In the world of online businesses, it can seem like there’s a virtually endless checklist of tasks to cross off. To start with, you need the right products and services for your customers. Then there’s the case of marketing your business. Oh, and you also need to factor in financing, hiring employees, securing the right premises, taxes… The list goes on and on.
With so many other things to consider, it can be easy to overlook an important issue: insurance. Most entrepreneurs think that just because they have an online business, versus a bricks and mortar store, that they do not need business insurance.
This is absolutely not the case, online businesses need to protect themselves like a typical bricks and mortar business. Online businesses have many situations that can go wrong such as hosting failures, ransomware, or even copyright infringements. What happens if a clients website crashes during a large sale and they lose out on possibilities hundreds of thousand of dollars?
I have a personal story to share about the time I once had downloaded a free and what I thought “royalty image” from one of the major sites, only to find out that the person who uploaded it had uploaded the image from Shuterstock did not have permission and I was accused of stealing it. The client was messaged from their legal department requesting a few thousand dollars or would be taken to court.
10 Types Of Fussiness Insurance For Online Companies
If you’re unsure where to start with all of this, you have landed on the right article. Below is a list of ten types of insurance your business needs to acquire. With these in place, you can rest easy knowing your company is protected against a wide range of potential problems.
1. General liability insurance
As the same suggests, general liability insurance is a great starting point for any business arranging coverage. In fact, it doesn’t matter if you run a large organization or a home-based operation – general liability insurance is a necessity.
The question is: What does general liability insurance actually cover? Well if your products, business environment, or services result in someone being injured, the policy will generally cover your company. The same also goes if any damage is caused to someone’s property.
As previously mentioned, this insurance is a great starting point. However, its general nature means that other policies are required as additional support.
2. Professional liability insurance
Also known by its alternative name of Errors & Omissions (E&O) insurance, professional liability insurance is often paired together with the previously mentioned general liability insurance.
This insurance is particularly useful if your company needs to deal with disgruntled customers. The reason for this is simple: if your business is sued due to work-related mistakes, the policy can help protect you from a financial point of view.
The reasons for being slapped with a lawsuit can vary. If you run a tech business, this could be down to delivering an app that is deemed buggy and incomplete. Another example would be an electrician who mistakenly wired a plug socket the wrong way.
It also goes beyond accidents or creating a product that is deemed not up to standard. You could also be faced with a court case even when the job has been done as expected. Say you install a new bathtub in a home. This was done properly and signed off by the client. Yet a couple of months later, it is deemed that the installation has ultimately damaged the plumbing. As they need to replace the piping, they will hold you responsible for footing the bill. Oh, and customers who simply don’t want to pay could try and drag the issue through the courts with feeble reasoning.
Professional liability insurance isn’t only about saving money. It’s also vital for protecting your reputation. If your business suddenly hits the news due to a court case relating to something you’ve done wrong, this could end up being much more costly than the lawsuit itself.
3. Product liability insurance
If your business sells physical products, it is imperative that you sign up for product liability insurance. The reason is a straightforward one: it covers any possible damage your products cause when used by customers.
As for what this damage entails, it could be if someone becomes ill or injured from using your product, or if it causes property damage. This could be as simple as someone having an allergic reaction from using a lipstick you sold. Even if you weren’t responsible for the manufacturing of the product, your business could still be liable.
Instead of possibly needing to pay for a client’s property restoration or medical costs, the product liability insurance will cover the bill.
Note: when searching around for the aforementioned professional liability insurance, keep in mind that certain plans already incorporate product liability insurance.
I personally believe that all businesses, especially selling on Amazon, need product liabillity insurance.
4. Workers’ compensation insurance
Your employees are the most important asset of your business. As a result, it makes sense to take care of them with workers’ compensation insurance.
With that said, the benefit of this insurance isn’t strictly for the workers. Your company will also massively benefit if one of your employees has to deal with an injury or sickness caused while on-the-job. Instead of having to deal with an expensive medical bill – the type of bill that could wipe out a small business in the US – the workers’ compensation insurance will cover the costs.
However, it is the workers that gain the most from this insurance. If the medical bill was aimed in their direction, they also won’t need to use their life savings to pay it off. Additionally, the insurance will deliver extended coverage while the employee recovers from the injury/sickness. This means that while they focus on resting up and getting back to 100%, the policy will send a partial wage packet to help cover their living expenses.
When you’re getting a workers compensation insurance quote, ensure the policy covers every aspect you need. There’s no point going with the cheapest option if it’s limited in what it provides – and that policy should be applied when signing up for any other insurance.
5. Property insurance
If your business grows to the point where you are fortunate to own your own building or warehouse, property insurance is another policy that you absolutely need. To extend on that statement, this insurance should also be used by any company that uses and stores its own business personal property. This personal property includes the likes of computers, tools, inventory, and office equipment.
