- Killer internet business idea: check.
- Business plan: check.
- Domain name: check.
- Customer base: check.
- Insurance: ch…wait, what?
For many internet business owners, internet business insurance is not one of their first (or even fifth) concerns.
While no traditional small business owner—with stock to lose, a storefront to maintain, and payroll to meet—would consider operating without insurance, many internet startups do just that.
The question is, are these internet entrepreneurs flying without a parachute, or are they simply saving themselves from an unnecessary bill?
Online business owners need to protect themselves and their business by obtaining insurance. Insurance can protect against loss of income from situations such as internet or hosting failures. It also protects from liability threats like accusations of plagiarism, security breaches in customer information, and copyright infringement.
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Insurance for Internet Businesses Can Be Hard to Find
Although the internet is about 20+ years old, and many of us cannot recall what life was like before its existence, it is still a very new phenomenon. As such, the insurance industry does not yet have the actuarial data on the likelihood of different types of losses for internet business.
This means it is very difficult for insurers to calculate premiums, because premiums are based on risk assessment.
The lack of data also means it is tough for business owners to shop around and know they are getting the best insurance coverage for their money.
So should internet businesses just avoid the hassle and expense of insurance? Not so fast!
There are many traditional and internet-specific calamities a business owner would want to protect himself against, making internet business insurance a must.
Internet Businesses Have Unique Threats
An internet business owner stands to suffer a loss of income because of physical damage to some aspect of your business (e.g., a loss of internet connection because of weather/fire/vandalism, etc.)
They also have to worry about things such as:
- computer viruses
- copyright violations
- lost ad revenue
- the privacy of customer information, and
- other issues specific to virtual business
These issues could lead to a real loss of income or even the business itself.
How should you navigate all of this? The first step in protecting yourself is shoring up your security.
The Center for Internet Security provides business owners with a list of benchmarks for enhancing protection of web-based businesses. These benchmarks range from enabling pop-up blockers, to disabling remote desktop sharing, to managing firewalls.
As for insurance coverage itself, it may make sense to purchase a policy.
For example, a single accusation of plagiarism or copyright infringement, a single determined hacker breaking into your customers’ information, or a single internet outage during peak traffic could spell disaster.
Do you have the money to pay for a protracted legal battle or to cover a huge revenue loss? If not, you will want to find a policy.
The question is what type of insurance do you need as an online business?
Related: How to Form an LLC in 10 Easy Steps
What Types of Insurance are Recommended for an Internet Business?
While every internet business is different, here are the most common types to consider.
It makes sense an online business should protect themselves and their information while online.
Cyber liability insurance can protect your company when there is a data breach. Whether information is stolen or leaked, having valuable information get out is not good.
Recovering from an information leak can be costly, both financially and with your time.
What’s covered under a cyber liability?
Every insurance company’s policies look slightly different.
Here are ways cyber liability insurance could protect you:
- Ransomware expenses
- Business interruption costs
- Computer restoration
- Public relations help
- Legal fees
As hackers and other online threats become smarter, it’s important for online businesses to invest in security measures and also cyber liability insurance.
Commercial General Liability
Commercial general liability insurance is comprehensive insurance, which makes it a must for online business owners.
It provides coverage for injuries and property damage which occur on the business’ premises.
Also, if you sell a product and someone is injured by it, the manufacturer may get sued, but you could as well.
If you sell products on Amazon, they require some businesses to carry commercial general liability. It depends mostly on how much you are selling on their platform.
As you sell products on Amazon, or other e-commerce platforms, its good to spend time researching their requirements to ensure you have enough coverage.
Employment Practices Liability
As your business grows and you have to add more staff, you’ll need to start thinking more about protecting yourself and your business.
Everyone wants a safe working environment, but the reality is issues with employees will occur. Whether the issues are legitimate or not, they are serious and you should be protected.
Employment practices liability covers businesses from things like:
- Wrongful termination
- Invasion of privacy
- Negligent evaluation
- Mismanagement of employee benefits
- Miscellaneous employment-related issues
Who is covered by employment practices liability insurance policies? You, the business owner, are covered. So are your higher ranking staff, like managers or directors. Some policies will also cover your employees.
