A guide to online business insurance

What insurance do you need if you're running an online business?

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Insurance is an important consideration for any business and the internet is littered with please from frustrated online business owners who are struggling to find cover. In this piece, we’ll dig into the range of insurance options on offer in the online space, find out why it can be difficult to find the cover you need, and explore what you can do to make sure your business is covered.

Public and product liability insurance

As an online business, it’s likely that most of your customer interactions will be virtual, meaning that your public liability risk is probably quite low. However, that isn’t always the case. If your business operates a warehouse, for example, this could mean that you or your staff will have contact with members of the public, and could be held responsible for injuries.

Product liability cover, on the other hand, is usually a key part of online retail insurance and is often sold as part of a public liability insurance policy. If you sell items online – jewellery, clothing or furniture, for example – you could be help responsible for any damage or injury the products cause.

Let’s say you are an online retailer selling personalised caked and delivering them to clients’ doors. If someone blames you for food poisoning soon after eating one of your cakes, you could be liable to pay compensation claims. Alternatively, if you sell electrical components online and someone blames the faulty component you supplied when there is a house fire, you might be liable to pay compensation for the damage caused.

Even if you have not manufactured the items yourself, you could be liable for compensation claims if the product bears the name of your business – if you’ve repaired, refurbished or otherwise changed the product, or of the original manufacturer cannot be traced. Online businesses often have long, even international, supply chains with a lack of face-to-face interaction between links. If you’re unable to identify the manufacturer, or if the manufacturer has gone our of business, then you could be held responsible for any of their products sold by you.

Stock cover

Stock cover is another important consideration for online businesses, particularly if you are in retail.

As an online business, it’s likely that you’ll keep a fair amount of stock either in your home or on another site before it’s shipped to customers. If this stock is damaged, stolen, or anything else then the right insurance can cover the cost of replacement, based on the cost price.

The value of stock cover is dependant on the goods you have, but can be priceless in other ways. Losing stock in any way can mean the difference between operating or not, and often a pause in trading can mean that customers flock to your competition where the stock is still available. Having measures in place to help cover any losses and get trading again as soon as possible is massively useful.

Employers’ liability insurance

If you’re a sole trader then you won’t need to worry about employers’ liability insurance, but as soon as you hire your first member of staff you will need it.

This protects you in the event of employee related issues and can be scaled to suit your business. If you start with a single employee and have two more by the end of the year then you’ll need to make sure you are still covered.

If you don’t work in online retail but instead offer any sort of professional advice to clients, you may also want to consider professional indemnity insurance as part of your policy. This is a form of cover that protects your business if ever a client deems that the work produced for them, or the advice given them, is inadequate.

Is online cover difficult to find?

In the past many insurance companies refused to provide cover for online businesses, or lacked the relevant products to do so. There were various reasons for this: from the implications of international selling, to the basic lack of understanding of the business models emerging.

In more recent years this has become easier to deal with as online business has quickly become a dominant force around the world. Today there are a range of products on offer from both traditional and specialist insurance companies that cater specifically to online business models. However, it’s still important to make sure you understand what you need.

In this article we’ve included some of the most common options you might want to consider but we recommend speaking to a specialist to understand exactly what you need. Because online businesses can vary so massively – from small-scale resellers all the way to national or international companies – it’s important that you find something as tailored to your needs as possible.

Tips for getting covered

You should be careful when you buy your insurance policy. Most insurers will need to know both what you do, and how you do it. This means that, if you are an online gift card retailer, labelling yourself as simply a gift card retailer may not provide you the cover you need. You will need to make sure that your provider knows you both sell cards, and that you sell them online.

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