If your small business is based online, you might think you don’t need business insurance. After all, you don’t have a brick-and-mortar store, so nobody is going to slip and fall on a slippery sidewalk while visiting your homepage, right? Not necessarily. As more and more businesses are conducted online, liability laws are changing accordingly to protect customers. You could still become the target of a lawsuit, and should purchase insurance to protect your business-related and personal assets from loss.
What Is There to Insure?
Your business assets may not be as clearly defined as in a traditional business, so the liability rules are different. Instead of worrying about customers being hurt while visiting a physical store, you need to worry about them potentially being hurt while visiting your website. How is this possible? There are several ways this could happen.
- What if your site were hacked, and all of your customer data was stolen or compromised? Your customers could become victims of identity theft, and you could be held liable.
- If you sell any products that are shipped out to customers, you will carry the same liability for the quality of those products as if they were purchased in a physical store. If a customer is injured by something you sold, you could be held liable.
- If your business is service-related, and your customers depend on your website being available in order for them to perform their business, what would happen if you experience an outage? You could be liable for any business losses they incur, because they were unable to access your website.
These are only a few examples to illustrate why you should purchase an insurance policy for your internet-based business. So where do you start, and how can you be sure you’ve purchased adequate protection?
Determining Your Insurance Needs
Since online businesses are still relatively new to the insurance industry, determining the value of your online business will not be cut and dry. Whereas insurance companies have decades of actuarial data at their disposal to calculate the risk of insuring a car or home, they do not have similar data to determine their risk when insuring an internet-based business. You’ll need to consider several factors to determine how much – and what type – of business insurance you need.
The first part is easy – your physical assets. In order to run your business, you most likely have a computer or laptop to monitor it, and probably some office furniture, too. Make a list of all your business-related property to determine the value of your physical assets. If you maintain inventory, this should be included as well.
This is where it gets tricky. You will need to determine the value of your company – from your personal brand, the services you provide, and any customer data you retain. How much is your domain name worth? If you were to sell your company, how much do you think it would go for?
For the liability piece, provide your insurance agent with a list of all the ways you can think of whereby you could incur losses or be held liable. Who would be most affected if your website was unavailable for a period of time? What if your website was up, but you were unable to ship an order as promised because your inventory was damaged by flood or fire? Discuss all of this carefully with your insurance agent to come up with a policy and terms you feel comfortable with.
Marshall Graham is an insurance claims consultant from Great Britain. Since mortgage lenders require your house structure to be insured, Marshall recommends getting online buildings insurance quotes for quick comparisons in price and value.