So, that covers just about every business on the planet.
What makes property insurance so important? Well, if your company is unfortunate enough to deal with a natural disaster such as flooding, the insurance will cover the costs the damage incurs to the property and/or equipment. If the building is set on fire, the policy will also cover for the destruction this causes – including smoke damage. Furthermore, the insurance will pay out when items have been stolen.
6. Business interruption insurance
Alongside property insurance, your company should also incorporate business interruption insurance. Although both insurance types might be considered pretty much the same, there is a major difference between the two.
That difference is down to what business interruption insurance actually covers. Rather than covering for physical damage to a company’s premises – which is what property insurance is used for – it focuses on the rebuilding process following the damage.
This means that a business interruption policy will cover the various costs incurred while a company returns to its original state. As for what these costs are, they include:
- A loss of profit: If the damage has caused business operations to cease, profits that would’ve been netted are covered by the insurance.
- Temporary location: If the business can continue at a temporary location, certain policies will cover the expenses needed to move and lease new premises.
- Fixed costs: When a company has fixed costs – such as rent and utilities – the insurance policy will cover these until the business is back functioning as normal.
- Training costs: If new machinery or equipment is used to replace previous items, the cost of training operators will be covered by the insurer. At least, that is the case if the insurer was the one responsible for the new replacements.
7. Commercial/personal automobile insurance
While there are only minor differences between commercial and personal automobile insurance, both of them might need to be utilized by your business.
Personal automobile insurance is, of course, used by any vehicle operator. In terms of what vehicles are covered, it includes all road vehicles such as cars, trucks, and motorcycles. It also serves two main purposes. First of all, it covers any liability and vehicle damage that could arise due to a collision if you crash your auto. Secondly, it will also provide protection and medical coverage if you end up with a bodily injury.
As for commercial automobile insurance, this shouldn’t only be employed by businesses that primarily operate with vehicles – such as taxi firms or a haulage business. In fact, if you or your employees use personal vehicles for anything other than simply commuting, then you should be considering commercial auto insurance.
Why? Well, commercial auto insurance covers many different vehicle-related aspects. For instance, personal insurance is unlikely to pay out for any damage or injuries suffered while your business is transporting goods/people for money. Commercial auto coverage does the job, however.
If employees are utilizing their own cars for company business, different insurance will be needed: non-owned auto liability. This will cover workers who do not have adequate coverage for business purposes with their own personal insurance.
8. Cyber insurance
With the continued rise and implementation of cyber technologies, the need for cyber insurance grows in return.
If you use the Internet, you will know it is a breeding ground for a wide array of risks and malicious activities. While these can be sophisticated processes aimed at bringing down a company’s online security, seemingly innocuous methods can produce the same results. As an example, a cyber attacker could send an email to an employee with a harmless-looking URL link. Yet once that link is clicked, the employee’s data becomes compromised and a hacker could gain access to the rest of the organizations sensitive information.
However, this is only one aspect that is covered with cyber insurance. This product also protects against IT-related risks such as theft, defamation, the failure of a host to safeguard data, and data destruction.
Acquiring cyber insurance could also directly improve your security efforts. In an effort to limit the need to pay out to their clients, cyber insurance firms might also offer security products alongside their coverage.
Cyber insurance is particularly advantageous for any company that suffers from a breach on a large scale. It will deliver funding to smooth over these losses, helping a business to recover and get back to normal.
9. Directors and officers liability insurance
If your business is large enough to boast high-ranking personnel such as directors and officers, it means you’re doing something right. It also brings additional concerns for your business. After all, the more elements and departments you add, the more potential headaches you face.
Thankfully, there are different insurance policies available to cover these elements. This is exemplified by directors' and officers' liability insurance.
As the name suggests, this insurance revolves around the directors and officers of your organization. Specifically, it supplies coverage whenever their decisions cause a negative impact as to how the business operates. This could be, say, the directors introducing a new product. Yet, instead of it being a success, this new product has tanked the company’s profitability. Furthermore, general business operations may have slowed and affected productivity levels.
If problems occur, a director or officer – due to their actions when working for your company – might find themselves in a legal situation. With directors and officers insurance, however, the costs and/or damages caused by a lawsuit can be covered.
10. Homeowner’s insurance
On the opposite end of the scale from the previous section about directors and officers liability insurance, there is homeowner’s insurance.
No clues are needed when it comes to deciphering what homeowner’s insurance entails. In general life, this is one of the most imperative insurance types you require. This is particularly the case if your business operates from home.
With homeowner’s insurance in place, your business assets are protected from any damage. As a result, if your house suffers from a natural disaster or serious issue beyond your control, you will receive coverage for the assets that have become damaged.
In addition, certain homeowner’s insurance policies can even protect against accidents that were down to your own actions. For instance, if you leave the oven on and this causes a fire, you could still receive a payout to cover any lost assets.