Insurance for Online Businesses

If you own an online business, you are likely in need of insurance for protection. While it may seem kind of magical to most people not in the tech industry, the internet comes with some very real vulnerabilities. Sixty percent of small businesses who experience a data breach or cyber attack go out of business within six months.

These days, the internet is pervasive in business and commerce.

• Company websites
• Social media
• Email
• Other digital platforms

Do You Need Business Insurance?

If you have an online business that operates from a physical location you own or rent, you need business insurance. The same is true if you have digital or physical property that can be stolen or damaged.

Business insurance can help if you face scenarios like the following:

• Your payment system is hacked, and customer credit card information stolen.
• You use copyrighted items, such as a photo, without permission.
• You are sued by a client for breach of contract.

Insurance Coverages to Consider

Cyber Liability Insurance

There are many different types of business insurance coverages to protect your online business. Some of the most common kinds is cyber liability insurance, which covers financial loss due to a data breach or other cyber event. The typical annual cost of cyber liability insurance is up to $2,000.

There are two modes of coverage, first-party coverage and third-party coverage.

1. First-party covers out-of-pocket expenses incurred by your company when there is a cyber breach.
2. Third-party covers damages and settlements related to claims or lawsuits for injuries that came about because of actions or failure to act on the part of the company.

Coverage for a Data Breach

After your business has incurred costs you will be reimbursed by a cyber liability policy. Here are some common kinds of cyber liability coverages.

• Data restoration: The policy covers costs related to restoring or replacing electronic data, programs, a virus, software damaged or destroyed by a hacker, denial of service (DoS) attack, or other covered peril.
• Loss of income and extra expenses: If your business suffered income losses and expenses incurred while restoring operations following a virus-related shutdown, hacker attack or other covered peril. After a data breach and depending the policy, coverages can include loss of income following the forced shutdown of a supplier, distributor or other business that your business depends on.
• Extortion: You see it on the news more and more: hackers taking control of systems for profit. Cyber insurance covers a ransom plus expenses you had to pay a hacker on threat of destroying data, planting a virus, or releasing confidential information. Policies might also cover the expense of hiring a specialist who negotiates with extortionists.
• Notification costs: Most states require businesses to inform clients whose personal data has been compromised. Some policies also pay to provide credit monitoring expenses as well as for establishing a call center.
• Crisis management: Policies differ, but they may cover the expense of hiring crisis management experts:
  • Attorney services
  • Computer expertise
  • Forensic accounting
  • Public relations

Claims & Lawsuits Coverage

Your cyber insurance policy may include liability coverages which typically cover damages, settlements and defense attorney costs. The following are some common coverages in this category.

Electronic Media Liability

Lawsuits against the company for acts of libel, defamation, slander, invasion of privacy, copyright infringement and domain name infringement are covered by electronic media liability insurance. These kinds of acts are typically covered only if the policyholder publishes the electronic data on the internet.

Network Security and Privacy Liability

Protect your business from claims against the company for negligent acts, errors or omissions. For example, acts can be seen as failure to protect sensitive data, failure to prevent a security breach that results in a denial of coverage, introduction of a virus, or failure to notify clients about a DoS attack

Traditional Business Coverages

There are other insurance policies that small businesses rely on.

Business Owner’s Policy (BOP)

This insurance, generally designed for small businesses and is considered a good place to start as you build a portfolio of coverages. BOP features three types of coverage:

• General liability – If someone files a claim for bodily injury or property damage general liability is there to protect the business.
• Commercial property insurance – Protects the physical location, whether rented or owned, business equipment, or tools.
• Business income insurance – If your business cannot function because of a covered loss, such as property damage, business income insurance can help cover lost income.

Online Retailers’ Product Liability Insurance

Sometimes a product you sell someone a product that hurts them or damages their property. The customer can sue your business for any injuries and relating medical costs. Product liability insurance will also help if it goes to court, pay a settlement or judgement.

Professional Liability Insurance

One important option should someone sue the business if they believe you made a professional mistake. Professional liability insurance can step in to help you pay legal fees and other costs.

Workers’ Compensation Insurance

If an employee sustains work-related injuries or illness, workers’ compensation can help with the medical costs. Like many states, yours may require you to provide workers’ compensation insurance coverage. If you have employees, check with your state regarding what is required.

Commercial Auto Insurance

Even online businesses can need car insurance – commercial auto insurance. If you or your employees drive a company car, protect your business with this car insurance. If an employee gets into a car accident while on the job commercial auto insurance helps pay for any property damage.

The Roundup

When you own an on-line business, consider insurance made for such a situation as well as coverages that might surprise you. Talk to your insurance representative for a consultation about what is right for you.