Do online businesses need insurance?

Many small business owners and start-up owners know that they can reduce their risk via online business insurance, and many do just that. However, what if your business is a purely online business? Can online businesses benefit from reducing their risk with business insurance? And if so, what types of business insurance might owners of online businesses consider for reducing their risk?

What are the potential liabilities for online businesses?

Generally speaking, online businesses don’t carry all the risks of their physical counterparts. But that doesn’t mean that they aren’t exposed to risks.

As the owner of an online business, you may be responsible for any injuries that the products you sell – be they jewellery, baby clothes, razors, or one of many, many other common products – cause. Even if the products were not made by you, you may still be legally liable if they were to cause injury.

You may be held responsible for any products sold under your business name. Your online business may also incur other losses, such as the loss of sensitive customer data due to cybercrime, website downtime, or loss of stock from your warehouse due to theft or extreme weather events.

Do online businesses require online business insurance?

So, can online businesses benefit from business insurance, and what insurance do you need for an online business? Well, the simple answer is ‘generally, yes’. If your online business gives advice or sells products online, you can benefit from reducing your legal and financial risks.

If your business sells physical goods, Business Insurance can protect your inventory when things go wrong. For example, it can provide cover your contents or stock if they are damaged in a fire, storm, or due to malicious damage or some other defined event listed in the policy.

Along with Business Insurance you may consider Product Liability insurance for your online business. This typically forms part of a Public Liability policy and protects your business against claims by third parties relating to property damage or personal injury caused by your products.

There are also general business insurance products for businesses that offer an online service or advice such as Professional Indemnity insurance. This insurance typically covers you for losses claimed by a third party and defence costs due to alleged or actual negligence in your professional services or advice.

Four additional ways to reduce the risks to your online business

1. Review your terms and conditions

Ensure that you have your comprehensive terms and conditions published on your website. A well-drafted clause with a limitation on liability will help to protect you, your assets, and your online business.

2. Review your End User Licence Agreements

Strong End User Licence Agreements and Service Level Agreements (SLAs) can be key for the longevity of your online business. These could prove valuable to your business if you are unable to reach your service providers quickly, or if they are not available or responsive in a reasonable amount of time.

3. Incorporate your online business

Consider incorporating your online business as a Pty Ltd business, which can offer benefits that go beyond protecting your personal assets. When you work remotely, you can also claim tax deductions for the costs of business expenses. You also have greater flexibility in structuring your business income. You can structure your business and issue shares to make capital raising easier.

4. Intellectual property

Register your company name and logo to protect your intellectual property.

You may lose your domain name or business registration if someone else registers your business name before you do and you might have to start over.

Discover  insurance options for online businesses to compare competitive insurance quotes for your online business, get covered in only 10 minutes, and get back to building your business. If you prefer to speak with us, you can reach our friendly team on 1300 920 867.

This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.
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