Avoid Nasty Surprises with Proper Insurance Coverage for Your Online Business

Having commercial insurance for your online business is an important part of your risk management strategies, along with having written contracts and considering your legal structure.

There are five important types of commercial insurance that you should consider for your online business:

Commercial General Liability Policy ("CGL")

A CGL policy is the basic liability policy that every business requires.  You may think of it as relating to having a physical space, but it also includes some important additional coverages. 

A CGL policy primarily covers two main risks  (1) Bodily Injury to third parties - think someone slipping and falling on your premises and (2) Property damage to third party property.  These could happen on your business premises, on public property or at a client’s premises and could result from your actions or inactions of you or your employees.

A CGL policy may also contain important extensions including a Non-Owned Automobile Liability extension, Commercial Property coverage or Business Interruption Coverage.

Professional Liability Policy ("E&O")

If you are providing professional services to your clients, you should consider professional liability aka Errors and Omissions coverage.  This will cover you for claims that arise from the services that you provide.

If a client holds you responsible for professional service or advice that they believe didn’t perform as promised, this could result in financial damages. Even if claims are found to be untrue, legal and court costs could be significant, putting a strain on your business.

If you belong to an industry association, this is usually the best place to look for professional liability coverage.  If this is not available, you will have to look for professional liability coverage for your industry type.  A client recently recommended Easy Cover for this purpose.

Cyber Liability Coverage

If you work online or use computers in your business (and who doesn't in 2021), you may be subject to threats that are not covered by your CGL Policy.

Cyber exposures and threats make your business susceptible to data loss, viruses, network damages, information theft, and other digital threats. Small businesses are not immune to these threats. This type of specialized insurance program will cover these threats.

Insurance coverage could help your business deal with associated costs to stop the breach, replace lost data and information, comply with regulations regarding notifying clients, deal with potential reputational damage and losses due to business interruption.

Automobile Policy

If you are incorporated and your corporation owns vehicles, you are required to have Commercial Insurance coverage for these vehicles.  Check with your accountant before you purchase or transfer any vehicles into the name of a corporation (there may be tax issues).

If you own vehicles personally that are insured under your Personal Automobile Policy that you are using for business purposes, you need to check with your insurance company to discuss your business usage.  You may be ok to stay on a personal auto policy or you may require commercial coverage.  Have this discussion and get the recommendations in writing.  

If circumstances change (like the distances that you are driving for work), make sure that you discuss these changes with your insurance company to ensure that your coverage is still sufficient.  You DO NOT want to get into an accident while making a delivery to a client or travelling to a presentation and have your claim DENIED.

If you have employees driving their own vehicles for your business, ask about having their use covered under your CGL policy (see above).

Home Office - Check Your Business Usage

If you are working from home (and so many of us are in 2021), you should check with your home insurer regarding the business usage of your home.

If your insurance company indicates that your business usage of your home does not require additional coverage, get this recommendation in writing.

If your insurance company advises that your business usage will require additional coverage, ask whether your CGL policy coverage needs tweaking or another solution is necessary.  

Conclusions

Having proper insurance coverage for your business will help you to avoid potential losses of various types.  Find an insurance broker or company that understands your business needs with whom you can have an ongoing relationship. 

Have a discussion about what you need (and can afford to purchase) now and what might cause you to need additional coverage in the future.  It likely does not cost as much as you think and can help you avoid nasty surprises in the long run.