eCommerce Insurance: Protecting Your Business and Wealth

Custom Email Subject Line: When the Phone Rings at 2 am

This year a member posted in the eCommerceFuel Forms that they received a call at two in the morning.

Never a good sign.

Their warehouse was on fire and it took them 18 hours to put it out. The entire building and everything inside was a total loss.

While they were insured they didn’t have anywhere close to enough coverage to compensate for the destroyed property, inventory and lost income.

So….. How’s your insurance looking?

If you’re like most people (myself included) you’re likely underinsured in some pretty key areas. Which means the wealth you’ve worked hard to earn and save is at risk of evaporating.

I asked Andrew Egenes and Phillip Naples from Unbrokerage.com to join me to talk about what types of eCommerce insurance store owners need to protect themselves to help insure (pun absolutely intended) this kind of thing doesn’t happen to you.

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(With your host Andrew Youderian of eCommerceFuel.com and Andrew Egenes and Phillip Naples from Unbrokerage.com)

Andrew Y.: Welcome to the eCommerceFuel podcast. This show is dedicated to helping high six and seven-figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow e-commerce entrepreneur, Andrew Youderian.

Hey, guys, it’s Andrew here, and welcome to the eCommerceFuel podcast. Thanks so much for tuning into the show, and today, Oh, do we have a sexy topic for you, insurance. All right, I may have lied, this may not be the most…the sexiest episode you’ve listened to all year… But can I give you a promise? It might end up, turn out to be the most profitable one for you. Take, for example, one of our four members in the private community this year who posted about how their warehouse burned entirely to the ground. And he didn’t have ample insurance to cover it. So they lost on not just the building, but on the inventory.

So, I mean this is serious stuff, and the thing that’s funny is it’s… it’s not very… it’s kind of a pain. When I first start shopping for insurance for my business, I don’t even know where… Like you know, where to get car insurance, right? There’s AllState and Progressive. Where do you go to get general business liability insurance? It’s not exactly a transparent industry where you know where to go when… There’s a lot of things you don’t realize are a risk either…Like I think there’s some things that are racket in insurance world. One thing I didn’t realize about was…that we’ll talk about in the episode was, if I have an employee, if Laura, the Community Manager for eCommerceFuel, if she is, you know, she’s driving down to Boston to take a flight ECF Live in her own car, which I don’t own, but it’s on a work trip and she plows into somebody, I’m on the hook for that. But if I have general liability insurance, unless I have the special clause called non-owned auto or something like that, right, then there you go, my parent company. Then you know I’m on the hook for any damages potentially if they sue us so.

Anyway, there’s a lot of things you don’t realize that you’re exposed to. And knowing which ones to self-insure for or ignore, and which ones are important, it can be tricky. Anyway, that’s what we talk about today. I’m joined by a couple people to really dig into this.

Andrew Egenes is from really the early days of the forum. He was one of the first 30 members probably back when I launched in 2013. He used to be in the e-commerce space, owned his own business, has since left and co-founded unbrokerage.com with Phillip Naples. And Phillip has an extensive deep back on the insurance world. So between the two of them, they really understand the pairing of insurance and e-commerce. So, we get into all the different kinds, you know, the auto stuff I mentioned before, of course, your stuff like property. We talk about that, like cyber policies. We really get into a lot of the different things. We should be thinking about how much roughly they cost, which ones are most important, and where your risk… really, you know, where your risk probably is most acute.

So, hope you enjoy it and again, like I mentioned, this may not be a blockbuster episode in terms of action and crazy things but like I said the top, may just turn out to be the most profitable episode if something bad happens to you that you listen to in a while. Hope you enjoy.

The Meet Cute

Andrew Y.: Well guests, maybe Andrew, you can start. What was the story with how you guys met? You mentioned it’s a pretty entertaining one, I’d love to hear it.

Andrew E.: Yeah. So, you know, when I started my first company Shoplio, back in 2010 which you know, ultimately turned into a successful e-commerce company, it was the first time I had ever gone into business for myself. And you know, like every first-time entrepreneur, you know, you’re optimistic, you’re going to defeat the odds and you’re going to figure everything out on your own as you go, there’s nothing that you won’t be able to figure out. And so I operated for you know, a good year where I was working out of my house, my business partner was working out of his house. And there wasn’t really anything that triggered a need for insurance, that was until we decided actually kind of grow up and get an office, start hiring employees, so on and so forth.

