Prompted is the next generation of insurance comparison. It doesn't just compare on price, it reads the insurance policy wording too, working out what each insurer actually covers. To find the right insurance for tutors, Prompted crunches claims, business and complaints data to pinpoint the risks that matter most, then reads insurance policy small print to assess how well each insurance policy protects you as a business that sells online.
The range of different insurance types available for online sellers is confusing, especially as most insurers and comparison sites try to 'upsell' as many different types as possible. This is our analysis of the insurance types that are right for online sellers based on the risks they encounter.
If you sell physical products, Public and Products Liability (PL) insurance protects you from compensation claims and legal fees if a product you sold injures someone or damages their property, or if a member of the public is injured through your business.
Product claims are the core risk for a seller. A dye or fabric treatment triggers a serious skin reaction, a loose fastening injures a child, or a faulty item ruins a customer's other belongings in the wash. Claims can arrive long after the sale, and as the seller you can be held liable for goods you did not make, especially imported goods where the manufacturer has no UK presence. Check your policy includes products liability, not just public liability: for an online seller the products element is the part that matters. PL also typically covers the cost of defending prosecutions under consumer protection law. If you sell through marketplaces, check their seller terms too, as some require you to hold liability cover.
Your shop lives online. You take card or online payments and hold customers' names, addresses and order histories, so a cyber incident hits both your systems and your customers' data. Cyber insurance covers the cost of investigating and fixing your systems, restoring data, notifying affected customers, and defending claims if their data is exposed.
It can also cover cyber crime that targets sellers directly: fraudulent payment redirection, hacked storefront accounts, and ransomware that locks you out of your own shop. Because your revenue depends on your online presence, look for cover that replaces income lost while your store is down. For an online seller, downtime is closure.
If you hold stock at home or in storage, a fire, flood or theft does not just cost you the stock itself. It costs you the weeks of income while you replace it and get orders moving again. Business Interruption (BI) insurance replaces the income you lose after an insured event damages your stock, equipment or workspace.
Timing makes this bite for sellers: losing your stock in November costs you the Christmas season, not just the goods. Check the indemnity period is long enough to restock and rebuild sales, and note that BI pays lost income; the stock and equipment themselves need their own contents or stock cover.
As a sole trader your business stops when you do, and there is no employer sick pay behind you. Personal Accident (PA) cover pays a weekly benefit or lump sum if an injury stops you photographing, packing and dispatching orders. Income protection goes further and replaces income if illness, not only accident, keeps you from working.
If selling is your primary income, a few weeks unable to work means missed orders, refunds and a shop that stalls. This cover keeps money coming in while you recover.
Selling means contracts, suppliers and tax paperwork, and any of them can turn into a dispute. Legal Expenses (LE) insurance covers legal costs for the disputes an online seller is most likely to meet: a supplier who delivers faulty or late stock, a customer chargeback dispute that escalates, chasing money you are owed, or an HMRC enquiry into your tax or VAT position.
Legal costs mount quickly even when you are in the right. LE cover means you can defend your position, or pursue one, without the costs deciding it for you. Many policies also include a legal helpline, useful when a dispute is still just a difficult email.
Professional indemnity protects against claims that your advice or professional service caused a client financial loss. If you sell products and do not charge for advice, design or consultancy, it does not apply to you.
Employers' liability is only a legal requirement once you take on staff or labour-only help. As a sole trader with no staff you do not need it. If you do take someone on, even casually, it becomes a legal requirement with a £5,000,000 minimum limit.
Directors and officers cover protects company directors from personal liability for management decisions. It becomes relevant if you incorporate as a limited company; as a sole trader it does not apply.
We reviewed insurance policies offered for online sellers by leading insurers (Markel and DirectLine)
For this comparison we assumed that the business selling online within the UK and is set up as a sole-trader with an annual revenue below £85,000, and with no claims in the last 5 years.
