don't need liability insurance. Listed below are descriptions of various types of insurance, and factors to consider when deciding what types you need.

Property insurance. Business property insurance compensates you for damage or loss of your property, both the physical space where you work (your eBay home office, for example) and the equipment and inventory of your eBay business. If you lease commercial space — for example, to store inventory and ship products — your lease may require that you carry a specified amount of property insurance.

A “named peril” policy protects against only the types of damage listed in the policy — typically, fire, lightning, vandalism, storms, smoke, and sprinkler leaks. A “special form” policy offers broader coverage, usually insuring against all but a few specifically excluded risks (floods and earthquakes are typically excluded), and is more expensive. A good insurance professional can help you decide which choice makes more sense for your business. (Choosing and working with an insurance broker or agent is covered below.)

If you operate a home office, like most eBay businesses, your property insurance needs may be met through an inexpensive rider/endorsement to your homeowners’ policy. But don’t assume that that this cover all eBay business losses — most homeowner policies offer very limited coverage for business property (see below).

When buying property insurance, your choice is between a cash value policy, which pays whatever your damaged property is actually worth on the day it is damaged, or a replacement cost policy, which pays to replace your property at current prices. A replacement cost policy is always more expensive but is worth the extra money. Business equipment like computers, fax machines, and digital cameras lose their value quickly, and cash value proceeds generally will not come close to purchasing replacement equipment in the event of a loss. If you’re like most new eBay business owners, you’re probably using some equipment that’s already out of date. If you suffer a loss, you’ll need to replace this equipment quickly so you can get back to work.

Liability insurance. Liability insurance covers damage to other people or their property for which you are legally responsible. This includes, for example, injuries to a UPS delivery person who trips on your son’s skateboard on the way to your eBay office and damage caused by any products you manufacture and sell (called products liability coverage). Liability insurance policies typically pay an injured person’s medical bills and other out-of-pocket losses, any amount you are ordered to pay in a lawsuit for a covered claim, and often the cost of defending you in such a lawsuit. If you are a home-based eBay business that is seldom visited by outsiders, you will probably be able to get a relatively inexpensive liability rider/endorsement to your homeowners’ policy.

Car insurance. If you have a car, you probably already have insurance that covers your personal use. However, your personal insurance policy may not cover business use of your car — for example, driving to and from trade shows, or picking up large deliveries of inventory. If your policy doesn't cover business use, you’ll want to get business coverage to protect against lawsuits for damage you cause to others or their vehicles while using your car for business.

If you don’t do much business driving — and particularly if you don’t often have business passengers, such as clients or customers — then you can probably get coverage simply by informing your insurance company of your planned business use (and paying a slightly higher premium). Many insurance companies simply factor in occasional business use of a vehicle, along with commuting miles, driver experience, and many other factors, in setting your insurance premium. If you use a commercial vehicle such as a van or put most of the miles on your car while doing business, consult with your agent to determine if your business liability policy will cover this use (and whether it will cover employee use of the vehicle, as well). If not, you will probably have to get a separate business vehicle insurance policy.

Business interruption coverage. A business interruption policy replaces the income you won’t be able to earn if you must close your eBay business due to a covered event such as a fire or storm. These policies typically provide money to both replace lost profits, based on your eBay business’s earnings history (as shown by its financial records), and pay any operating expenses still due even though you can’t do business. Business interruption policies are not typically sold as standalone products; instead, they’re added to property insurance policies or sold as part of a business insurance package (see below). If you can't afford any type of interruption in your flow of eBay income, consider acquiring some form of interruption coverage.

When you’re shopping for this type of insurance (or any other, for that matter), always check the exclusions and coverage. For example, some policies may provide an “extended period of indemnity,” which kicks in after you reopen, to cover your continuing losses until you are fully back on your feet. If your customers don’t immediately return after a temporary shutdown, your policy will pay for the business you’re still missing during this transition period.

Web insurance. Some insurance companies offer Web insurance policies, which protect business with websites against a variety of risks, including theft, copyright infringement, and interruptions of service. Today, you can get insurance for a simple site for anywhere from $500 to $3,000 a year. An insurance professional can help you decide whether your cyber-risks are great enough to justify this expense.

Insurance specific to eBay transactions. In addition to more general types of business insurance protection, there are policies which protect particular aspects of an eBay transaction. eBay offers insurance to buyers against nondelivery and misrepresentation, which is discussed in Rules, Disputes, and Feedback. Shipping insurance, as offered by the various carriers, is discussed in Shipping and Returns. Additionally, some third-party insurers such as BuySafe reimburse buyers in the event of a rip-off, fraud, or other nondelivery issue with the seller, also discussed further in Rules, Disputes, and Feedback.

Mandatory insurance for employees. This section does not cover workers' compensation or employee-related insurance requirements, but you can read about them in Hiring Help.

Employee benefits. Similarly, this section does not discuss the myriad employee benefit programs you may offer employees or provide for yourself, such as health insurance, life insurance, or long-term disability coverage. If you’re interested in these types of insurance, a good place to start gathering information is the National Association for the Self-Employed website.

by: , Attorney

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