And truthfully, I can say this, insurance was the first thing… You know, we had figured out financing, we had figured out accounting, we had figured out legal. And insurance was the first time when we realize we were going to have to turn to someone else to figure this out because it’s just too difficult, and it’s too complicated and we don’t understand it. And so ultimately, what happened is Phillip was one of the only insurance brokers, commercial insurance brokers that would return my phone calls and my e-mails. I happened to you know, share some interests with him as well. And so ultimately, you know, with Shoplio, we ended up buying our insurance through the agency that Phillip worked for, stayed with him for three years, but because the insurance industry is the way it is, I finally just got fed up with it and ultimately ended up firing him because I was tired of managing and dealing with insurance the way that I had to deal with it.

And there was nothing at the time that Phillip could do about that. You know, his hands were handcuffed. So I have three great years of working with him. He did a great job given the circumstances that he had to work with but ultimately I just couldn’t… I couldn’t continue dealing with insurance the way I had to deal with it.

Andrew Y.: But bottom line is, you in the past had fired your, now co-founders? Is that what you are saying?

Andrew E.: Literally, Yeah, I fired Phillip and then we’ve come full circle, we’ve made up and you know, we’re on good terms now.

Andrew Y.: Phillip, how long of a forgiveness period was that? Did he have to like court you back? What did you do to get back your good graces?

Phillip: In my good graces? I mean, I needed help, and I knew he could solve it. So I just kept in touch with him and you know, stuff like that happens in the insurance industry. You get fired one month, one year, you’ll maybe pick it up a couple years later just because it’s bought and sold like a commodity. But, yeah, so literally when I formed UnBrokerage, I was just kind of testing the model. I knew that marketing, kind of product development were all going to be hugely important to this and I’m… You know, I’m an insurance guy, I’m not a tech guy by any means. So I just ran it by people who I knew were, you know, smart in areas where I wasn’t. You know if you look at our board, on our Board of Advisors on the website, two of the guys on there also fired me too. So I tend to have a lot of… I’d say second at-bats if you will, where we’re doing better than the first time.

Andrew Y.: We’re going to get in here in just a minute to all the different types of insurance that people should consider having or not consider having, whatever the case may be. But I’d love to know I mean, you were in the industry for a long time obviously, started UnBrokerage to combat some of the issues that…the problems that you saw. What do people who aren’t in the industry…what do they not understand about how the insurance industry works? Especially maybe some of the problematic issues, you know, how… What are some of the major problems in the ways that consumers are getting ripped off? If they are, ways it doesn’t work efficiently or you know, things that they just don’t see that are behind the scenes and in that whole world?

Major Problems for Consumers Getting Ripped Off

Phillip: Yeah. Yeah, sure. So I wouldn’t say people or companies are getting ripped off. That’s not to say there aren’t some sleazy insurance brokers out there, but those guys are so far and few between and that’s not a real problem. The big issue really is that most individuals who are looking to buy commercial insurance for the first time or you know, early in the first time of purchasing insurance view it a lot like what personal-line insurance? So like your car insurance, your house insurance. Is like where you can go online, fill out a quick application, they can pull up NVR records or property records and say, “Here’s your quote and here’s how you can pay for it. You pay with a credit card.” That really does not exist in the commercial space.

Dependent upon the type of business you run, there could be 50 to 60 different types of rating factors for each type of insurance you need to purchase for your business. So that’s just a long-winded way of saying that most people’s experience purchasing insurance is on the personal-line side, and that does not translate very well to the commercial side. That we’re trying to change that, and we’ve been successful in changing bits of it so far, but it’s a long road ahead where it’s going to be as simple as buying car insurance for your car as it is to buy, you know, a full business package for your organization.

General Business Insurance

Andrew Y.: Let’s start diving the some of the actual… because I’ve got a list of you know, oh man, what’s close to… close to ten of these here. There’s so many different types of insurance that you could conceivably have as a business and so I’m going to be kind of, let’s approach this if you guys will with me. With the, let’s say the mindset of someone who’s got an e-commerce business that’s doing about $2 million in sales, they have inventory, they have a team and kind of so that maybe you know, hypothetical customer mind. And I’ll start with general business insurance, if that’s even the term, you will probably have to correct me a lot of these terms. But general business insurance, I know I have a policy that it’s just kind of general liability. So can you give me a sense? Is that… What is that called? What’s the technical name for that and what normally does that cover?

Phillip: Yeah, so general business insurance, most people are thinking of general liability insurance. For an e-commerce company, what that is going to provide is two main things. So, if this is a hypothetical $2 million a year company, let’s say they have $500,000 worth of inventory in other property values, most likely they need to rent some office space or warehouse space. So the landlord’s going to require that they have a general liability policy because there’s a coverage section in there that will pay the landlord back in the event that you know, you burn the place down by accident or you caused some sort of damage to it. So that’s going to be triggered by the lease agreement.

