Retail stores face a variety of risks in everyday business. From a customer becoming injured in your store to property damage due to a fire or other disaster, the potential for financial losses and liabilities is daunting. With the right commercial insurance in place, however, you can make sure that you, your business, and your employees are protected in the event of any unexpected catastrophes.

Retail Store Business Insurance Types

Commercial Property Insurance

Commercial property insurance protects the value of your business property, including buildings, merchandise, signage, equipment, furniture, and more. Retail stores are highly dependent upon their physical spaces and even more so on their product inventory. If any property is damaged or destroyed by a covered peril, commercial property insurance can cover the costs of repair or replacement. Commonly covered perils include fire, theft, vandalism, storm, explosion, and water damage.

Example:

• Overnight, vandals hit your downtown bicycle shop, breaking windows and spraypainting over signage, walls, and merchandise. Commercial property insurance would cover the costs of repair.

Business Income Insurance

If your business suffers property damage, you may be unable to operate until repairs are made. For many retail businesses, this means losing out on income while your store is closed but still having to pay for expenses like rent and payroll. Business income insurance, also called business interruption insurance, provides for situations like these, covering lost income and operating expenses if your business property is damaged to the point of needing to cease operations.

Business income insurance only kicks in if property damage is caused by covered perils, which often mirror the same covered perils in your commercial property policy. Business income coverage is typically added on as an endorsement to your property policy or your business owner’s policy.

Example:

• A fire breaks out in your furniture store, causing severe damage to your building and destroying much of your inventory. The building must undergo extensive repairs, requiring you to close your business for a few months. Business income insurance would provide for your lost income and operating expenses until you’re able to open up your shop again.

Equipment Breakdown Coverage

If key equipment were to breakdown at your retail location, including point-of-sale equipment, electrical or HVAC systems, and computer equipment, you may experience a business interruption or a prolonged closure. Equipment breakdown coverage covers the repair or replacement of malfunctioned or damaged equipment and many of the costs associated with the breakdown of equipment, including spoiled inventory and losses to business income.

Example:

• Due to an internal malfunction, your point-of-sale system goes down, making it impossible for you to conduct any transactions at your clothing store. You’re unable to have a service person come out to fix the issue for a few days, meaning you’ll need to close down your store temporarily. Equipment breakdown coverage would cover the costs of repairing the point-of-sale system and any lost income.

Commercial Crime Insurance

With any retail store, crime can be a major challenge. Your store could be the target of shoplifters or burglars, you could be the victim of checkout or refund fraud, or you may experience employee theft. Any one of these crimes could send your business reeling. 

While thorough background checks of employees and security systems can help reduce crime risk, there is no foolproof solution. Commercial crime insurance can provide coverage for financial losses related to crimes such as theft, burglary, robbery, forgery, and fraud.

Example:

• Your marijuana dispensary is held up at gunpoint, and you are robbed of tens of thousands of dollars worth of cash and product inventory. Commercial crime insurance would cover your losses.

General Liability Insurance

General liability insurance is an important coverage for retail businesses, given the frequency of customer visits and interaction with third parties. Accidents can happen at any time, and if a customer is injured in your store or in your parking lot, your business could be held liable. General liability insurance can cover the cost of medical expenses, legal fees, and other damages if a third party is injured or their property is damaged on your business premises.

General liability also provides protection against non-physical personal injury claims, which can include allegations of discrimination, privacy violations (e.g., invasion of privacy in dressing rooms), and false arrest or detention (e.g., when dealing with a suspected shoplifter). 

Example:

• You own a convenience store and suspect a customer of shoplifting. You force the customer to the back office and keep him detained until you review the security footage. After reviewing the security video, you realize you’ve made a mistake, and, in fact, the customer did not steal anything. The customer sues you for false imprisonment. General liability insurance would provide coverage in the lawsuit.

Product Liability Insurance

Product liability insurance is an important coverage for retailers, providing coverage for third-party bodily injury or property damage that results from the use of your business’s sold goods or products. Product liability insurance covers the legal and court costs of defending any claims of bodily injury, property damage, or financial losses caused by products you sell.

Depending on the type of products your retail store sells, product risk can vary. While adult clothing may pose little to no danger, children’s clothing or baby products can present much higher risk.

Example:

• Your toy store is selling a hot new transformable car imported from Japan. The cars are flying off the shelf, and you’ve already put in significant orders for more. Soon, however, you start receiving complaints from customers who claim that some of the transformable parts on the toy car break off easily, presenting a choking hazard for younger children. Your business is named in a lawsuit filed on behalf of a group of customers. Product liability insurance would provide coverage.  

Workers’ Compensation Insurance

Workplace injuries are a common occurrence, and employees can suffer a wide range of injuries, from back injuries due to lifting heavy objects to slip-and-fall injuries. Workers’ compensation insurance provides employees who suffer occupational injuries and diseases with coverage for medical expenses, lost income, and, in some states, rehabilitation and vocational training costs. This is an important coverage for any business that employs others, and it is also required for businesses by almost every state.

Example:

• You own a furniture store, and one of your employees is injured while loading a customer’s dresser onto a moving truck. He injures his back, requiring medical treatment, and will be unable to work for at least a few weeks. Workers’ compensation insurance would provide for his medical expenses and a portion of his lost income while he is recovering and unable to work.

