E-commerce can sometimes be a complicated back-and-forth between websites and their users, especially when it comes to legal issues. Although these platforms have been around for a while, there are still a lot of gray areas from a legal perspective. Which is why you need the right protection for your online business.
Luckily, independent insurance agents are here to help. They know all the ins and outs of protecting businesses, whether it’s online, brick-and-mortar, or a combo of both.
They’ll shop multiple companies to put together the policy options you need to minimize your risks and keep your e-biz dreams alive. But first, let’s take a look at the risks involved in your business and the coverage options you need to consider.
E-Commerce Comes with Its Share of Risks
In one high-profile case, a hearing-impaired woman sued eBay for not adequately accommodating for her disabilities, as outlined in the Americans with Disabilities Act (ADA).
She argued that when she applied to sell goods on eBay, the registration process required her to answer an automated phone call that gave out the registration access code – which she couldn’t hear.
In her claim, she also argued that eBay operated as a storefront, and should be required to have accommodations for deaf customers, in accordance with the ADA.
Representatives from eBay countered that their site is not a storefront, and so ADA requirements do not apply. In a statement, eBay officials said that the internet is not a “place,” but instead a “means of remote communication.”
This issue still remains on shaky legal ground in a world where a majority of consumers prefer to shop online. The legal system continues to struggle with e-commerce, from taxation laws to seller agreements, and new legislation is constantly proposed to help address these issues.
Thirty years ago, e-commerce barely existed. Today, millions of businesses buy and sell products online. And e-commerce businesses face different risks from brick-and-mortar stores. You need a business insurance policy that’s designed to address your online concerns.
E-Commerce Insurance vs. Standard Business Insurance
For many small businesses, a standard business owners policy (BOP) will cover most risks. This policy combines property coverage with general liability.
If someone slips and falls while shopping in a store, the liability portion will help pay for medical expenses. If a severe windstorm breaks a few windows, the property damage will be covered by insurance.
An e-commerce business presents unique challenges that only e-commerce insurance can address. Two key areas that internet businesses should focus on include:
- Data security: An online business is likely to keep sensitive customer data and valuable business information in a secure database, but breaches are known to happen — more and more happen every day. Risk management is essential to preventing a breach, but are you prepared if information is exposed? You could be held liable for each customer’s information.
- Business interruption: You probably rely on other third-party providers to assist you with functions like shipping or internet service. If they experience an issue that stops business on your end, a prolonged problem could lead to reduced profit. Business interruption insurance helps you recuperate losses.
E-Commerce Insurance Coverages
It’s a good idea to speak to your independent insurance agent about other forms of coverage that could help protect your business:
- Transportation coverage: If you sell a product, you need to ship it to your customers. But do you have a way of ensuring that it’s covered during transportation?
- Contents coverage: If you manufacture your own products or have a warehouse, you are likely to need comprehensive property coverage that also protects inventory.
- Workers' compensation: Just because you operate online doesn’t mean you don’t need help. If an employee is injured while on the job, this coverage helps with medical expenses and possible lost income. Check your state laws, it may be required.
- Directors and officers insurance: Specifically made to deal with the liability of directors and officers of a business, this provides coverage if they make an operational mistake that leads to lawsuits against them.
- Intellectual property insurance: If you work with intangible property like software, data, or even gaming operations, you could be sued for the rights. This insurance helps cover your legal defense. You should also let your agent know if you ship globally. Some insurance policies will have exclusions for goods shipped internationally.
E-Commerce Liability Protection
Liability protection is always a must, but setting the right limits is the best way to get the most protection. A good place to start is analyzing your risk factors and business worth.
If you’re a small business worth several million dollars, liability limits of $1 or $2 million may cover your needs. On the other hand, a large e-commerce business with multiple branches would need more protection.
If you’re unsure about the liability risks your business faces, it’s important to seek professional help. An attorney can help you understand your legal responsibilities, patent law, and even the ADA and other items that you might be curious about from a protection standpoint.
Of course, insurance agents are also very familiar with liability and can help advise you when it comes to finding a policy that will cover your risks. Just be sure to find a reputable insurer who understands the business you run.
The Benefits of an Independent Insurance Agent
E-commerce insurance is a specialized and confusing niche. Thankfully, you don’t have to go it alone. Independent insurance agents will walk you through a hand-picked selection of options in language you can understand. So you know exactly what you’re getting.
Most importantly, they’ll be there to help you when claim time comes. The outcome of insurance claims can be strongly impacted by how the process is approached and handled. They've got your back.
TrustedChoice.com Article | Reviewed by Jeffrey Green
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Manatt Phelps & Phillips 4 7 2010