As of July 20, 2020, there are 4.8 billion internet users in the world, and the number keeps increasing. Now that so many people are moving onto the online sphere, many small businesses are finding it easier to operate entirely online. Whether it’s selling products or providing services, you can find a plethora of online businesses.
One of the biggest advantages for businesses operating online is that there are no overhead costs. While an online store may be less expensive to maintain than a brick and mortar store, it can come with its fair share of risks. So, to keep your business safe, you must get the right kind of insurance. If you’re operating in Connecticut, you’re probably asking the question, “what insurance do I need for an online business in CT?” Well, this article will answer just that.
This comprehensive guide will address different types of insurance coverage that you should consider. There’s no one-size-fits-all solution, so you can determine which coverages are relevant to your business.
Best Online Business Insurance
Business insurance, which is the same as commercial insurance, can protect your small business from various unique risks. Therefore, you won’t have to pay out of your pocket if your online business is at risk.
What Does Business Insurance Cover?
Business insurance can cover the costs of the following for your online business.
- Property damage, which also includes digital property
- Lost business income
- Legal fees during lawsuits
A business insurance policy can cover the costs of other losses. The exact coverages will depend on your insurance policy.
Why Do You Need Business Insurance for Your Online Business in CT
You need business insurance for your online business in CT because it can protect your business from the following situations.
- A person or party hacks into your online business’ payment system and steals payment information on your customers, such as credit card details, billing addresses, and so on
- One of your clients files a lawsuit against your online business, claiming a breach of contract
- Another company claims that you stole the design of their logo. Thus, it sues your online business for copyright infringement
Each of the situations above would incur high costs for your business. If you don’t have business insurance, you would have to bear these costs on your own, which could potentially put you out of business.
As a general rule, you should consider business insurance for your company under these conditions.
- Your online business possesses digital or physical property that other parties can steal or damage. Examples of such property include physical or digital products, customer payment information, copyrighted material, such as logos.
- You own or rent a physical location from which you run your online business.
While business insurance policies are necessary, they don’t always provide for other common risks. Let’s take a look at other types of insurance that your online business in CT may require.
Business Owner’s Policy in CT
A business owner’s policy (BOP) is a great insurance option for small businesses because it offers different types of insurance under one policy. Typically, it’s a bundle policy of three types of insurance, which include:
Commercial Property Insurance
This helps protect the physical space that you own or rent for your online business. Coverage for the tools and equipment that your online business uses also falls under this type of insurance.
General Liability Insurance
This type of insurance helps protect your company against an employee or third-party claims of bodily injury or property damage.
Business Income Insurance
If your business loses income due to property damage or any covered loss, a business income insurance policy will cover some, if not all, of your lost income.
A business owner’s policy in CT is an excellent starting point for small businesses. The odds are that you’ll be aware of more potential risks to your business after you begin operations. In that case, have BOP will still keep you covered for the most part.
Data Breach Insurance
Data breach insurance is also known as cyber liability insurance. As the name suggests, it will protect your online business if confidential or sensitive information is stolen or lost. This insurance policy will cover the costs of:
- Credit monitoring services
- Notifying customers/clients that are impacted by the data breach
- Taking the necessary steps to improve or restore your online business’ reputation and credibility
Many online businesses in Connecticut keep records of confidential or sensitive data. Therefore, data breach insurance in CT is worth considering.
Product Liability Insurance for E-Commerce Businesses
If your small business is an online retailer, you should consider purchasing a product liability insurance policy. This type of insurance will help protect your company if a product you sold harms your customer due to mishandling or damages.
Consider this example: your business sells dietary supplements, but you don’t store the product in the right environment (i.e., temperature and humidity). You sell those dietary supplements to a customer, they consume it, and they fall ill because of them. Now, the customer may sue you because of your product. And considering the fault was yours and not the manufacturers (due to storing the product in improper conditions), you will be liable for it. Therefore, a product liability insurance policy will cover the costs of legal fees that you may during this process.
Check If Your Policy Covers Your Product
When purchasing product liability insurance for an online retail business, you must make a note of what products are covered and excluded. Many policies have long lists of excluded products. So, you must ensure that your products are covered. There’s no point in paying premiums for this policy otherwise.
In some cases, your insurer will include product liability coverage within your general liability insurance. This way, you may not have to pay extra to purchase a separate policy if you already have BOP coverage. Look into what options your insurer offers.
Product Liability Insurance for Online Manufacturers
If your online business manufactures goods but does not sell them, you should still consider product liability insurance. This is because this type of insurance will protect your company if your product makes your customer sick or injured. Your policy will cover the costs of legal fees if the cause of the customer’s injury or illness is negligence during the manufacturing process in this case. If you’re both the manufacturer and the retailer, then you will be responsible for negligence during manufacturing and storing before selling. Make sure to consult your insurance agency in Connecticut on details of your coverages to ensure your company doesn’t end paying a fortune in losses.