Now, the other piece to it, that’s in general liability that’s probably most important to businesses like this one is a product liability portion. So if you are selling an actual product, you manufacture or selling a product that you maybe source from overseas, you are going to be viewed as the manufacture of that product and if someone is injured in the course of using that product, the product liability portion of that policy would respond to pay defense costs and protect the entity.

On the flip side, let’s just say you’re a reseller of it. The product liability…You could still be brought into a product liability suit. So, for example, you’re a reseller of milk and your refrigerator kind of goes caput and the milk goes rancid because it can’t be kept at a cool enough temperature, causes someone harm after they buy it. Well, you’re actually at fault for that. So that product liability portion will actually go into effect to protect you and your business against your failure to keep that product at a consistent temperature. The rating factors for being a manufacturer, as opposed to a pure reseller are different. Obviously, the manufacturer rates are going to be much higher because that’s where the buck stops, there’s no one beyond you who can make that third party whole. Whereas the reseller could still be brought into suit, even if they did nothing wrong, simply because they brought it or because they sold it. And therefore the rating factors for that particular type of product policy is less.

But the two main things for this hypothetical company and the GL policy really is just the fire legal, to pay the landlord back in the event you damage the premise and then the product portion of the products that you are selling online.

Andrew E: Yeah and that’s… I just want to reiterate Andrew real quick with Phillip’s staying there. So, there are standalone product liability policies and we can get to that later but you know, one thing that’s going to be important for an e-commerce business or retail business, in particular, is that a lot of times, there is going to be some form of product liability coverage bundled with that general liability policy. And so, you know, business owners should make sure that they’re not purchasing a standalone product liability policy if there already is protection provided through that general liability policy. Now there can be exclusions and things like that. But an entrepreneur that’s not savvy or business owner that’s not savvy, could end up purchasing you know basically redundant product liability coverage if their GL policy already provides it.

What General Liability Covers

Andrew Y.: Makes sense. How do you know on the portion of your general liability that would cover let’s say a warehouse? Paying your landlord back, that could be you know, probably covered by the value of the building, that’s a little bit easier to figure out or understand your liability for. When it comes to understanding how much you might be on the hook for a lawsuit that comes because somebody accuses you of your product doing harm, that’s something… that’s a much more difficult thing to even try to understand if you’re not in the, you know, the legal or the or the insurance world. How should people think about how much to buy because I think a lot of times I’m guessing myself included when I got that policy, I just probably picked a number out of thin air and said, “There, I should do this.” Or maybe it’s what my net worth is. I’m not sure. How should people think about that?

Phillip: Good rule of thumb is to always remember, no is going to sue you for less than million dollars. If they feel like your product cause them harm, they are going to sue you for more than a million bucks. And I’m talking like, bodily injury harm. The GL policies come standard with a million bucks. There are some random carriers who will provide less than a million dollars, I just kind of avoid those all together. But any major you know, national or global insurance company that’s providing the GL policy, the standard is going to be one million dollars per occurrence or per event, up to $2 million per year.

So you can have multiple, multiple claims that all add up to $2 million as long as no one claim is above a million. This is kind of jumping down a little bit. But let’s say, you’re a 15, 20- million-dollar-company and you’re selling a bunch of products. Well maybe a million dollars isn’t enough, and the way to increase those limits is to buy an umbrella policy. So the umbrella can start at a million, it could go all the way up to a couple hundred million. So you would probably want to stay… If your company is growing, you probably want to consider going with an extra layer of protection above the general liability and product liability with the umbrella.

Umbrella Policies

Andrew Y.: One question, why wouldn’t you want… Why go with an umbrella policy which is a different type of policy, and we can get into the details in a minute, versus bumping up the level of your general liability? Why…Because it sounds like you’re saying, just that general liability usually caps out the one or two million but don’t bump but just go with an Umbrella.

Phillip: Yeah it’s less expensive to go with the Umbrella.

Andrew Y.: Yeah and that’s probably what you were going to say something. So maybe that’s a good transition point for getting to the umbrella, so umbrella is just… What does it cover in general versus the general liability?

Phillip: So most umbrella policies are what’s called follow form. All it does is it follows the form that’s underneath it so the general liability, however that reads, and we’ll just pick up what the general liability falls off. So you have a million dollar GL policy and a $5 million umbrella. You have a product liability claim and you get sued for $5 million dollars. A million comes from the GL and then four million comes from the umbrella.

