Starting an online store—insurance

So far our Digital Guide’s entries on setting up your own online store have focused primarily on the online store software aspects required for this business model. But before you boot up your PC and enter your elec­tron­ic emporium, there are some critical legal aspects that need to be resolved ahead of engaging in any business activ­it­ies. In the following article, we’ll give you an overview of three of the most important insurance types that you need to be aware of before going live with your online store. But before reading on, please keep in mind that this text is an in­tro­duc­tion to what you need to be aware of as an online business owner regarding insurance—there are many other policy types available on the market besides the ones mentioned in this text, so make sure that ample research is done prior to finally setting up shop.

Enticed by the prospect of carving out your own piece of the online retail pie, you’ve completed your business plan, found a suitable e-commerce platform, and stocked up on inventory: so you should be ready to finally get the ball rolling and send out your first orders, right? Wrong. One very important step needs to be accounted for before you can truly open your digital doors for business: like any com­mer­cial entity, your online store is going to need the right insurance. As pre­vi­ously stated, this text focuses spe­cific­ally on three different insurance policies commonly purchased by online store owners.

These include:

• Premise liability insurance,

• Cyber liability insurance,

• and Business in­ter­rup­tion insurance

Premise liability insurance

While most of us consider online stores to be strictly virtual en­ter­prises, in many regards they bear no major dif­fer­ences to tra­di­tion­al brick-and-mortar business models. What happens, for example, when an employee, client, or gov­ern­ment inspector is injured while visiting your office or storage facility?

Bodily injury and property damage cases present two common scenarios that, when not properly insured for, can quickly drive a business into in­solv­ency. And it doesn’t matter whether you’re renting out space, or running things from home: if damage is done to a third party, you could be po­ten­tially liable for paying out com­pens­a­tion. Signing up for a premise liability insurance policy (often this is included in a general liability insurance policy) is easy to do and could be the dif­fer­ence between a few hours of paperwork and closing up shop for good.

Cyber liability insurance

You’ve almost certainly en­countered stories in the news involving attacks on the servers of large companies or in­sti­tu­tions on which sensitive client data was stored. Two prominent attacks in the UK over the recent years include data breaches to both NHS and Wonga. Here, an array of sensitive in­form­a­tion was stolen including patient data and customer data.

While it’s true that most hackers have bigger fish to fry than your average sized online store, it’d be wrong to assume that a business is safe from attack just because it’s not a Fortune-500 listed company. As a business owner, it’s your re­spons­ib­il­ity to safely secure the personal in­form­a­tion that clients and customers have entrusted you with. Those who ex­per­i­ence attacks and have failed to secure a thorough policy, could face hefty, po­ten­tially para­lys­ing, legal fees and other reg­u­lat­ory fines. For­tu­nately, there are plenty of polices to choose from to protect you and your business from such horror scenarios; a few examples include:

• Data breach and crisis man­age­ment coverage: this policy helps business owners deal with the fallout resulting from the com­prom­ised security of their servers. Legal costs, reg­u­lat­ory fines, and emergency IT support con­sti­tute some of the biggest expenses here.

• Extortion coverage: deals with losses stemming from extortion threats.

• Media liability coverage: covers damages resulting from theft on in­tel­lec­tu­al property or the de­face­ment of a pro­fes­sion­al web presence.

Business in­ter­rup­tion insurance

Many online stores purchase their web space through third party providers or rely entirely on e-commerce platforms to create their online presences and sell their goods. But what happens when the server on which your site is hosted suddenly crashes? Generally, most providers react quickly to such situ­ations, making extended periods of down time a rare event. Even so, fires, natural disasters, and other accidents can still occur, and these scenarios can often lead to extensive in­ter­rup­tions of business op­er­a­tions.

Business in­ter­rup­tion insurance seeks to mitigate these losses by helping to keep your company afloat while you’re busy trying to get back on your own two feet again. Other potential cases that may be covered by this insurance type include:

• Damage to inventory or mer­chand­ise that has already been sold (e.g. as the result of a fire or storm)

• Losses resulting from the need to relocate due to un­in­ten­tion­al damage to your business’ property.

Any business venture involves some degree of personal risk, and the same also applies to running an online store: loans will in­ev­it­ably need to be taken out to finance your inventory and any necessary hardware com­pon­ents or software packets. External factors, like the state of the economy or changes in fashion and taste may also affect sales, but at least for some things there are ways of reducing the stakes of running your own business.

Pro­tect­ing yourself with the proper insurance policies is one way of cutting down on these potential losses. Every business owner needs to be informed about the vast selection of different policies, and in some cases, it may be worth your while to meet with an in­de­pend­ent insurance agent to find out which offers are right for you.