Regardless of whether you have a physical store that you greet customers and sell products out of, or you are strictly an online retailer, it is critical to have the right insurance to protect you from all the risks you face. Even with just having a website, you face just as many risks as a brick and mortar store, they just might be a bit different. Knowing what risks you face can help you determine the best type of insurance policies you need to protect your business and ultimately your wallet. After all, making money is the goal of owning a business and if it all goes away from an unforeseen incident that you were not prepared for, all of your blood, sweat, and tears will be for nothing.
The sheer number of online retail businesses is growing by the minute with the ease of being able to set up a business in the digital space. Any type of store you can imagine shopping at physically can be done online, and often there are both options. There are websites selling everything like women's fashion online retailers for all the fashionistas out there. For gamers, there are video game retailers and memorabilia sellers for those who enjoy classic toys. People that enjoy fitness and exercise can find online supplement stores and workout clothing retailers. Even medicine and vitamins can now be purchased online. While these industries may all be different, each of these types of businesses has a lot in common in that they have an online presence.
Often, entrepreneurs start an online business because it is a more affordable option with low overhead, and think they don't need insurance. Because having an online presence is now more common than it used to be, there is an answer to the growing amount of risks that online retailers face. While brick and mortar businesses have to worry about fire and theft being common problems, online retailers have different concerns. From data breach to cyber extortion to employee theft to property concerns if stock is held in-house, there are a whole host of risks that must be considered. Insurance for your online business is an investment in your protection, not an expense.
A digital retailer can face a mountain of issues by working in the online space, some of which a brick and mortar store will not. Data liability is a huge concern for any business using the internet to conduct their operations. A business that is online faces the risk of being hacked from many different directions from its website to stored customer information to payments. It is largely known that data breaches happen often, but only the ones that are damaging to customers make it to the news. By having the proper risk management plan in place, coupled with the right insurance, you can prevent any data breach from going public if you can contain it when it happens. And, chances are, it will eventually.
First-Party - Cyber liability insurance will often have both first and third party coverages. First party includes damages to your electronic data and the costs to restore it, loss of income, notification expenses (this can be huge if you have a large customer base to notify, cyber extortion (often these claims are best to be paid if your data is locked and you are being extorted for a sum of money rather than get the police involved), and public relations expenses if you need to try to protect the public image of your company.
Third-Party - Third-party coverage of the Cyber Liability insurance will cover for claims against network security issues, electronic media liability which is slander, libel, defamation, etc., and regulatory issues if you receive a fine for breaching any data privacy laws.
Defense - Possible the biggest expense of any claim is court costs and attorney fees. Cyber Liability will pay for these defense costs. Just be sure to understand if this coverage is within your limit of liability, or if it is separate. If you are going to pay for the insurance policy, you want to make sure it is adequate coverage if a claim should arise.
Even if you have an online retail business, you may have clients come to your home. Often, online retailers list their products on free marketplaces like Facebook and Craigslist to generate more customers. If this is the case, you may need General Liability insurance. Additionally, if you manufacture any products to sell you have exposure here. It is highly likely that you post on social media platforms to generate traffic to your website to get more sales. If this is the case, someone could allege that you posted something causing them hardship, which is personal or advertising injury.
Bodily Injury - If you have clients visit your home or office, or even if you order things for your business and the delivery person steps on your business premises (even if it is inside your home) and they slip in fall, your business could be sued. Bodily injury claims happen for businesses all the time and online retailers are not exempt.
Personal and Advertising Injury - Let's face it, not all customers are going to be pleasant. If in a fit of rage, you decide to post about how terrible your experience with this customer was and they see it, you could be sued for defamation.
Property Damage - If you have to lease any equipment for your business, such as a computer, and spill coffee on it and damage it how will you pay to replace it? Chances are if you leased or financed it you agreed in a contract to replace the item. Third-party property damage claims are covered under General Liability insurance.
And, as with most policies, the defense costs related to any claims for General Liability will be covered. Usually, there is no deductible for liability claims, but sometimes there will be for Property Damage so be sure to read your policy thoroughly.
While Directors & Officers Liability insurance more often affects brick and mortar businesses, digital businesses can be affected too if they have a board of directors. If your business does have a board of directors, their personal assets could be at stake. Not only can customers sue if there is a mismanagement of funds or similar claim, but so can shareholders, competitors, suppliers, and even government entities.
While D&O Liability is critical for a business that has a board of directors, often coupled with this policy is Employment Practices Liability insurance. If you have employees you definitely want to have this type of insurance. Claims of wrongful termination, wage issues, and discrimination are becoming more and more common and EPLI can protect your business from them.
As an online retail business, you may not have a physical building or office, but you probably have inventory stored somewhere. Additionally, you have business personal property that helps you to run your business. This can be computers, printers, office supplies, basically anything that is owned by and used for your business. It is essential that you have Commercial Property insurance for your business personal property in the event that it is damaged physically. This would include things like fire, theft, vandalism, wind, and lightning. It doesn't matter if you store your stock in your home or a warehouse as long as you have the location correct on your policy.
Often business owners who operate in the online retail industry assume that their homeowner’s insurance will cover any claims of Liability and Property Damage. Unfortunately, this is not the case as almost all of homeowner’s insurance policies will specifically exclude any type of business operations within the home. If you are selling any kind of product online, you must purchase the proper insurance.
Since you are already online savvy, you can purchase your insurance policies online. Our online marketplace is the most comprehensive and offers a wealth of information at your fingertips. Our platform is easy to navigate and we can provide all of the necessary insurance products described above, and much more. Take your time and work on getting some quotes for your business. You should be able to put together your entire insurance portfolio and feel confident that your business and its profits are protected. If you are still unsure after securing all of your insurance quotes, our educated insurance advisors can help.
Being an online business in this day and age is an exciting experience. Offering quality products to your customers can leave you with a feeling of accomplishment. Whether you sell clothing, fitness products, toys, electronics, used goods, or anything else that the consumer wants you still have some risks. Even without owning a brick and mortar store, it is clear that you must take the proper precautions by properly insuring your business to help manage the risks you may face.
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