Andrew Y.: Interesting. And can you have an umbrella that applies to multiple things that say like, can you have one umbrella policy that extends to your general liability and your car insurance and your property insurance and your cyber insurance? Or do you have to have an umbrella for every single individual to have a policy that you have?

Phillip: No, you can package them. So the umbrella covers the liability portions, so general liability would cover that. If you had auto liability, it would also sit on top of that same, same policy form. They share that $5 million limit that’s within the umbrella, so that same claim where we just paid out $4 million in the umbrella, well now there’s $1 million left that’s also sitting on top of your auto liability or some other liability-type coverage you may purchase.

Property is not a liability policy. You have to schedule the exact amount of property values that your company has. So if you just buy, you know, $200,000 but you really don’t know how much property you have, that’s the only way to get the full use out of your property policy is to make sure you have a good understanding of what your fixed assets look like. And then you just increase that as high as it needs to be. Cyber liability, which is a great, great mention as well has a different type of trigger and we don’t need to get too deep into that. But all you need to know is an umbrella can’t sit on top of a cyber policy. A cyber policy, you would actually increase limits to however high you need them to go.

Covering Inventory

Andrew Y.: What about inventory? Let’s assume that that hypothetical store we’re talking about, and you’ve got let’s say half a million dollars that the inventory sitting in the warehouse. What kind of insurance covers, if any? I’m sure there are some that does but, what kind of insurance covers that inventory in the warehouse and also when it is coming over on the boat? Let’s say they imported from China or somewhere else overseas. Is that something that is going to be covered normally by sort of property policy? Would it be covered by a general obligation? What do you need to do to make sure if you have inventory, it’s protected?

Phillip: Sure, great question. So if it’s in their location, in their business location, they simply schedule up with the property values in that location. Anything that happens in there, short of like flood or perhaps an earthquake, if it’s in a specific region will be covered. So fire, theft, when let’s say that sprinklers in the building go on and it damages the property, those are sorts of items that would be picked up. If you live in California, you probably need a separate earthquake policy to cover for the earthquake exposure. And if you are in a flood zone, you need a flood policy to cover the flood exposure.

As for it coming over you know, overseas, being shipped overseas, first you need to just understand who owns that property. Do you own the property the second it’s loaded on the boat in China for example? Or do you own the property the second that inventory is offloaded from the boat to the truck or from the truck to your to your building? Larger organizations will typically own that property the second it gets loaded onto the boat in the country that it’s being manufactured in and then they carry the liability of making sure that property gets to their location.

If that’s the structure you have, then you need what’s called a cargo policy or marine policy. It’s basically a property policy form that covers a property anywhere it goes, pretty much in the entire world until it changes owners to a customer or until it’s offloaded into your warehouse in the U.S. Does that make sense?

Business Income Insurance

Andrew Y.: Yeah, absolutely. What about business income insurance? Like, what percentage of businesses and to what extent is important to protect against, you know, let’s say you know, something happening unforeseen of course where it doesn’t do any… You are not being sued. You haven’t lost your assets but for whatever reason, you can’t…Your business isn’t generating income for six months. Is there a policy for that and what does that look like?

Phillip: So if the company is not generating income for six months because of a covered loss, a covered peril, there’s business income. So for example, a hurricane floods your building and you are spending the next year kind of, cleaning up and getting ready to do business again. So your property policy would respond and say, “You know, we’re averaging $20 million a year, right? We cannot sell anything because we’ve lost all of our inventory. We’ve lost all our building.” And they it pay you your monthly income until you get up and running, usually, up to 12 months is what most policies these days offer. And then there’s an extended business income limit that goes beyond that.

So after the 12 months, and after you’re back up and running again, your sales still aren’t coming in as fast as they were before because you’re having to go re-acquire those customers. So provides you with additional income to make sure you are whole throughout the next 12 to 24 months, whatever you choose. So that’s the most common type of business income coverage. With an e-commerce company, they have one more facet that makes a little bit more challenging and that’s in the event that someone’s able to, let’s say hack into their e-commerce site and shut it down. I mean you can’t sell if no one can access your site and buy a product from you.

There are what’s called electronic business interruption policies that are usually packaged within a cyber liability policy that perform the exact same way. It will pay you the lost revenue you incur during the time frame that your system is down and then once your system is back up, there’s still the potential to receive an extended amount of electronic business and income revenue from the policy until you are back to the position you were at prior to that data breach or hacking event.

