When we hear the term ‘business insurance,’ we often associate it with offline businesses. This is because they deal with services physically. As a result, they have the potential to end up in situations that require protection from external parties and threats. So, do online businesses need insurance?
But what you might not realize is that your online business is equally in need of protection and requires a good insurance plan to rely on.
There are multiple factors taken into account when starting an online business. Usually, these factors mainly focus on ways to increase customer engagement and attract online attention. However, insurance is a factor that is often neglected because:
- People often think of insurance as an expensive and extensive process
- They simply don’t see the need for protection for a business that is entirely online
But in reality, there are a number of factors that can risk the liability of your online business.
7 Reasons Why You Need Insurance for Your Online Business
The factors that should be taken into account when deciding do online businesses need insurance, are stated below:
1. Cyber Theft
Cyber theft means illegally obtaining information that is confidential to a particular business website or organization. If lost, all critical and sensitive information of your business and customers, such as your financial data, customer’s credit card information, and other crucial aspects, can seriously damage the reputation of your online business. Therefore, you need protection from potential threats.
2. Technology Errors and Viruses
Running an online business means entirely relying on the internet and technology, which means internet connection failures, software issues, data loss, and harmful viruses are inevitable. Internet failure and crashing your website at peak traffic can cause a serious loss of revenue which can be covered in your insurance.
3. Defamation
Your business competitors can take measures that could harm the reputation of your business and cause defamation which includes claims of stolen content or spreading false information about your product. Another factor that can cause harm is copyright claims which mean filing a lawsuit against your business for stealing content or ideas and questioning the originality of your product/business. These matters require a strong safety net, which comes in the form of cyber insurance.
4. Maintenance of Customer Relations
Let’s assume that you sell a specific product by bridging the gap between the manufacturer and customer. If that product causes any harm to your customer, whether financially or physically, they might file a lawsuit not just against the manufacturer but also against your business because you were the source of that product. Both the manufacturer and the seller would be held responsible for such conduct. They can face severe loss, which can be resolved or minimized if your online business is covered by your insurance.
5. Loss or Damage of Your Valuable Stock & Equipment
No matter the scale of your business, the most valuable and essential factor of your eCommerce business is your products. Therefore, the safety and protection of your stock should be the utmost priority. If that stock faces any kind of damage due to theft or destruction in some other form, it would undoubtedly be a significant setback for your business. It will be challenging to recover from, but you can have an insurance plan covering the loss and damage. This will help you and your business to gain momentum again within no time.
If you sell a digital product then that's ok, but in this case, be sure to insure your hardware in case it fails, so you can quickly get back up and running with a fixed or new computer.
6. Safety and Protection of Employees
If your online business has workers, you must stand by their side whenever they face a difficult situation because of their work. This might include any kind of injury they might endure due to the nature of their job. It can consist of delivering products by vehicles or loading and unloading goods. You could be responsible for all the medical expenses and provide them with an income if they miss workdays due to this. These expenses are covered under worker’s compensation insurance.
7. Key Person Cover
In case you did not know, generally speaking, key person cover or key person insurance involves purchasing a life insurance policy that covers the owner of the business and/or other key members of the business that are required for its continued function.
If the owner or another significant member of the business passes away, then the beneficiary, which in this case would be the company as a whole, would receive the payout.
There are a few circumstances where key person cover is essential, with the biggest one being that the death of a key person could quickly and drastically affect the financial wellbeing of the company. Moreover, if the reputation and credibility of the company are directly linked to a person, (Think Elon Musk & Tesla), then key person cover is very important.
What is also important to note is that if you need a business loan and the creditor wants collateral, then putting a lien on a key person policy is always an option to think about. The bottom line here is that if the most important person (or other important members) dies, then you want the rest of the company to have a safety net.
FAQs
How Much Does Business Insurance Cost?
The cost of business insurance depends on several factors. First is the policy you purchase and how much coverage it provides you. It also depends on the type of industry you are operating, the revenue, the number of employees, and the amount of risk associated with your business. Small, low-risk businesses pay a lot less for insurance than big companies.
However, there are some ways small business owners can lower the cost of insurance. One of the best ways is to ask for recommendations. Get in touch with business owners and mentors in your field for affordable insurance policies. Or make a decision after carefully comparing the rates of different insurance companies. You can also save some money by bundling essential coverages into one policy.
How Do You Get Online Business Insurance?
Getting insurance for your online business is simple and requires the same procedure as getting insurance for your offline business. You can start by contacting online focused insurance companies (see our recommendations below). All you need to have is the complete information of your business in your hand. The insurance firms have basic questions to find the right coverage for your business.
What Type of Insurance Do Online Businesses Require?
To decide what type of insurance your online business requires, carry out thorough research to analyze your risks and understand our coverage needs. Some types of business insurance that are essential to protect online small businesses from various threats are:
- General liability insurance protects against the claims of injury or property damage caused by the product you sell online
- Commercial property insurance helps to protect the property. For example, your physical location or pieces of equipment you use in operating your business
- Business income insurance helps compensate for the income you lost due to covered damage
Recommendations
You must understand the nature of your online business and the kind of services it provides before you settle on a specific insurance plan. Here are a few recommendations of insurance companies that we think are the best suit for online businesses.
Hiscox is a US-based insurance company which excels in providing small business with suitable insurance plans. Hiscox covers various liability factors and provides a safety net to business owners who are just starting or have a small-scale setup.
Why We Like It
The various options are suitable specifically for online businesses.
State Farm insurance companies are an excellent choice for online businesses. State farm specializes in providing the best deals to small business owners based on their needs and requirements. In addition, their coverage covers all different types of liabilities such as general, professional, and commercial liability, which helps the business grow and flourish without the fear of loss and damage.
Why We Like It
They allow a myriad of liability cover for small businesses.
Tivly provides you with specially trained customer service rep's who source the best insurance agents or agencies for your situation to ensure that the offer is customized to you and your situation. It allows you to choose your liability factors like general, professional, or commercial, including workers’ compensation insurance and other employee benefits.
You can easily look through your options and tailor a plan with the customer service rep you think aligns best with your needs and budget of your online business.
Conclusion
When considering do online businesses need insurance, you need your business to reach its maximum potential without the fear of loss of valuable products, data and revenue. Therefore, although there can be various reasons, it is vital to have insurance protection beforehand.
Having a comprehensive insurance plan for your online business that covers all the possible liabilities provides a strong foundation. No matter what kind of business you have, some factors can always harmfully affect its reputation and/or progress. Therefore, you should spend some time choosing an insurance plan that best fits your business and budget to have a secure future.
