Retail insurance refers to the various types of insurance retail businesses need to purchase in order to be protected from liability in their day-to-day operations. Most small business retailers need, at a minimum, general liability and commercial property insurance, and can expect to pay at least $1,000 – $2,000 per year in combined premiums.
Finding the right coverage for your retail store is easy with The Hartford. Their team of experts will help you identify the insurance you need at the right price. Get a free, no obligation quote online in minutes.
How Retail Insurance Works
Retail insurance is not a specific insurance type but is instead a combination of all the coverage types that retailers need. Since the majority of retail business owners work with the public and have valuable assets, such as physical property and inventory, their primary insurance needs can be met with a business owners policy (BOP). A BOP can include general liability, commercial property, and business interruption coverage types.
The BOP makes it easy for small retailers to administer and pay for their insurance needs because you can combine your main coverage into a single policy. This can save you time since these insurance types will all come from the same provider, and you can save money on a BOP compared to what you would pay if you bought each coverage individually.
Since most retailers also have employees, workers compensation coverage is typically required. Depending upon the nature of the retail operation, other insurance types may be recommended. For example, if you use a vehicle in your business, you will need commercial vehicle insurance. These coverage types are purchased individually and have separate costs than your BOP.
Common Types of Retail Business Insurance
|Commercial General Liability||Third-party claims for bodily injury, property damage, medical payments and personal and advertising injury.|
|Commercial Property Insurance||Assets owned by the business, such as building, equipment, or inventory|
|Workers Compensation||Work-related injuries, medical bills, wage replacement and more for your employees. Required in most states.|
|Commercial Vehicle Insurance||Repairs and lawsuits from accidents involving vehicles owned and used by the business|
|Inland Marine Insurance||Expensive equipment and products shipped by the business to customers or other businesses|
|Commercial Umbrella Insurance||Extended coverage on other insurance types|
|Business Interruption||Loss of income when a covered claim causes suspension of business operations. Often included in a business owners policy (BOP).|
|Cyber Liability Insurance||Losses resulting from cyber attacks or data breaches|
Retail Insurance Costs
Retail insurance costs for small businesses range from about $500 to $1,000 per year for each coverage type you need. However, depending upon the coverage types selected and the risk exposures to the business, premiums can be lower or higher than this average range. For a better idea of annual cost, you can look at the average cost of insurance most retailers buy in the table below.
Retail Insurance Costs by Coverage Type
Since there are many different types of retail businesses that have unique insurance needs, your business’s costs may vary compared to the average retail insurance cost. Also many businesses buy a business owners policy (BOP) because it combines general liability, property insurance, and business interruption coverage, if needed. The costs you’ll end up paying will vary based on your industry.
Here are average annual costs for insurance by retail store type:
- General Merchandise Store: $760
- Clothing Store: $855
- Flower Shops: $855
- E-Cigarette/Vape Shop: $890
- Grocery Store: $1,100
- Jewelry Store: $1,160
Your industry won’t be the only thing that determines your costs. You’ll also pay extra for having more employees or asking for a lower deductible. Each individual retailer will get their own costs quote based on their business attributes and long-term term needs.
Here are some of the primary impacts on the cost of retail insurance:
- Number of employees
- Annual revenue
- Coverage limits needed
- Value of merchandise/inventory
- Store location
- Type and amount of customer personal data you store
As you can likely predict from this list, costs are going to vary widely by retailer. For example, a flower shop with one employee will have a much lower cost of insurance than a jewelry store with five employees. This is because the jewelry store will require more workers compensation and commercial property coverage types. Plus, jewelers sell expensive merchandise, which will require higher coverage limits.
Retail Insurance Providers
When purchasing retail insurance you can either partner with an insurance agent or work directly with a broker. The fundamental difference between the two is that insurance agents represent one insurance company while brokers may work with several different insurers. If you’re getting quotes from agents, we recommend getting at least three quotes before you buy.
In no particular order, here are four insurance companies we’ve researched that specialize in retail businesses:
1. The Hartford
The Hartford is a trusted and experienced nationwide insurance company with a long history of helping small business owners. They offer all of the primary coverage types needed by retail businesses, such as general liability, commercial property insurance, and workers compensation. They also offer a business owners policy, business interruption and several more alternatives, such as cyber liability insurance.
2. AP Intego
AP Intego is a national, fully licensed insurance agency. They specialize in providing small businesses insurance from industry leaders such as Berkshire Hathaway Guard, Travelers, and AmTrust. AP Intego’s licensed agents provide broad coverage options to retail establishments of all sizes. Their agents will help you find multiple quotes to match your specific coverage needs in a matter of minutes.
Progressive Commercial is another national insurance company on our list that can cover almost any retail insurance need. Their Progressive Advantage Business Program helps tailor the coverage for their retail insurance clients to include insurance programs that meet the unique needs of small business retailers.
