All you need to know about insuring your e-commerce Business
While creating an e-commerce business can be appealing for many positive reasons, protecting your e-commerce business can be a very tricky topic, especially when it comes to business insurance. The most popular reason being the fact that insurance products are sometimes complex, and it is easy to feel intimidated by the many technical jargons involved.
But as much as we might want to skip the process, insurance is an important way to protect your business, and if you ever end up relying on commercial insurance, it can be the difference between an unfortunate situation and a total disaster.
In this blog post, we will be walking you through the several process and products involved which would help you understand the lay of the insurance landscape before you sit down to talk to a professional.
What is Insurance?
According to Wikipedia, Insurance is a term in law and economics. It is something people buy to protect themselves from losing money. Insurance, at its core, is a way to minimize risks in your business.
Ecommerce insurance is the protection of the buying and selling of goods and services, or the transmitting of funds or data that took place over an electronic network, primarily the internet. In other words, it is you preparing your store for that worst-case scenario in case your site gets hacked.
Now you would ask, But I am a small business, who would want to hack me?
As a small-business owner, you may not believe anyone would target your website, but that’s just it bad actors are likely not seeking out your site specifically, said Mark Risher, head of account security at Google.
“Sometimes, we talk about the distinction between targets of choice and targets of chance,” Risher said. “Targets of chance is when the attacker is just trying anything they’re walking through the parking lot seeing if any of the car doors unlocked. The target of choice is when they’ve zeroed in on that one shiny, flashy car, and that’s the one they want to break into and they’ll try the windows, the doors … the moon roof. I think for small businesses, there’s this temptation to assume, ‘No one would ever choose me; therefore I’ll just kind of skate by anonymously.’ But the problem is they’re not factoring in the degree of automation that attackers are using.”
Even the least-trafficked websites still average 62 attacks per day, according to SiteLock research. “These cybercriminals are really running businesses now,” said Neill Feather, president of the company. “With the increasing ease of automation of attacks, it’s just as lucrative to compromise a 1,000 small websites as it is to invest your time and try to compromise one large one.”
What are the options for small Businesses?
For many small businesses, a standard business owner’s policy (BOP) will cover most risks. This policy combines property coverage with general liability. If someone slips and falls while shopping in a store, the liability portion will help pay for medical expenses. If a heavy windstorm breaks a few windows, the property damage will be covered by insurance.
An e-commerce business presents unique challenges that only e-commerce insurance can address. Two key areas that internet businesses should focus on include:
Data security: An online business is likely to keep sensitive customer data and valuable business information in a secure database, but breaches are known to happen, with more and more happening every day. Risk management is essential to preventing a breach, but are you prepared if the information is exposed? You could be held liable for each customer’s information.
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Business interruption: You probably rely on other third-party providers to assist you with functions like shipping or internet service. If they experience an issue that stops business on your end, a prolonged problem could lead to reduced profit. Business interruption insurance helps you recuperate losses.
E-Commerce Insurance Coverage
It’s a good idea to speak to your independent insurance agent about other forms of coverage that could help protect your business:
Transportation coverage: If you sell a product, you need to ship it to your customers. But do you have a way of ensuring that it’s covered during transportation?
Contents coverage: If you manufacture your own products or have a warehouse, you are likely to need comprehensive property coverage that also protects inventory.
Workers' compensation: Just because you operate online doesn’t mean you don’t need help. If an employee is injured while on the job, this coverage helps with medical expenses and possible lost income. Check your state laws, it may be required.
Directors and officers insurance: Specifically made to deal with the liability of directors and officers of a business, this provides coverage if they make an operational mistake that leads to lawsuits against them.
Intellectual property insurance: If you work with an intangible property like software, data, or even gaming operations, you could be sued for the rights. This insurance helps cover your legal defense. You should also let your agent know if you ship globally. Some insurance policies will have exclusions for goods shipped internationally.
E-Commerce Liability Protection
Liability protection is always a must, but setting the right limits is the best way to get the most protection. A good place to start is analyzing your risk factors and business worth. If you are a business owner with your business worth several million dollars, liability limits of $1 or $2 million may cover your needs. On the other hand, a large e-commerce business with multiple branches could need more protection.