Business insurance is a necessary expense for nearly all businesses that helps keep it protected when the unexpected happens. It’s common practice for brick and mortar, but what about businesses that sell only digital products? The pandemic marked a turning point in digital transformation for many organizations, and the rapid adoption of partially or fully digitized products by consumers means there is a wealth of new opportunities for business owners in the digital space. Let’s talk about insurance if your products are exclusively digital, such as digital templates and tools, ebooks, educational materials, software business, online courses or licensing rights. Do you still need insurance coverage?
At CoverWallet, we get asked questions about business insurance all the time. These are some of the most pressing questions we get about business insurance and protection if your business is already digital or will be in the foreseeable future.
Do I need business insurance if I only sell digital products?
Yes, every business faces some level of risk, so even if you have an ecommerce business, you’ll still need commercial insurance. For example, for web-based businesses, it will be essential to have cyber liability coverage to protect against data breaches or cyber-attacks. In addition, ecommerce businesses should consider product liability insurance. This policy is designed to protect against claims related to product recalls like contamination or defects that could cause illness or injury to your clients.
When should I get my digital business insured?
Depending on the industry you work in, many states require you to have at least general liability coverage when you register your business. Purchasing commercial insurance is something you’ll want to do in the first 90 days of operating your business, if not sooner. Then, you’ll likely need more insurance policies for each new phase of growth. For example, once you hire your first employee, you’ll need to purchase workers’ compensation insurance. Or, if you’re a startup, when you raise a new funding round, your VC firm may require you to buy directors and officers insurance as a way to protect their investment in your company.
Keep in mind, it’s important to have insurance in place right away before an accident happens; otherwise, you’ll be stuck paying for damages out-of-pocket.
How do I pick the coverage that’s right for my business, and where do I start?
Not all insurance providers are created equal, and the same goes for policies and coverage levels. To get started, you need to find a broker who understands your business’s industry and needs, and can tailor a policy to fit your organization. The number of options and nuances in policy type can be daunting, but with an online insurance broker like CoverWallet, there’s no need to get overwhelmed. With CoverWallet, you can get multiple quotes and recommendations on policies by filling out some simple questions about your business. From there, you can quickly buy a policy and generate a certificate of insurance. If you have questions at any point, our team of experts are standing by to help.
How often do I have to renew my commercial insurance for my digital-only business?
Most commercial insurance policies are annual, so you’ll only need to worry about renewing once a year. However, there are times when you may need to update or change your policy information before your renewal period. For example, if you decide to open a new store, you’ll need to add that information to an existing commercial property policy. In this case, your insurance advisor can quickly help you update the policy.
I’m a teen entrepreneur. Do I need insurance?
There is no easy answer to this one, and it’s one of the challenges of being a teen business owner. Commercial insurance providers cannot sell policies to minors. So even if you were able to legally form a business in your state, you won’t be able to purchase commercial insurance until you’re over the age of 18. The best advice in this case is to start researching now, so you’ll be ready to get your business covered as soon as you come of age. Look into online commercial insurance providers, read reviews and outline your policy needs. Check out resources, like CoverWallet’s Business Insurance 101 ebook, and equip yourself with the knowledge you need to make the best choice for your business.
Are there any “insider tips” to keep in mind when shopping around for commercial insurance?
Here are some key points to keep in mind when you’re looking for the right coverage for your business:
This is not a one-size-fits-all or one-time-only expense. Remember, insurance is a vital investment in the long-term health of your business.
Beware of “basic” coverage policies. While there are some basic policies most businesses will need, it’s important to work with an expert who can help you get tailored protection for your business.
Bundles are best. If you’re on a tight budget, consider bundling policies into what’s commonly known as a Business Owner’s Policy (BOP). A BOP combines general liability and commercial property into one policy, which can help you save money compared to paying for two separate policies.
Consider your budget. Don’t forget to ask your insurance advisor if you qualify for any pricing plans, such as a pay-as-you-go premium rather than paying a lump sum annually.
You may think that operating a business without brick-and-mortar locations, manufacturing facilities or tangible products mitigates your risks, but in reality, digital-only businesses need protection, just like any other commercial operation. More importantly, these businesses need a broker that understands the risks specific to the digital commerce industry. Get started on the right path to protect your assets.