Farmers Insurance is a large insurance company with thousands of agents in locations all around the U.S. Like the other large insurers on our list, they offer home insurance, auto insurance and life insurance for small- and mid-sized businesses, such as retail stores. For retail insurance coverage, they offer all of the required types, such as general liability, property insurance, and workers compensation.
Tips on Applying For Retail Insurance
The insurance coverage needs of each retailer will differ, depending upon the type of retail business you own or operate, how much money you bring in, and how many employees you have. An important part of getting the right coverage is understanding where you could be at risk of liability and making sure you apply for coverage that eliminates as much risk as possible.
Here are four of the most important things to remember when applying for retail insurance:
1. Know Your Risk Exposures
Every business has risks that are inherent to that business. In the retail business, some of the biggest risks that need to be covered include theft of merchandise, property damage, and bodily injury to employees during accidents. Risks and respective coverage needs increase if you have a building, employees, or vehicles.
2. Don’t Under-Insure
It’s better to be over-insured than underinsured. Small business owners will naturally want to minimize the cost of doing business but it’s not wise to increase risk by cutting costs with insurance coverage. Therefore identify which coverage types you need first, then shop for the best value. Leaving significant risk exposures uncovered can potentially bankrupt your business.
3. Reduce Costs By Bundling Coverage Types
When possible, bundle your coverages into one package for a broader, cost-effective policy. For example, most retail businesses need commercial general liability and commercial property insurance. Many insurance companies will offer a business owners policy (BOP), which combines both coverage types into one package at a lower rate than buying them separately.
According to Chris Orletzki, Blankit Insurance Group:
“Generally a BOP will allow ‘a la carte’ style coverages, meaning you can pick and choose to add-on which coverages are important to your business.This can be a great way to save money by using a single provider.”
4. Use an Agent or Broker Who is Experienced in the Retail Business
Retail insurance is industry-specific, which means not every insurance company will have intimate knowledge of your business or the risk exposures that need protection. When shopping for an insurance policy, try to find an agent or broker that understands the retail business.
5. Gather Documents You Need Before You Apply
Be sure to include all information that will help the insurance agent, broker or underwriter know how to best protect your business against risk exposures common in the retail industry. Providing accurate and complete information will not only help protect your business but may also prevent you from being denied coverage for a false statement on the application.
Here are the documents and information to have ready before shopping for retail insurance:
- Business contact information
- Number of employees
- Type and value of merchandise and inventory
- Type and amount of your customers’ personal data you store
- If and how you ship products to customers
- Number of years you’ve personally worked in the industry
- Number of years your business has been in the industry
- Information on other insurance coverage you already have
- Claims history (at least the past 3 years)
According to Walt Capell, President, General Liability Shop:
“Taking additional time to speak with your agent about all of the aspects of your business can help them find you the ultimate package. If you rush the insurance agent through the quoting process, they may classify your business wrong. This can result in extra premium paid by your business. It also can cause a claim to not be covered if you do not tell them all of the aspects of your retail business.”
Required Retail Insurance Coverage
There are several types of insurance coverage that most small business retailers need to cover their primary risk exposures. Some retailers can get the coverage they need with commercial general liability but most also need commercial property insurance. If you have employees, you’ll also need workers compensation.
The three types of retail insurance coverage that most retailers need are:
1. Commercial General Liability
Commercial general liability (CGL) insurance covers bodily injury and property damage to your customers, or what an insurance policy refers to as third parties. This is the primary coverage type every retail business owner needs to buy because claims from third parties are the most common and potentially the most expensive kind for retailers.
A CGL policy is necessary for businesses that work with the public. For example, if a customer trips and falls over a display in your store, your CGL policy will pay their medical bills. Liability claims can be the greatest financial risk to small business owners, especially for those retailers working out of a building that is owned or leased.
2. Commercial Property Insurance
Commercial property insurance covers assets, such as your store and your inventory. Property Insurance may cover your business for losses due to fire, theft, vandalism, and other covered events. The biggest risk to brick and mortar retail businesses is theft. This makes property insurance a must for many retailers.
Commercial property insurance is needed by all retail businesses because they typically have one or more assets, such as real estate or inventory that can be stolen or destroyed in a fire. Even the online boutique that does not work directly with the public still has assets, such as a warehouse or inventory, that needs to be protected. If you’re working out of your home, your personal insurance likely won’t cover damage to business inventory.
3. Workers Compensation Insurance
Workers compensation insurance is required in most states if you have one or more employees. Therefore, workers comp is a common coverage type that retail businesses need. The cost of coverage depends upon risk exposures and the number of employees working for you. For example, grocery stores will pay a higher premium than clothing stores because the risk exposures are much higher.
Workers comp pays for your employees’ work-related injuries. This includes payment for medical bills, wage replacement, time off of work, and more. Retailers have a high risk of employee accidents occurring on the job compared to many other businesses, which is why most should take out a policy to protect against those incidents.