Take time to research what’s covered and what you need before buying a policy.
As you add more employees, it’s good practice to have company policies in place, like in an employee handbook, so expectations and rules are clear to everyone.
Have you hired employees for your business? If so, you need a worker’s compensation insurance policy. Accidents happen and you want to be prepared for them.
A workers compensation policy covers your employees for accidents and illnesses that happen while on the job. If an employee needs time off to recover, that’s covered as well.
Worker’s compensation is also beneficial if an employee pursues legal action for a work-related injury. Any legal expenses related to lawsuits could be covered by your worker’s compensation policy.
It’s important to provide and promote a safe working environment, but it’s also important to be covered by insurance when accidents inevitably happen.
Seller Suspension Insurance
If you run an online business that involves selling on sites like Amazon, you may want to invest in seller suspension insurance. Amazon is all about its customers, which means as a seller, your account could get shut down if your customers have issues with your service.
Amazon accounts get suspended all the time and often it seems like there’s no rhyme or reason as to why this happens. Their policies are constantly changing and it’s hard to keep up.
Of course, you can appeal your suspension, but having your business go down for days and possibly weeks can change everything for you.
For example, if you have employees, could you continue to pay them?
Seller suspension insurance provides resources and financial backing during these times. You may need to hire a specialist to help get your account reinstated. That would be covered by this type of insurance.
It doesn’t seem needed until your account gets suspended. If your business relies on Amazon to make money, it could be more than worth the investment.
If you need help determining insurance needs for your online business, CoverWallet can help.
They are an online insurance platform designed with business owners in mind. They’ve developed a unique system to determine your insurance needs and then help you buy and manage all of your insurance policies in one place.
Insurance policies are full of legal concepts that are often hard to understand.
CoverWallet helps to simplify.
What kind of business insurance do they offer? Well, they offer tons of options, including:
- General Liability
- Workers Compensation
- Business Owners Policy
- Commercial Property
- Professional Liability
- Commercial Auto
- Umbrella Insurance
- Errors & Omissions
- Employment Practices Liability Insurance
- Product Liability
- Cyber Liability
- Health Insurance
- Business Interruption
- Employee Benefits Liability
Coverwallet is like a business insurance concierge.
They are not an insurance provider themselves. They are more like a middleman, providing an easy way to connect business owners and reputable insurance companies.
Their insurance partners include companies like:
- Berkshire Hathaway
- Liberty Mutual
Beyond insurance quotes, CoverWallet is a great resource for small business owners. This includes tips for business owners and insurance guides.
It’s important to learn and grow as a business owner and CoverWallet’s free resources will help you stay prepared.
How to Obtain a Business Insurance Quote
Obtaining an insurance quote through CoverWallet is easy. Simply head to their website to start the process.
If you know the type of insurance you need, you can choose from the menu of available policies. You can pick as many types of insurance as you’d like and you will receive quotes for all of them.
If you’re not sure what you need, CoverWallet can assist you in helping find what you need. They offer live one-on-one help via chat and phone support. They also offer email support.
After clicking on an insurance type, they will ask you to provide some basic information about your business like your:
- Business address
- Company name
- Years in business
- Annual revenue
- Type of business entity
Their website is easy to navigate, as well. As you continue, you’ll be asked more questions.
It’s fairly straightforward and the whole process only takes a few minutes.
At the end of the process, you’ll have a chance to review all of the provided information to ensure it’s accurate.
If everything is correct, click “Submit.”
If there are online insurance options available that fit your needs, they will appear shortly after. If there isn’t, CoverWallet provides a phone number to call and speak to a representative that can help you understand available options.
Protect What You’ve Built
Building a business is hard work. Why would you let all your work go to waste by not protecting your investment?
Carve out time in your schedule to sit down look at your insurance needs.
Should you opt for the bare minimum coverage or should you plan for future growth? How much can you afford to spend on insurance?
These are important questions business owners need to ask, especially as their business grows and expands.
You’ve probably taken time to insure your home, car, and life. Your business deserves the same protection.
Do you have business insurance for your online business? Have you ever looked into it?