Hurricane Coverage

Andrew Y.: And you had mentioned the hurricane one as an example. In that kind of situation, is that something that a property policy would ever cover or would the property policy really only cover the cost of the fixed asset, the real estate and you’d have to have a separate income policy to cover the loss of income for those 12-plus months?

Phillip: Short answer is the property policy would cover both the inventory and property amounts that were lost from the hurricane and it also provides a specified limit of lost income during a specified time frame, and then once that timeframe expires or the business is back up and running the way it was prior to the loss, it will provide an extended amount of income. So it’s all packaged into one form. Now, dependent upon where you live and the type of exposure you have from being hit by a hurricane, the policies that are available to you may not be that broad, but you can still create a solution that accomplishes the same thing with multiple policies. So basically saying, you could have a standalone property policy. You could have a standalone business income policy, and you could package it all together so that works the same way. The only reason they’re being split up is because in that particular region, the potential for loss is so high that they need to be rated independent of each other.

Andrew Y.: Yeah, like which is why you mentioned earthquakes in California for example.

Phillip: Exactly.

Car Insurance

Andrew Y.: Got it. What about car insurance? I think most people are really familiar with how you buy car insurance personally. We’ve all done it. Is there any… I think the best question to cut through things is, is there really any big difference between buying car insurance personally versus for your business?

Phillip: Well, a little bit, yes. First, we need to determine, does the business actually own the vehicle or do you own it personally? If the business owns it, then the business should insure it, but that operates pretty much the same way. It would just be packaged within… It will be packaged in the commercial program. Even if the company itself does not own any vehicles, but you have employees or yourself driving personal vehicles or renting vehicles on behalf of the business for business use, the entity itself has its own exposure because they are basically allowing its employees to drive vehicles for work. So in that case, you simply need to provide a driver list of all the employees at your organization who are going to be driving for company purposes. So if your sales guy is driving around, if you are taking a package to go get it shipped at UPS or dropping off a check at the bank for a business purpose, all of those expose the business.

So if you run into a family of four, God forbid, you kill them, that loss is not going to be a million dollars and then that individual’s personal auto is not going to be large enough to cover that loss. So the organization purchases what’s called hired and non-owned liability, auto liability which essentially provides defense dollars and settlement dollars to pay for those sorts of events. And the umbrella would sit on top of this as well. So you’d simply get a million dollar auto liability policy and then increase your Umbrella by however much you think you need to survive a potential loss.

Andrew E: And I’ll add something here real quick Andrew if you don’t mind. So the commercial auto is interesting because at Shoplio, both my co-founder and I leased vehicles through the company. And like lots of business owners, we did not know that we needed a commercial auto policy in addition to our personal auto policies. One of the biggest misconceptions is that “Oh, my personal auto insurance covers me anytime I’m driving this car.” And you know, to Phillip’s point, someone’s personal auto limits rarely get to be enough to cover you know, a significant accident.

The one other thing I’ll add ,and I didn’t realize this until I purchased commercial auto insurance but it’s relative to other types of insurance, extremely inexpensive. So it’s a really small price for a company to pay for arguably what might be one of the biggest risks. I think Phillip ,correct me if I’m wrong, but that’s the second or third most common insurance claim that businesses across the board experience, is a commercial auto claim.

The Second Highest Event That Can Put a Business Under

Phillip: Close, it’s the second…It’s the second highest event that causes a business to go out of business because they don’t purchase it. So that again, that family of four that was killed in this you know, theoretical claim situation, if I was driving to go to a customer site and then they find out that I did that, they’re going to sue the entity. And the entity is going to be liable. My personal policy is $100,000 worth of coverage, that will all go to the injured party and then they’re going to come after the entity for five million bucks. And they’re going to win. Every single time, they’re going to win. If they don’t have this auto liability policy, it’s going to shut their doors.

Andrew Y.: So just to make sure I understand this right, so if you have… let’s say you have a business and you don’t want a fleet of vehicles per say, but let’s say your employees maybe occasionally run errands for the business, you would by what’s called a hired And non-owned liability policy, which will cover you for let’s say a million dollars. So they could drive their vehicle, but if they smash into somebody in the post office dropping off the package, you have that protection which will still cover you even though they will cover you when they were doing kind of an on-the-clock task but in their own personal vehicles, is that right?

Phillip: Correct.

Andrew Y: And what happens if let’s say, our $2 million dollar… That hypothetical store owner, let’s say he has… Let’s say he does own a couple…one or two vehicles that his employees, he at the business actually owns them and then they drive them. Would it still be the same type of… probably wouldn’t be the same type of policy. Would you buy what’s very similar to a personal policy for those vehicles and just list all of your employees on that policy or how would that differ?