Recommended Retail Insurance Coverage
Retail insurance policies with broad coverage will protect against most risk exposures of small business retailers. However, there are often other coverage types that are recommended for retail businesses, especially when they expand beyond the local brick and mortar stage. Retailers should be aware of the potential need for additional coverage.
1. Commercial Auto Insurance
If your business owns a vehicle and it is involved in an accident, commercial vehicle insurance will cover you for repairs and lawsuits. This insurance can also cover you for damage caused by an uninsured driver. In general, you should have a commercial auto insurance policy if you use a vehicle for business purposes other than for commuting to and from work.
For example, if your vehicle is being used to pick up or deliver goods, transport people, or meet with clients, you need commercial auto insurance. You will also need this coverage if you have employees that use your vehicle to complete tasks for your business.
2. Inland Marine Insurance
Inland marine insurance covers equipment and products being shipped to customers or to other retailers. Most small retail businesses will not need inland marine insurance. However, a business that ships expensive goods, such as a jeweler that mails high value merchandise to customers, can use this coverage to protect against theft or damage while in transit.
Inland marine insurance may be needed if you ship specialty equipment and products, including computers, communications equipment, high end clothing, jewelry, medical and scientific equipment, music equipment and instruments, and photography equipment.
3. Commercial Umbrella Insurance
Commercial umbrella insurance extends the limits on other lines of insurance. Therefore umbrella insurance does not protect against a specific risk exposure, like other insurance types. Instead it adds coverage wherever you need it, with limits being expanded in increments of $500,000 or $1 million.
Most small retail businesses will not need umbrella insurance because standard liability limits, such as $1 million, is sufficient to protect against most risk exposures. However, those businesses that are at risk of expensive lawsuits are wise to consider this added coverage.
4. Business Interruption Insurance
Business interruption insurance covers a loss of income to your business that is caused by a covered event that forces a suspension of business operations. When your business is forced to close because of extensive damage to your store, you’ve lost the ability to make sales. Fortunately, with business interruption coverage, you can recover most or all of your loss in income.
For example, a fire or a burst pipe can do extensive damage to your building or leased space, causing you to close your store for days or weeks. The revenue lost while your premises are being repaired and restored can be covered by business interruption insurance. This can be crucial if you have retail business loans that require fixed payments.
5. Cyber Liability Insurance
Cyber liability insurance protects against losses resulting from cyber attacks or data breaches. According to new data from Insureon and Manta, over 80% of small businesses experience either significant or moderate increases in growth from online sales.
Businesses that store customer data are wise to consider cyber liability insurance. For example, if you store personally identifiable information (PII), such as credit card numbers and customer addresses, or protected health information (PHI), you will need cyber liability insurance. This presents both opportunity and challenge in online retail. In fact, not having cyber liability insurance is one of the top mistakes small business owners make.
Still, deciding which insurance coverages you need can be difficult to determine. Small business owners need to be aware that they may have risk exposures not covered by the primary insurance types, such as general liability and property insurance. This is why they need to understand what risks they face and how to cover them with the appropriate types of additional insurance.
According to Jeff Somers, President, Insureon:
“General liability is usually the first coverage type for small business retailers to buy. This coverage is often needed to get into contracts. It protects against third-party bodily injury, property damage, and advertising injury. Product liability is important because it will protect against claims from customers that received your product (i.e. online retailer shipping product out to customers). Also, you may need cyber liability insurance. If you are taking in any kind of customer information, you are absolutely at risk of a cyber attack. Small business owners need to know that they are at risk. 62% of cyber attacks happen at small- and mid-sized businesses.”
Who Needs Retail Insurance
Whether you have a brick and mortar location or you have an online presence, or both, retail insurance is a necessity. Every retail business has at least one risk exposure that needs to be covered by the appropriate insurance type. In fact, aspiring retail business owners are wise to have insurance coverage in place prior to opening to the public.
Each of these key factors may qualify your need for retail business insurance:
- You work with the public out of space that you lease or own.
- You have inventory that is at risk of theft, damage or spoilage.
- You or your employees use a vehicle to do tasks for the business.
- You ship products to customers.
- You store customer data.
- You have employees.
Any one of these factors alone qualifies your business for retail insurance coverage. You have customers coming to your premises; you have inventory on display and in storage; you have client data stored in your database; you have products to deliver and receive. You have risk exposures that are unique to your business that need to be protected.
The Bottom Line
Small business insurance may be the most important investment you can make other than the business itself. Choose the retail insurance package that works best for your business and keep the doors open for the long run. To get started on choosing the best retail insurance for your business, be sure to get multiple quotes from various providers.
Finding the right retail insurance policy is easy with The Hartford. Their team of experts will help you identify the coverage that best suits your needs. Get a free, no obligation quote online in minutes.