Do Online Businesses Need Insurance?

Ecommerce is a booming industry, and it’s not slowing down anytime soon. Especially after recent events that forced people to look for other ways to make a living.

However, you might not be aware of the risks involved with taking your business online and you need to have the right type of insurance to protect your business. Stepping into the eCommerce world comes with its own set of problems that a successful online business needs to be thinking about.

Here are just a few of the potential points for legal and financial issues:

  • Product Liability
  • Cyber Attacks
  • Privacy Issues
  • Professional Liability
  • Property Damage
  • Third-Party Crimes
  • Employee Crimes
  • Negligence

It doesn’t matter the industry, every business needs the right insurance package to manage risk in the areas. It’s not a matter of “if” something will go wrong– it’s only “when.”

So if you’ve been wondering, “do online businesses need insurance?” The answer is yes, and we will cover some of the different types of insurance available and when you might need it. However, for the best and most comprehensive policies, please consult with an insurance agent to find the right one that fits your needs.

General Liability Insurance

General liability protects you from third-party bodily injury, property damage, and lawsuits or damages caused by advertising. Let’s say you break your computer– very important for an online business– then general liability may kick in to help you replace it.

It’s also important if you sell any physical products or deal with any other people in any capacity. Even if you’re just starting out and running your online business from your home, don’t skip out on this type of insurance.

Let’s say your e-shop sells cell phone cases and accessories.  If you get them delivered to your house, and the delivery driver breaks his ankle dropping the box at your door– guess what? You could be on the hook for that and general liability would save you here.

Product Liability Insurance

If you sell products online that could hurt someone or damage someone’s property, that’s another risk vector and product liability insurance may protect your business here. For example, if you sell arrows and someone accidentally shoots themselves, then they could potentially sue you for medical costs and damages.

Product liability insurance coverage may take care of those and any settlement/judgment costs. Insurance companies can bundle this with general liability, but it’s often cited as a must-have if you have any physical products going out to customers.

Cyber Liability Insurance

If you process payments on your site and gather personal information from your customers, then you may need cyber liability insurance. Cybercrime increases year over year (at least the reported ones), so a data breach is not out of the question.

In fact, small businesses account for almost half of the cyber-attacks. And not only will you lose money from the attack and reputation loss, but there’s also the potential for lawsuits, fines, penalties, and other legal fees you might need to face.

However, a good policy will cover your defense cost and help with damage control with things like providing customers with free credit protection or monitoring.

Commercial Property Insurance

You’ll want to disclose your business operating out of your house with your insurance agent. There could be some instances that impact your coverage, or maybe even exclusionary clauses that disqualify claims. If that is the case, you would need to explore commercial insurance.Most policies cover things like fire, wind, vandalism, and thefts done by a third party.

It may also protect inventory if it’s stored in a warehouse or storage– make sure you specify its location when talking with your agent and mention it when looking for insurance quotes.

Professional Liability Insurance

Professional liability insurance (sometimes called errors & omissions insurance) aims to provide protection should you or your product not perform the way the customer believed. Think along the lines of a contract breach, failure to deliver, or perceived negligence on your end.

Let’s say you’re an online business who sells printers. If the customer says you sent a faulty printer or it arrived late and it caused them to lose money, then they could sue you. This type of insurance may save you from legal fees, settlements, and fines associated with the suit.

Workers’ Compensation Insurance

If you have employees in New York, it is requiredif you have employees in any capacity. And that includes “part-time employees, borrowed employees, leased employees, family members, and volunteers” per NY’s Workers Compensation Board.  This insurance protects you and your workers by covering any costs caused by a work-related injury or illness.

Employment Practices Liability Insurance

Sometimes disgruntled current and former employees can bring lawsuits against you and your company. It could be for wrongful termination, issues with payroll, harassment, or any number of reasons. EPLI is helpful and may be added as a policy endorsement in some cases.

Commercial Crime Insurance

We want to trust the people we hire, but not everyone has the best intentions. Commercial crime insurance helps to cover damages caused by crimes your employees commit. Think of things like stealing cash from you or clients, unauthorized transfers, embezzlement, and other fraudulent activities. It also may protect physical equipment and inventory as well.

Directors and Officers Insurance

D&O insurance protects the board of directors from facing personal losses should a lawsuit arise against the company. It’s not only the customer who can sue you but also shareholders, the government, or anyone else who feels the company isn’t being managed properly or there’s a breach of fiduciary obligations.

Final Thoughts on Insurance for Online Busineses

Many people take their business online, not fully aware of all the risks involved. There are cyber attacks and the risk of data breaches. People who can sue for defamation should speak negatively about them on your business social media. And then there are the general problems like theft, injury, and property damage every business faces.

While there’s no one-size-fits-all insurance policy as every business is unique, this should give you a good idea of what to look out for.

Looking for help in finding the right insurance company for you? Then contact us today to speak with our experts!.

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