Phillip: You essentially insure the vehicle through the business and during the the underwriting process, the carriers or an insurance company would want to know who has access to drive those vehicles. And you said the same, that here’s the driver’s list and the same people who drive their personal vehicles for business have access to these you know, two or three vehicles as well.

So in the event that one of those employees drives a corporately-owned vehicle and smashes it, the only real difference there is that our policies will pay to fix or replace the corporate vehicle that was damaged in addition to taking on all of the liability as a result of that car crash.

Andrew Y.: Great, that’s… I think of all the ones we’ve talked about so far, that’s the one that scares me the most because I realize I don’t have it all and I don’t… our team doesn’t drive around a lot. But I mean, there’s been dozens of trips, you know, here and there over the years and, yeah I hadn’t even thought about them smashing into somebody on that, one of those ad hoc trips and that’s so sobering to think about.

Phillip: Well, I know a guy who can get that for you so if you need some help, let me know.

Andrew Y.: Perfect. Wonderful, you have to give me his number after we get off here.

Phillip: Yeah. Sure thing.

Cyber Security Insurance

Andrew Y.: So, I want to move on to maybe a few of the more online, e-commerce specific ones. One that you kind of touched on already, we touched on already with cyber security insurance. And there’s a lot of things there. So, you know, things come to mind for me, one, getting hacked and you kind of mentioned being… your business being down and losing income because of that, that’s one facet. Another one, credit card breach, potentially especially if you’re storing credit cards and somebody hacks in credit card or any kind of customer. Customer theft of customer sensitive information would be one.

So you can give… give us a sense of what different policies are out there how broad is, you know, is there just a general cyber policy that covers all of this? Are there multiple ones and if so, which ones are the most important ones to think about?

Phillip: Yeah, sure, so there’s the basic core, I’ll say air quotes, cyber liability or internet liability policy which will cover two main things, one, a network security breach and two, a disclosure of private information, whether it’s personally identifiable information or corporate confidential information. So those two things combined typically respond in a manner which is generally viewed as cyber liability. So credit card theft, you know, let’s say health or personal identifiable information theft, bank account theft, all that would be… all of the liability resulting from those items would be picked up in a traditional cyber policy.

For an e-commerce site, that could probably work for most of the smaller ones as you grow then you can add in certain coverages similar to the electronic business interruption that we discussed. You could add in coverages such as cyber extortion where someone has actually penetrated your system and is trying to extort money out of you or they’ll release confidential information or they’ll shut your site down. There is, in many cases, a lot of e-commerce sites may design their website to look more like a larger organization and they could get hit with some sort of trade dress IP-type claim. There’s the potential of covering certain intellectual property items based on the way you present and you advertise electronically to your customer prospect base.

But as a whole, you would really just start with the foundational policy and if that insurance company has the ability to add on to it, then you could as your business grows, those are the other items you want to consider thinking about. There’s a new type of coverage which I wouldn’t quite classify…or newer type of coverage which I wouldn’t quite classify as cyber yet, although it does kind of operate similarly to the electronic business interruption coverage. And that’s the, you know, the suspension coverage. If you’re using an e-commerce platform to house or store and sell your products and then for some reason they believe or deem that what you’re selling or how you’re selling doesn’t comply with their terms of service and they basically shuts you down.

So there’s the newer coverage that has been coming on to the market to provide the lost income or lost revenue for those e-commerce sites in the event that they are suspended but suspended for a reason that’s not in line with what that e-commerce platform’s terms of service say. So it was a mistake on let’s say the platform’s side and it caused three months of downtime during the holidays which can be very, very detrimental to the e-commerce store.

Andrew Y.: And what was the name of that type of policy?

Account Suspension Insurance

Phillip: Is called account suspension insurance. We candidly and full transparency, we have not sold any of this, it is a new product, and I’m getting my hands wrapped around exactly how the triggers are and what the claims handling processes will be. I’ve not seen or heard of any type of legitimate claims that have been paid. So I’m a little…I don’t want to say I am against this policy or I’m not. I don’t want to promote the policy. It’s just so new and I don’t think the carriers and the underwriters quite understand exactly how to underwrite it appropriately. So I think it’s going to take some time to get some real claims to determine whether or not it’s a worthwhile policy meaning it’s worth the premium dollars you’re paying or if it’s not going to be.

