Taking Your Business Virtual? Here Are Some Crucial Insurance ConsiderationsMar 07, 2023 04:16PM ● By Rakesh Gupta
It is safe to say there will always be brick-and-mortar businesses. Some companies must have a physical presence due to their offerings. In other cases, an owner may simply prefer to have a physical business location.
However, a growing number of companies are capitalizing on the many benefits of being an online-only business — from lower overhead to decreased risks. If your organization has operated from an office, storefront, etc., but you will be shuttering that site in favor of being completely web-based, there are crucial business insurance considerations.
Online businesses need insurance
“It’s tempting to think that if you take your business online, you will no longer need business insurance,” says Peter Shelley, president at biBERK. “After all, the risk of incidents like customer slip-and-fall injuries — which are common — is now gone. But while your company’s insurance needs may change, they don’t go away entirely. Online businesses still face many types of risk.”
Failing to address your risks adequately can jeopardize your business. For example, let’s say you run an accounting business and engage with clients exclusively online. They can sue you if they feel your mistake caused them a financial loss — regardless of whether you have a physical business location or not. Consequently, you must maintain errors and omissions insurance (sometimes called professional liability insurance). Without it, one lawsuit can lead to a devastating financial burden.
Similarly, if your company possesses sensitive customer or client information (and what organization today doesn’t?), you should have cyber insurance coverage. It protects the business in the event of a cyberattack or a breach where data is stolen and used to commit fraud or will likely be used for that purpose. Costs related to notifying your customers or clients, conducting technical assessments of the incident, etc., can be very high.
As another example, imagine you run an online retail shop. Everything is going well until a company hits you with a lawsuit claiming you used its copyrighted photo in one of your digital ads. Even if their assertion turns out to be false, you must defend your company, which can be costly. If you don’t have a general liability policy that covers copyright infringement, you will have to pay that amount (and any potential judgments against your company) out of your own pocket.
General liability coverage can also provide vital protection from lawsuits related to product liability. If an item you sell harms a person or their property, you can be found liable in court and ordered to pay damages. Even if you don’t design or manufacture the product, you could be held responsible, as can anyone in the distribution chain.
In addition, if your company has employees, you are almost certainly required to carry workers’ compensation insurance. It covers costs related to on-the-job injuries, including medical care and lost wages. And while injuries may be less likely when someone is working from home, they can still occur. Plus, if you’re required by your state to carry workers’ comp coverage and fail to do so, you can face fines and penalties even if no employee ever suffers an injury.
Before you make the transition to digital
“In the same way that it’s essential to secure business insurance before your company begins operations, you must also assess your requirements and ensure you have the right insurance for online businesses prior to switching to an internet-only business model,” adds Shelley.
“If your physical-to-digital transition means you no longer have a brick-and-mortar location or any business vehicles, then there are likely policies or coverages that you can drop. However, you should be certain your assumptions are true before changing your coverage. The best way to do that is to talk with a licensed insurance expert. They can help you realign your business insurance portfolio with your operational risks.”
Keep in mind that every company has unique insurance needs. The fact that a business similar to yours was able to cancel specific policies when it shifted to online-only operations doesn’t necessarily mean yours can. An insurance company representative will ask you critical questions about your business to determine your insurance requirements — things like the type of work you do, where your company is located, whether you have employees, etc.
Getting business insurance is simple
If it turns out that taking your business online means you need to purchase one or more new insurance policies, the good news is that they’re easy to obtain. Many companies enable you to get instant online quotes and then make your purchases online, as well, with coverage active within a day or two at most. And thanks to the growing digital transformation in insurance, you may also be able to report claims and manage your policies on your insurance provider’s website.
If you are considering or actively planning a move to online-only operations, it is a good idea to consider your insurance needs promptly. With that critical detail settled, you can focus on other aspects of your transition and be confident that you have the financial protection you need.
Rakesh Gupta is chief operating officer at biBERK, part of Warren Buffett’s Berkshire Hathaway company. biBERK specializes in commercial insurance for small businesses. In his role, Gupta focuses on simplifying the insurance-buying experience using technology and process innovations that make it easier for small business owners to get the coverage they need. For more information, visit https://www.biberk.com/.