The digital world has fundamentally changed our society, from how we communicate to how we learn and work. It's easier than ever to build an entire business from the comfort of our homes and defy the standards of a traditional business. From social media businesses to e-commerce platforms, companies no longer require the physical assets they once did. In turn, companies no longer face the same risks they once did. This has led to business owners wondering if they still need insurance to protect themselves. While some policies may no longer be applicable to modern businesses, even a digitally-based company faces risks every day that could financially burden them without proper protection. Whether you are an experienced digital entrepreneur or looking to launch your first online company, examining your risks and understanding how to protect yourself in the digital age will give you the foundation for a successful future.
What Risks Do Online Business Face?
Just as any business faces risks, digitally-based companies face threats that could jeopardize their products, reputation, and operations. Looking at your business in a holistic way and ensuring that all potential risks are addressed will help mitigate the likelihood of a claim. Some of the potential risks your businesses may face include the following:
While online businesses may not face the same physical property risks as traditional brick-and-mortar, they face their own set of unique risks that are just as much of a threat. The most common risk that most will already be familiar with is cyber hacking. Every day people who use online technology are at risk of being hacked, so of course businesses with value face an even greater threat of attack. Cyber hacking can lead to loss of information, security breaches, operational shutdowns, ransomware, and loss of customers.
Intellectual Property Theft
Another risk growing in frequency is intellectual property theft. This occurs when someone copies digital work or products, and resells and or markets them as their own ideas. It can also be considered property theft when someone publishes owned photos, videos, or licensed music. Online businesses may struggle to protect themselves under copyright laws, patents, and product ownership. It can also be challenging to prove they are copies or catch them before their copied products become well-known. Historically, intellectual property theft can lead to long and costly lawsuits.
A prominent risk consideration for all online businesses should be data privacy. This is different from cyber hacking, although poor data privacy can lead to an increased likelihood of cyber hacking. Data privacy and protection ensures that any collected customer data is used only for the purposes of the business, and is not sold, traded, or tracked by third-party companies without permission. There are laws and regulations that vary by state mandating certain essential privacy practices. In general, customers prefer online businesses with proven strong track records of data protection. Failure to secure your online platform could lead to a loss of reputation, and legal action by those affected.
For digital businesses, access to the internet is the foundation of their business. Within that spectrum is the quality of the website, servers, coding, and overall platform. Just as a traditional business would suffer from building damage, an online business can suffer from operational setbacks concerning online access. This includes things like a power outage, mass internet loss, a bug, malware, among other interruptions. All these circumstances could interrupt business operations, increase costs, and cause demand issues for customers.
What Kind of Insurance Do Online Businesses Need?
An online business won’t need many traditional insurance policies as a physical business would. For instance, a standard commercial property policy is most likely unnecessary as this would cover a building and its contents. Depending on the structure of your business and what type of work your employees do, you may not require worker's compensation coverage. However, as mentioned above, there are many risks that require additional protection. Some coverages to consider include the following:
As a digital business, cyber insurance should be one of the first coverages you opt for. If your platform is hacked, it could cause detrimental setbacks for your finances and operations. Before you even launch your businesses, make sure you have a robust cyber policy with strong limits. These policies will cover a range of expenses including the costs to investigate, costs to mitigate claims, costs to recover data, and costs to notify affected individuals. Cyber insurance can also provide additional financial assistance for legal fees and potential settlement costs.
Intellectual Property Insurance
Intellectual Property Insurance is designed to protect businesses that own copyrighted or patented property. As it's common for companies to be accused of infringement, or suffer infringement from another business, this insurance can protect you in both situations. For example, if your business is accused of copyright infringement but later found to be innocent, the legal fees could add up to be quite costly, regardless of the outcome. Even if your business is extremely diligent in following best practices for publication, insurance is a must.
Professional Liability Insurance
Professional liability is important coverage to have for all business owners, including those who are mainly digital. This will protect you against lawsuits claiming you did not provide adequate services or falsely advertised your products and services. Professional services can range from physical products you are selling, to online services like coaching, teaching, marketing, or digital creation. For example, if you sell a product for stress relief and a customer experiences increased stress after using your product, this coverage would cover the claim process. There are many other instances when this type of insurance could be beneficial, so consider adding to your insurance program.
Other Insurance Coverages to Consider
Every business is complex and comes with its own unique set of needs. While the coverages listed above are common for online businesses, there are many other coverages to consider to fully protect your business. In some instances, owned or rented property insurance could fall under the obligation of your online services. Auto insurance may be necessary if there is transportation involved in your digital services. Workers' compensation can sometimes be necessary if you have employees working under you that perform duties in an employer-operated space. General liability and business insurance come into play for some online businesses as well, depending on their specific operations. There are so many variations of coverage needs that could apply, and understanding your business's practices is key to building a proper insurance program.
Find and Protect Your Risks with ECBM
To assess what insurance coverages your online business may need, working with seasoned professionals is the best approach. ECBM has qualified insurance agents and consultants who can accurately evaluate your unique business needs and suggest coverages accordingly. Regardless of businesses being mainly online these days, real risks are still very much prevalent. In some instances, they can be even harder to detect online. Don’t risk your business’s reputation, operations, or financial well-being. Reach out to ECBM today and protect your online business.