Additional Insurance Coverage

There are a number of other commercial insurance types available to retail store businesses, depending on the exact details of your company and its risk profile. The following are a few additional coverages you may want to consider:

• Commercial auto insurance protects not only the value of your company vehicles but also your business from liability if you or one of your employees is found to be at fault in a car crash. If your business delivers items to customers or transports merchandise between stores or warehouses, commercial auto insurance is a must-have coverage.
• Inland marine insurance can provide coverage for a variety of property that doesn’t stay in a fixed place, including merchandise that you transport from your warehouse or deliver to customers and equipment or furniture that you move between stores. Bailee’s coverage, a type of inland marine insurance, is also important for your business if your business offers repairs or alterations on merchandise.
• Cyber liability insurance covers your business against first- and third-party losses caused by cyberattacks such as hacks, data breaches, denial of service attacks, and viruses. For retail businesses that store client information, from credit card information to contact information, cyber liability insurance can help cover the costs of dealing with a data breach and addressing any related lawsuits. This coverage is especially important for those retail businesses that sell goods online.
• Employment practices liability insurance (EPLI) provides financial protection for your business against lawsuits by current, past, or prospective employees accusing your business of wrongful treatment such as discrimination, harassment, or other employment-related issues.

Insurance Coverage for Your Employees

Part of protecting your business also means providing the right coverage for your employees. You can sponsor group insurance plans for your employees to provide financial protection in their time of need. A comprehensive employee insurance plan can also serve as a way to attract and retain top talent.

Group health insurance helps your employees pay for medical and healthcare expenditures, including everything from primary care to hospitalizations and surgeries. Offering health insurance to your employees can not only keep your employees in better health, but it can also help to retain your employees.

Group life insurance provides a financial payment to an employee’s family or other survivors if the employee unexpectedly dies. The death does not have to be work-related. Although individuals can purchase life insurance on their own, as an employer-sponsored group, you can usually obtain better rates than an employee could get on their own.

Group disability insurance provides income to employees who cannot work as a result of non-work-related injuries.

What retail businesses need insurance?

Every retail store could benefit from some basic forms of commercial insurance. From small mom-and-pop shops to large online retailers, business insurance can protect your company from myriad risks. If your business is involved in any of the following, consider researching commercial insurance policies or talking to an agent: 

• You own or lease commercial property, including retail locations or warehouses
• Members of the public visit your business property
• Your retail location depends on functioning equipment, including point-of-sale systems or HVAC systems
• You store valuable inventory or money on your business premises
• You own or lease company vehicles
• You drive a personal vehicle for work purposes
• You hire employees
• You run an e-commerce site that handles credit card transactions and stores customer information
• You sell products that have the potential to harm your clients

Commercial insurance can cover a wide variety of retail businesses. Some common businesses and professions that need insurance include:

Choosing an Insurance Company

The first step in acquiring insurance for your retail business is finding the right insurance company to partner with. Below, we’ve highlighted a few of our trusted insurance partners, who offer a variety of coverage suitable for retail businesses. We’ve also included a few factors that are important for your business to consider when evaluating insurers.

Provider	General Liability	Professional Liability	Business Owner's Policy
Embroker	??	??	??
CoverageSmith	??	??	??
CoverWallet	??	??	??
Hiscox	??	??	??
Thimble	??	??	??

Financial strength. While you may think getting the best-priced policy should be your main goal, it is more important to ensure you purchase insurance from a financially stable provider. It’s worth remembering that insurance claims are paid directly from the finances available to the insurance company. In other words, if the insurance provider is financially stable, they will be able to fulfill their claims commitment. When an insurance company does not have financial stability, it may collapse and be unable to support you.

While this is rare, it does happen. You want to know your company is always secure and certainly don’t want the surprise of finding out your insurance provider cannot cover your losses when you make a claim.

Of course, this leads to the obvious question: How do you know your insurance company has financial strength? Unfortunately, it is not as simple as just purchasing a policy from the biggest industry names because even giant insurers go through periods of financial instability. Luckily, there are rating agencies that grade insurance companies in terms of their financial strength. Some of the major rating agencies are Fitch, Standard & Poor’s, AM Best, and Moody’s.

Price. Cost is important for any business, but the price of insurance is not the only factor. Instead, your retail store business will be better served by looking for the policy that is the most affordable but also meets all your requirements.

Different insurers have different methods for determining the premium you will pay, although there are some industry standards. For insurance companies, pricing is all about determining how much risk your business presents. The key to finding the best deal that meets your company needs is to shop around. Speak to insurers, use online quote engines, and work with brokers to ensure you get the coverage you require to protect your business.

Customer service. While you want your insurance provider to be financially stable and priced competitively, it is also important that you can engage with the company. It is possible you will need to make a claim, change policy details, or update personal information. In these cases, you want to deal with a company that has good customer care. While most major carriers have good customer service records, some spend more time and effort on ensuring their customers are taken care of. This may seem unimportant, but dealing with welcoming, qualified, and thoughtful professionals will be vital during a claims process.

Final Word

In the retail world, success often means transacting and interacting with a growing number of customers. But as your customer base grows, so, too, do your business’s risks and liabilities. With a comprehensive commercial insurance plan, you can protect your company from the risks of customer injury, property damage, employee theft, natural disasters, and more. Even just one unexpected event could mean catastrophe for your business. Ensure the financial safety of your company by investing in the right business insurance coverage.