Business Interruption Insurance
There’s always the possibility that something may damage the physical location from which you run your online location. It could be a fire or any such cause that could force you to temporarily shut down your online business until the space and the equipment within it is repaired. So, during the time that your business is not operating, you’ll lose sales and, consequently, an amount of income. If you have employees at your online business, this event may also result in lost wages for them. Therefore, to counteract that loss and ensure that your lost income is compensated, business interruption insurance will help you.
Your insurance agency in Connecticut will make an estimate of the amount of money you would have earned during that period. After that, it will provide you with a portion, if not all, of that amount.
Business interruption insurance can also cover the costs of a pause in operations due to your e-commerce website getting hacked. However, some insurers have a waiting period of one to ten days before reimbursing the lost money. Also, in most cases, your insurer will add this coverage to your cyber liability insurance policy. This way, you can save money by paying premiums for one policy instead of two.
Professional Liability Insurance
Professional liability insurance can help protect your company if your customer or client sues you for making an alleged mistake in your services. Consider this example: you have a digital marketing agency. You write ad copy and other content for your clients. The ad you created for a certain client doesn’t help them attract more customers like they hoped it would.
That client may claim that your services didn’t deliver as promised, and they sue your company on that basis. In this specific example, you will incur high legal fees to defend your company. Therefore, professional liability insurance will cover the cost of these fees.
Professional Liability Insurance Coverage
A professional liability insurance policy provides coverages for mistakes in your company’s professional services that allegedly cause a loss in your client’s finances. Thus, this type of insurance covers the following.
- Negligence in your online business’s professional services, which is also known as errors and omission E&O)
- Inaccurate advice that leads to financial loss for your client
- Misrepresentation of facts
If your business is dependent on giving advice to your clients regularly, you must consider getting in touch with an insurance agency in Connecticut for professional liability insurance coverage.
Worker’s Compensation Insurance in Connecticut
If your online business operates in Connecticut and has one or more employees, you must acquire worker’s compensation insurance in Connecticut. This is as per the state’s Worker’s Compensation Act. Worker’s comp provides your employee with benefits if they sustain a work-related illness or injury. These benefits can help your employees with the following.
- It covers their medical bills for whatever illness or injury they sustain at work
- It compensates employees for their lost wages during their time off when recovering
- Worker’s comp also provides employees with disability benefits
- It pays for an employee’s funeral if they sustain a fatal injury or illness at work
Other than being mandatory in CT, worker’s comp ensures that your employees are protected if injured. Considering that your employees are your assets, keeping them protected is always a plus.
Worker’s compensation insurance is also helpful to online business owners as it can cover the legal costs if an employee sues your company for their illness or injury.
Suppose you have an online retail business that relies on platforms like Amazon to distribute your products. In that case, there’s always the possibility that the platform will suspend your business from using it for a number of different reasons. If the platform suspends your business, you won’t be able to earn any income from your business during the period of suspension.
To compensate for that, you can acquire suspension insurance, which is also referred to as Amazon insurance. This type of insurance is relatively new, so the coverages may be limited. It’s always best to first consult your insurer about the need for this policy and the coverages it entails.
Commercial Auto Insurance
If your online retail business handles product deliveries yourself, you may want to consider commercial auto insurance. If you or any one of your employees uses your personal car for business purposes, your personal auto insurance won’t include the same coverages that a commercial car policy will. Therefore, in the event of an accident or vandalism, you may end up paying out of pocket. So, looking into a commercial auto insurance policy with comprehensive coverage can save you money in the long run. If you have a dedicated car for business purposes, then you must acquire a policy for that.
Last Few Words
If you have a small business, any of the aforementioned insurance policies may help protect your company. However, some may be more necessary than others. You should always consult your insurance agency in Connecticut about which policies you require. Paying for ones that you don’t need will only increase the overall costs of your business. Also, to minimize the cost of your insurance premiums, you can speak to your insurer about bundling different policies together. This way, you can save money and invest more in growing and expanding your business.
Digital Marketing Director
Pawson Insurance | Legal Disclaimer |
Informational statements regarding insurance coverage are for general description purposes only. These statements do not amend, modify or supplement any insurance policy. Consult the actual policy or your agent for details regarding terms, conditions, coverage, exclusions, products, services and programs which may be available to you. Your eligibility for particular products and services is subject to the final determination of underwriting qualifications and acceptance by the insurance underwriting company providing such products or services. Statements on this website as to policies and coverages provide general information only. This information is not an offer to sell insurance.