Insuring Your Online Business
By Sue C. Quimby, CPCU, AU, CIC, CPIW, DAE – Vice President/Media Editor
Lockdowns of the pandemic resulted in a significant and rapid increase in business being done online. Ibisworld.com estimates that 30% of business is now done over the internet. Selling online has risks and insurance considerations just as a brick and mortar store does. It is a common misconception that a homeowner’s or renter’s policy will offer protection for money making ventures done out of the home or automobile. This is often not the case. Helping clients understand the proper way to insure their online business is another value-added service of the professional insurance agent.
According to trade.gov, ecommerce sales rose 19% in 2020. For food and personal care items, the increase was even greater – about 26%. Online learning also soared. Weforum.org reports that online education course registrations doubled in 2020, increased another 32% in 2021, and reached a peak of 189 million.
What are the exposures and risks? Most personal lines policies, including automobile, have exclusions for business practices. Coverage for business use of your personal property, vehicles, home computer, and other office equipment is either excluded or very limited. If the mailman trips on a loose step while delivering a package to your home, or you cause an accident while traveling for your business, your personal policies may not provide coverage. Products or food that cause harm to customers also pose exposure. A stolen laptop may contain private customer banking and personal information. Posting a picture of someone without permission or infringement of a copyright or trademark also pose potential problems.
The type of insurance required will vary depending on the type and scope of the business. Part time sales of crafts and jewelry may only require an endorsement to the homeowners policy. Businesses with customer traffic, or storage of inventory are better off with a businessowners or commercial package policy. A business auto policy should be purchased for use of the vehicle in the business, including delivery to or pick up from customers, or driving to a different location to provide services such as dog walking or pet sitting.
Businessowners policies offer protection for loss or damage to property, liability for claims of bodily injury or property damage, and business income coverage should the operation be shut down by a covered loss such as a fire. In the event of a computer system hack, data breach and cyber coverages can provide funds for the required notification to customers and credit monitoring services – in addition to protecting your reputation. Product liability coverage comes into play when a product you sell injures someone or damages their property. This policy also includes defense coverage for court cases as well as funds to pay possible settlements or judgments.
The self-help and counseling industries are rapidly increasing in popularity. Anyone who offers advice or professional services needs professional liability insurance. These policies typically cover claims of negligence, mistakes in advice given, copyright infringement and personal injury, such as libel or slander.
In addition to having the proper insurance, it is important to make sure the business is protected legally. Part time or low income does not mean the business has no exposure to loss or lawsuits. A sole proprietorship may be attractive from a cost and simplicity perspective, but there are drawbacks. As a sole proprietor, all personal assets can be at risk. Important things to consider are record keeping and tax implications. Customer and employee information must be protected. If the business has a location in a state, typically applicable sales tax must be collected in that state. Insurance is not designed to protect anyone from operating outside of the law.
Technology has opened to the door to many business opportunities that were unheard of just a few years ago. However, running a business is much more than setting up a webpage or recording a how to video. Helping clients navigate the risks and exposures of managing an online business is another sign of the true insurance professional.
