There is a unique set of risks that come with running an online business.  Business, or commercial insurance, can protect you if the need arises.  While this type of insurance is typically designed to cover small businesses that exist offline, they now also provide unique coverage for online businesses.  Without the proper coverage, you could be held responsible for paying claims out of pocket.

Does an Online Business Really Need Insurance?

This isn’t a simple yes or no answer.  Some businesses do, and some don’t.  Here are some reasons you should have insurance coverage.

  • If you are operating your business from a physical location
  • If you have a digital or physical property that could be stolen or damaged, including inventory or customer data

Why Does an Online Business Need Insurance?

Online businesses are more than just websites. Successful online businesses use social media, email lists, and several other digital platforms to conduct business. Unfortunately, the nature of these operations leaves you open to risk.

How business insurance can help:

  • If someone hacks your online payment system and steals customer credit card information
  • If you are sued for copyright infringement for using a photographer’s photo without permission
  • A client files a lawsuit against your company for breach of contract

Business insurance will protect you in these and several other situations by limiting your liability and preventing you from paying claims yourself.

What Kind of Insurance Do Online Businesses Need?

It’s essential to the growth and success of your business to protect it from claims.  Several common insurance coverages can help protect you.

Data Breach Insurance

One of the unique characteristics of online businesses is that they store sensitive and confidential customer information online.  Any information stored online has a risk of being hacked or stolen, no matter how many security measures you have in place.  If this happens, data breach insurance can help protect you.

Data breach insurance can help you cover the costs of a claim by:

  • Notifying customers whose information has been compromised
  • Providing credit monitoring services
  • Improving your businesses reputation or restoring it after a breach

Business Owner’s Policy

This type of insurance combines three coverages into a single policy.  It’s commonly held by most small businesses.

These are the three types of insurance included in a business owner’s policy:

  • General liability insurance helps to protect you from claims of property damage or injury.
  • Commercial property insurance protects your business’s physical location, tools, or equipment.
  • Business income insurance covers lost income resulting from an inability to operate your business due to property loss.
Do Online Businesses Need Insurance

Product Liability Insurance for Ecommerce Businesses and Online Retailers

If you sell products online, you should consider product liability insurance if you sell a product that hurts someone or causes damage to their property.  For example, if you sell a customer a car battery and a defect causes the chemicals to overflow and burn your customer, they could sue you for damages.  If you have product liability insurance, you will have assistance in court or covering a settlement.

Professional Liability Insurance

You can be sued if you make an error in offering professional services.  This is where professional liability insurance comes in.

If you run an online business offering professional services, any mistakes you make leave you vulnerable. For example, say you run a consulting service that provides advertising advice.  After taking your advice, a client sees a decrease in revenue rather than an increase. As a result, they can sue your company for the decreased sales. 

Worker’s Compensation Insurance

This type of insurance is required by most states if your business has employees.  It will provide coverage to your employees’ benefits if they have a work-related injury or illness.

Several regulations surround what insurance your company needs if you have employees.  If this applies to your online business, make sure to check the requirements for your local area.

Where Do I Get Insurance for My Online Business?

You want to contact a company that specializes in insurance for online businesses and understands your unique needs.

Hiscox

Hiscox is a company that specializes in small business insurance.  While they have insurance coverage options for over 180 different businesses, here are the more common coverages they offer.

  • General liability insurance
  • Professional liability
  • Business owner’s policy
  • Cybersecurity
  • Medical malpractice
  • Workers compensation

Hiscox offers an online assessment in 20 seconds to determine what insurance your company needs based on your answers to a few questions.

State Farm

State Farm also offers several options for insurance for your online business. In addition, they have several options for customizable insurance policies, and quotes are available online.

Some of State Farm’s basic offerings include:

  • Commercial auto insurance
  • Commercial liability umbrella policies
  • Business owner’s policies
  • Worker’s compensation
  • Surety and fidelity bonds
  • Builder’s risk insurance

Insurance Specific to E-Commerce Businesses

There are a few questions to ask yourself regarding insurance for your e-commerce business:

  • What are you selling? What type of product you sell determines how much risk you have as a business owner.
  • Where are you selling? Many insurance companies will only offer coverage for domestic sales, so if you are selling internationally, take this into consideration
  • Do you have a brand or label on your product? A brand or label on your product leaves you responsible for any damages caused through the operation or use of your product.
  • How do you store customer information? If your online business stores customer information on a public server or cloud-based service, you should consider cybersecurity insurance.
  • Do you have commercial general liability insurance? This type of insurance is critical to protect you from liability if your company is sued.
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