Insurance for your drop shipping business

Drop shipping has plenty of perks for entrepreneurs looking to start an online retail business without spending a lot on stock and storage. 

Having a third party supplier ship the goods directly to the customer after you’ve sold them can take the hard work, hassle and expense out of managing an inventory and fulfilling orders.

That’s provided everything runs smoothly. You want suppliers to deliver the goods on time, undamaged and in good order, and you want customers to be satisfied with them.

Unfortunately, that’s not always how things roll. From shipping delays to product liability issues and data breaches, plenty can go wrong when you’re in the drop shipping game.

If it does, having the right cover in place can help mitigate your losses and safeguard your enterprise. So, what insurance could drop shipping businesses need?

Here are three common exposures you should protect yourself against.

Public liability and workplace injuries

If staff or customers are injured while working for your business or visiting your premises, they may be entitled to seek compensation.

Having workers compensation and public liability insurance can help you reduce the costs, including any legal fees you may incur.

Of course, prevention is always better than cure. Implementing stringent workplace health and safety procedures will reduce the likelihood of accidents and incidents and may also help you secure a more competitive premium.

Product liability 

Under Australian law, it’s a manufacturer’s responsibility to ensure the products they make are compliant with Australian standards and are safe to use. As a drop shipping business, you may not actually produce any of the items you offer on your site but if you import them or sell them under your own brand, you may be considered to be the manufacturer.

That’s why it pays to have product liability insurance. If a customer seeks redress for any injury or property damage they claim to have suffered due to using something they’ve purchased from you, it can help you cover the costs.

Cyber liability

In today’s times, online retailers are at constant risk of theft. Not of their stock but, rather, of their commercial and customer data.

Australia’s cyber watchdog, the Australian Cyber Security Centre, received 94,000 cybercrime reports in FY2023. The average cost per report was $46,000 for small businesses, and $97,200 for medium businesses.

It is essential to take precautions to prevent unauthorised parties from gaining access to customer data that can be used for fraudulent purposes, such as identity theft.

By implementing stringent cyber safety practices, you can make your online business a harder target. Should you have the misfortune to experience a cyber-attack or data breach, cyber insurance can help cover your losses and remediation costs.

Cover when it counts

Insurance helps safeguard your operations against the unexpected. Your broker or adviser can help you determine whether the drop shipping insurance cover you have in place is right for your enterprise. If you’d like to review your policies, contact your broker or adviser today.



Important notice – Steadfast Group Limited ABN 98 073 659 677

This general information does not take into account your specific objectives, financial situation or needs. It is also not financial advice, nor complete, so please discuss the full details with your insurance broker or adviser as to whether these types of insurance are appropriate for you. Deductibles, exclusions and limits apply. These insurances are issued by various insurers and can differ.

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