Your online business may not have real estate, but it certainly has real risks.
Don’t fall into the trap of thinking your online business is too small for insurance. Even Amazon requires its Pro Merchant Sellers to have commercial general liability insurance to use the platform.
So before setting up your website and finding customers, familiarize yourself with the following risks and make plans to protect yourself.
- A harmful or defective product
You wake up one morning to learn a defect in your product or improper labeling caused injuries. Yikes. It’s only a matter of time before your customers start pursuing legal options. An apology and a refund are not going to cut it.
Even if the fault lies with the manufacturer, distributors and resellers can be held responsible under Section 15 of Ontario’s Sale of Goods Act.
Quality control’s your best friend, but if that fails, a good product liability insurance policy will help you out instead.
- Accusations of defamation of character
If your website publishes something that’s a) deemed false and b) causes damage to a person or company’s reputation, you could be held liable.
Think this doesn’t apply to an e-commerce site? Consider all the ways in which you communicate with your customers or advertise your product. A libelous tweet or blog post about another company or individual (especially if you have a large audience) could land you in some deep trouble.
General liability insurance covers you from accusations of libel (written/permanent statements) or slander (oral statements) if you’re found liable.
- A web designer who “owns” your domain name
Let’s say after a year of using a web host provider you decide to switch to another. One problem: You don’t own your company’s domain name. The web designer who set you up registered the domain under their name.
If you’re working with an honest web designer it’s as simple as asking them to transfer ownership. Then again, if a web designer did this to lock you into paying them for hosting, it might be a long-term struggle that eventually requires legal help.
Your domain name holds a lot of financial and emotional significance. Make sure it’s yours. It’s important for copyrighting your brand name, switching to another host, selling your business, and more. Register your domain name yourself or make sure your web design contract explicitly states that it will be registered in your name or your company’s name.
- An unexpected event halting your business operations
All sorts of unexpected events can cause your work to grind to a halt. The extreme weather might knock out your neighbourhood’s internet or interrupt mail services. Your company’s payment processor may go down. Some of your supplies might get held up at customs. If you can name it, it’s probably happened to a business owner somewhere and they likely lost a lot of money in the process.
In this case, business interruption insurance can help you recoup some of that lost revenue. Be sure to choose your business interruption insurance carefully, so you’re properly covered.
- Cyber hackers accessing financial information
Your customers trust you with their credit card information. Hackers are counting on you not to properly protect it. If they manage to access it, good luck gaining customer trust back. Moreover, if customers discover the breach happened because you failed to implement proper security protocols, you’re looking at angry customers and a potential lawsuit.
Generally speaking, e-commerce business owners should:
- Become PCI compliant: The PCI Security Standards Council is a global body with a mandate to educate individuals and corporations on secure online payment processing.
- Get an SSL Certificate: Ensures secure connections and verifies the authenticity of your site to a user.
If you are hacked, a cybersecurity insurance policy can cover the cost of a breach, regulatory fines, notifications, credit monitoring, and legal fees.
- Risks to your inventory, home, or vehicle
A lot of e-commerce businesses are run out of the owner’s home. This means they bring home many of the physical risks of a brick-and-mortar retail company. A burglar may steal their inventory during a home invasion. The owner or an employee may get into a car accident delivering goods to customers.
A home insurance policy or personal auto insurance won’t cover commercial claims.
Assess how much risk you attach to your personal assets and find commercial property and commercial auto insurance policies accordingly.
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