Andrew Y.: And would Amazon suspension… One thing I’ve heard about kind of a little bit the last 6, 12 months is Amazon Suspension insurance. In case Amazon for whatever reason shuts down your account. A lot of people… You know let’s… Our $2 million store owner, let’s say 70% of its revenues on Amazon and that’s you know, they shut them down and that’s weeping and gnashing of teeth big time. Is that something that… Is that what I’m hearing about when I hear about Amazon Suspension Insurance or is there specialized policies just for Amazon in that case?

Phillip: There may be someone who sells it as Amazon Suspension Policy. I don’t know exactly, the ones I have seen have just been sold as e-commerce suspension policies. And then as you read into the fine print, it talks about how you are actually housing and managing your store through an e-commerce platform like Amazon or E-Bay or Pinterest. I do not know if Amazon is actually selling their own customized insurance policy. I wouldn’t be surprised if they try to figure it out, but right now, I think they have other things on their mind.

Andrew Y.: Be nice if you underwrite it. You know, be nice not to throw you guys under the bus really. But, you know, having it from them, it’s in their interest to keep you guys on the platform or keep whatever store or on the platform, you know.

Phillip: Yeah, absolutely.

Identity Fraud Insurance

Andrew Y.: What about identity fraud insurance especially with the breaches in the states that use Equifax and those issues, is that something like how big of a… is that something that you guys… I know that’s fairly affordable, but is that something that you guys sell, that you strongly recommend? What should we should be thinking about that.

Phillip: Yeah, so we do recommend these types of products. We do sell these products. We just released a new coverage form that it’s sold as an employee benefit. So your company would buy it for its employees. It’s relatively cheap, I think it’s 15 or 20 bucks per employee, per year. So I, you know, as opposed to taking them out to lunch one day a year, just buy this policy for them. But what it essentially does is it provides you with unlimited support to regain your identity back after it’s been stolen from some of it. In addition, now Andrew, correct if I’m wrong, is it $25,000 that it also provides in extra expense. So if there’s forms you have to fill out or if there’s transportation costs you incur, it’s going to provide a…

Credit Repair and Monitoring

Andrew E.: Credit repair or credit repair reimbursement, credit monitoring reimbursement, all those sorts of expenses that go along with recovering your identity.

Phillip: We highly recommend this, because it’s so inexpensive to buy and just with the, you know, with Equifax breach, I mean that basically affected half of America already. This is going to provide the individual whose identity was stolen essentially with one person whose sole job is to re-secure that identity. If you are to do it on your own, you’re probably going to spend 10 to 15 hours a week at minimum trying to jump through all the hooks and figure out how to regain your identity back.

Andrew E.: Yeah, you know, the one thing I’ll add here, so one of the models that we really like UnBrokerage is, we really like what we call off-the-shelf-products, point, click, buy. And maybe that’s my e-commerce background coming in because I really would love to one day be able to sell insurance the way I was able to sell products in my e-commerce days, but we do have some products in the identity recovery bags. One of them, where there’s basically no underwriting. We even have a cyber liability policy that is pre-underwritten, instant issue.

And so we’re working hard to introduce products that don’t require the business owner to spend a bunch of time, filling out a bunch of applications, going back and forth with carriers, so on and so forth. I think that’s what’s so unique about this particular identity theft product, is it’s peace of mind for employees, including the business owners and it’s significantly less expensive than credit monitoring and identity monitoring services that have a monthly fee. Those services provide you with insurance in the event that your identity is stolen, but you usually have to pay $15 to $20 a month to get this. This is $15 to $20 per year and you get the benefit of unlimited professional identity recovery services.

To Self-Insure or Not Insure

Andrew Y.: When does that make sense to self-insure or not insure? I mean I think about on the medical side, dental insurance. In my experience, maybe there’s some great policies out there, seems like the biggest rip off I’ve ever seen in the world. So, I mean, we don’t have it, people have and had it and it just seems like a racket.

Andrew E.: Vision, is vision insurance.

Vision Insurance

Andrew Y.: What’s that? I do not have vision insurance. You know, maybe I’m blessed with good eyes but it did sound like that may not be a big fan of… you may not be a big fan of those either. But so that comes to my, what if anything on the on the business side are things where the downside isn’t so bad, especially relative to the premiums or what you’re paying for, what you’re protecting against, isn’t that great of a deal? Or what areas should people start thinking about maybe if they can self-insure for a building? You know, obviously a lot of people… Maybe most people buy property insurance because you know, they’ve got a note or they’ve got a mortgage and they have to buy by law but at what point like if you look at the odds obviously, you know, something… So the chance of happening are so remote that if you can stomach the loss, maybe you should consider doing that. Where should people considering self-insuring or not getting insured at all?

