Does Your Online Business Need Business Insurance?

By Floyd Arthur

If you own a small business that operates on the Internet, the question of whether your online business needs business insurance has probably occurred to you. Particularly if you don’t have a bricks-and-mortar store, you may believe that business insurance simply isn’t worth the cost. Sadly, many online businesses have learned the hard way that this is not the case.

What Kind of Business Insurances Does an Online Business Need?

The type of business insurance required for your online business depends to a great extent on what type of business it is. If, for example, you sell products online, you will need product liability insurance to protect you in the event that a product you sold was defective in some way.

If you provide a professional service, such as consulting or financial advice, you will need professional liability insurance to protect you against claims that your service or advice caused a client harm.

Additionally, any time you do business on the Internet, data theft is a always concern. If your clients are harmed because your online database was hacked, you may liable for damages if your security protocols were lax. Business interruptions can also occur due to malicious software, a server malfunction or a cyber attack.

The Best Type of Business Insurance for an Online Business

The insurance industry has been somewhat slow to address the needs of online businesses, so there is no one-size-fits-all coverage that suits every e-commerce firm, nor is affordable coverage available to address every risk online businesses face.

Nonetheless, a business owner’s policy, or BOP, is a good place to start. A BOP provides:

• Property insurance -- which covers your business equipment, furnishings, inventory and office space in the event of a covered incident, such as a fire or theft.
• Computer operations interruption coverage -- which covers lost business income that occurs as a result of computer or server issues as well as the cost of replacement or repair.  
• Electronic data loss coverage -- which covers the cost to replace or restore electronic data destroyed or damaged as the result a computer virus or malicious code.

• Liability insurance -- which covers the cost of your legal defense and settlement costs if you are sued for libel, slander or advertising injury in connection with information on your website.
• Electronic data liability -- this is an additional endorsement to a BOP that covers liability resulting from electronic data loss. It typically covers incidents caused by an “accident, negligent act, error or omission” but does not apply to data theft.

Cyber insurance policies are also available, which cover many of the costs associated with a data breach or cyber attack. These include:

• Forensic investigations
• Breach notifications
• Public relations issues
• Credit monitoring for affected customers
• Plaintiff lawsuits
• Regulatory defense, penalties and fines, and attorney fees

However, these policies tend to be expensive, with premiums ranging from several thousand dollars to over $50,000 per year.

If you are the owner of an online business, talk to an experienced agent about your business insurance needs. We at Carmoon Group offer a wide array of coverages at very reasonable cost. Give us a call at 516-292-3780 to set up an appointment for your insurance review. Or if you prefer, simply request a free consultation online now. We will get back to you within one business day.