So, you’ve finally done it! You’ve taken your dream of business ownership to the internet and started your career as an entrepreneur. Maybe you’re offering consulting services to other online businesses. Or perhaps you’re selling your own brand of pasta sauce online. Whatever your area of expertise, today’s digital marketplace makes it possible to succeed with little more than a great idea, a website, and marketing plan. Keep in mind, though, that business success comes with some important risks. And even an online business needs insurance to keep its assets safe.
Common Risks to Your Online Business
Obviously, an online business doesn’t need the same insurance coverage as a brick and mortar store. For example, there’s little chance of a customer injuring themselves or sustaining property damage at your place of business if you conduct all of your operations online. But unless you’re working out of Starbuck’s on your laptop, you probably have an office, either in your home or at a rented space. So it’s important to cover your business equipment, furnishings, and other property in case of a fire, windstorm, vandalism or theft. (Note: your homeowner’s insurance does not cover business property if you’re running a business out of your home.)
Similarly, a web based business is subject to the same copyright, trademark, and defamation laws as a brick and mortar store. Thus, your business can be sued if a customer or a competitor believes you’ve violated those laws. Consider, for example, the following scenarios:
- You or an employee accidentally uses a copyrighted photo on your website without getting the proper permissions first.
- You post an op-ed from another website on your blog without attributing the source.
- An employee takes to Twitter and makes disparaging comments about a competitor.
- You hire a graphic designer to create a logo for your business and he “recycles” a logo he designed for a competitor instead of creating something new.
In any of these situations, you could easily find your online business on the defendant’s side of a lawsuit. What’s more, even if you ultimately win the case, the cost of defending it in court could wipe out your business assets in no time at all.
In addition to the “usual” risks of property damage, copyright infringement, libel, and slander, your online business may face product liability issues as well. For example, if you manufacture a product and sell it online, a customer can sue you if a product defect causes them or someone else harm.
Say, for example, the vendor who bottles your homemade pasta sauce doesn’t pay quite as much attention to sterility as it should. Your pasta sauce could become contaminated with bacteria and make your customers sick. In this case, it would be clear that the vendor who bottled your sauce was at fault. Nevertheless, customers could sue you because you made the sauce.
In fact, an injured customer can sue any company in a product’s supply chain for product liability. So, even if you merely distribute products through your online business, you could be held liable for damages if the product is defective in some way.
If you’re in the business of giving advice of any kind, you are professionally liable for harm caused to a customer if you make a mistake or fail to deliver the promised results. Let’s imagine, for example, that your consulting business provides content marketing advice to help businesses grow a presence on the web. You contract with a client and provide the service for six months, but the customer’s ROI doesn’t improve. The unhappy customer blames you for their poor performance and demands a refund. You disagree with their assessment and refuse to give the money back. In this situation, it’s quite possible you may be sued.
Professional liability can kick in in other circumstances as well. In fact, anytime you offer professional services for a fee, you run the risk that an unhappy client could sue you for damages. And, once again, even if you win the suit, the cost of defending it could empty your bank account in no time at all.
Any business that has a web presence runs the risk of hacking or a data breach. And if you store sensitive client information on your servers, the cost to your business if that data is stolen can be very high. Even if your customers don’t sue you, the damage to your reputation can be severe.
At the Carmoon Group, we specialize in small business insurance. Whether you’re a small online entrepreneur or a growing web-based company, we will tailor an insurance program to meet your needs. Don’t try to navigate the complexities of business insurance on your own! Give us a call today to set up an appointment for your insurance review. Or, if you prefer, reach out online, and we’ll get back to you right away.