Phillip: You know, I remember work comp insurance. So work comp is one we haven’t talked on. Most people are aware of it. The regulations vary by state but in general, usually, when you have three or more employees, that’s when you’re legally required to purchase work comp insurance. I chose with Shoplio to exclude myself and my business partner from our work comp policy because there were no steps going into our building, the floors were safe and stable, I wasn’t afraid I was going to slip and fall. I wasn’t climbing ladders to change light bulbs and so we kind of did a cost-benefit analysis and said. “You know what, the risks of us getting injured on the job are as about of low as they possibly can and so we’re going to go ahead and exclude ourselves from the work comp policy.”

I could see a lot of e-commerce business owners that work from home and you know are sitting behind a computer all day, the exposure to illness or injury is pretty low and so they’re probably going to choose not to get worker’s compensation insurance.

About UnBrokerage

Andrew Y.: Perfect, Is a great answer, thanks. Guys, can you talk a little bit about UnBrokerage, you know, why is it different? You talked about your story at the top, but what really makes it different? What do you guys offer? Why should somebody consider coming to you for their insurance versus one of the legacy carriers

Phillip: Yeah, so as the non-insurance guy, there’s a few things that are drastically different than the traditional insurance experience. The first thing and most important thing is we are providing access to the insurance market that large corporations get for small businesses. So traditionally small businesses, start-ups, first-time businesses have had a difficult time getting access to the same products that much larger established businesses get. We’re bringing that kind of enterprise, great access and making available to businesses of all sizes. One of the ways we’re able to do that is we’re also providing insurance the way that modern business owners want to purchase it. It’s available online, 24 hours a day from any device and human contact is optional. So, you can kind of think of us as the Turbo Tax of insurance and that we’re building an educational layer that walks business owners through the process of selecting the right coverage for their business, I would say third as we allow businesses to pay monthly with a credit card.

So because of the efficiencies that our technology creates and because we are enabling business owners to do this on their own and understand it and feel confident doing it, you know, we’re able to work credit card processing fees into our cost structures which traditional brokers just simply aren’t able to do. So you know, kind of in summary, we’re educating business owners. We’re allowing them to get exactly what they need. We’re not tricking them into buying coverage that they don’t need, and we let you pay monthly with a credit card which frankly that’s how business owners want to pay for their business services.

Andrew Y.: Great, it’s unbrokerage.com, I’m going to be heading over there this week to pick up a non-owned liability policy after this interview and some other stuff as well. On the insurance side, in closing, wrapping this up, if to be realistic, even if somebody is uninsured right now and they listen to this episode, they’re probably not going to buy everything that we discussed slash recommended on this podsy. If they were going to go… Let’s say that, let’s use that same hypothetical $2 million store owner, he’s got three or four employees, he’s got some inventory, he’s going to go out and buy one, maybe two policies as a result of this. So, you know, maybe from your perspective, you can think about it as where the biggest, you know, the biggest weak spots or vulnerable spots in his business. What one or two policies would you recommend they go out and buy right now?

What Store Owners Should Buy Right Now

Phillip: First, I would suggest instant-issue cyber policy. So like I said that one is, there’s no underwriting. You put your company name, your credit card and you have coverage up to $100,000 immediately, that’s 250 bucks a year. If they want to get a little bit more, I would say get the general liability policy to cover the products and cover the exposure of the location they may be leasing, and then get worker’s comp for or their… if they have employees. My guess is with the $2 million shop, they may have one or two employees. In the end of the day, all of those policies for $2 million company with a couple hundred thousand in property figures might be a couple hundred dollars a month. Throw on a credit card, you never have to worry about again, we’re just going to hit your card every month, you’ll have your policies and access to your policies whenever you need to. And again, we won’t call you unless you ask us to.

Andrew Y.: Phillip, Andrew, this has been great. Going to change some things that I do hopefully, it’ll help some other people get covered in some ways if they weren’t. Again, if you’re listening, it’s unbrokerage.com. And gentlemen, thanks so much for coming on.

Phillip: Thank you, sir.

Andrew E.: Thanks so much Andrew, appreciate it.

Andrew Y.: Want to connect with and learn from other proven e-commerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit, vetted group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at ecommercefuel.com. Thanks so much for listening and I’m looking forward to seeing you again next time.


What Was Mentioned

Photo:Flickr/Josie Elderslie

Andrew Youderian
Post by Andrew Youderian
Andrew is the founder of eCommerceFuel and has been building eCommerce businesses ever since gleefully leaving the corporate world in 2008.  Join him and 1,000+ vetted 7- and 8-figure store owners inside the eCommerceFuel Community.

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