Do you need insurance for your website business? It’s a good question. The short answer is “No”. But you do need protection.
If you had a physical ‘bricks and mortar’ shop, you would have insurance to protect the goods you are selling against theft, fire and damage, among other things. You would also have insurance for ‘slip fall’ claims in the event a customer entered your shop and fell or was injured.
These insurances are a requirement for physical shop fronts but what about your online shop? What might you be liable for?
If you sell goods or services online through your e-commerce business, your customers may make claims for damages or injuries caused by your products. There are a number of things they may try to sue you for, such as: allergies to your food or beauty products; injuries caused by clothing or electrical products you sell; financial loss for advice you gave, etc. And you may be liable, in some cases, even if you have not manufactured the products yourself or you’re importing the goods from manufacturers overseas.
Is insurance worth it?
It’s difficult to find specialist insurance policies that properly cover e-commerce website businesses. Many insurance companies refuse to insure online businesses and do not have suitable policies available.
There are more general business continuation insurance policies which may protect for some instances of business interruption but they usually require a minimum number of days of interruption before you can claim and would not cover you for any liability claim issues.
Insurance policies can be expensive too. Especially if they are very difficult to claim against and you rarely qualify to be paid for any claim.
If you do decide to have obtain an insurance policy of any type, ensure you read the policy terms very carefully. Do not rely solely on what the insurance sales person or broker tells you. And ask a lot of “what if” questions.
How can I best protect my website business?
Rather than trying to insure your website business here is what we recommend:
Have robust Terms & Conditions on your website. Well drafted Terms with a limitation of liability clause will go a long way to protecting you, your assets and your business.
Have strong relationships and agreements with your suppliers. You should have End User License Agreements (EULA) or Service Level Agreements with your suppliers that protect you. If your suppliers don’t support you adequately, they they can’t be reached easily or aren’t responsive, it will cost you financially and impact your reputation.
Consider setting up a Pty Ltd company. The benefits are not just to protect your personal assets but you can also claim tax deductions for a home office, business running expenses and you have more flexibility to structure your personal and business income. The corporate tax rate is attractive, as well as making capital raising easier since you can issue shares and structure your business with investors more easily.
Protect your intellectual property. Register your business name, logo and website domain name. This will prevent someone coming along, trademarking your business or company and taking your business out from under you. Imagine having to fight that battle or starting over from scratch!
Don’t risk your personal assets and your business. You spent a lot of time and money to setting up your business, so make sure you protect it and you.