20 Best Insurance for Online Businesses
As an online business owner, protecting your company with the right insurance coverage is essential. The internet has brought about incredible opportunities, but it has also introduced new risks that traditional brick-and-mortar businesses don't have to worry about. From data breaches and cyber attacks to loss of income due to website outages, online companies face a unique set of challenges that require specialized insurance policies.
Choosing the best insurance for your online business can seem daunting, with so many options available. To help you navigate this important decision, we've compiled a list of the 20 best insurance policies for online businesses in the USA. This guide will provide an overview of the key coverage types, typical policy limits, and average costs to help you determine the right mix of protection for your company.
1. General Liability Insurance
General liability insurance is a fundamental coverage for any business, including online companies. This policy protects your company against third-party claims of bodily injury, property damage, personal injury, and advertising injury. For example, if a customer slips and falls while visiting your office, or if you accidentally use copyrighted material in your marketing, general liability would cover the resulting legal fees and damages.
Typical policy limits range from $1 million to $2 million per occurrence, with aggregate limits of $2 million to $4 million. The average annual premium for general liability insurance is $500 to $1,500, depending on your industry, location, and other risk factors.
2. Professional Liability Insurance (E&O)
Also known as errors and omissions (E&O) insurance, professional liability coverage protects your online business against claims of negligence, errors, or omissions in the services you provide. This is critical protection for companies that offer consulting, IT, web design, marketing, or other professional services.
If a client alleges that your work resulted in financial loss for their business, professional liability insurance would cover your legal defense and any resulting settlements or judgments. Typical policy limits range from $1 million to $5 million per claim, with aggregate limits of $1 million to $10 million. Annual premiums typically fall between $1,000 and $5,000.
3. Cyber Liability Insurance
Cyber liability insurance is a must-have for any online business that handles sensitive customer data, such as credit card information, social security numbers, or protected health data. This policy provides coverage for data breaches, network security failures, ransomware attacks, and other cyber-related incidents.
Cyber liability insurance can pay for forensic investigations, breach notification costs, data recovery, legal fees, and liability claims from affected customers. Typical policy limits range from $1 million to $10 million per claim, with aggregate limits up to $20 million. Annual premiums typically fall between $1,500 and $7,500, depending on your data security measures and risk profile.
4. Business Interruption Insurance
Business interruption insurance, also known as business income insurance, provides coverage for lost revenue and continuing expenses if your online business is forced to temporarily shut down due to a covered event. This could include a website outage, server failure, natural disaster, or other disruption.
Typical policy limits are based on your company's projected annual revenue, with coverage periods ranging from 12 to 24 months. Annual premiums generally range from $1,000 to $5,000, depending on the coverage limits and your industry.
5. Product Liability Insurance
If your online business sells physical products, product liability insurance is essential coverage. This policy protects you against claims of bodily injury or property damage caused by a defective or dangerous product you've manufactured, distributed, or sold.
Product liability insurance can cover legal defense costs, settlements, and judgments if a customer is harmed by one of your products. Typical policy limits range from $1 million to $5 million per occurrence, with aggregate limits of $2 million to $10 million. Annual premiums typically fall between $500 and $5,000, depending on your product type and sales volume.
6. Employment Practices Liability Insurance (EPLI)
As an online business owner, you have a responsibility to provide a safe, equitable, and non-discriminatory work environment for your employees. Employment practices liability insurance (EPLI) protects your company against claims of wrongful termination, discrimination, sexual harassment, and other employment-related allegations.
EPLI coverage can pay for your legal defense, as well as any resulting settlements or judgments. Typical policy limits range from $1 million to $5 million per claim, with aggregate limits up to $10 million. Annual premiums typically fall between $1,000 and $5,000, depending on the size of your workforce and your industry.
7. Directors and Officers (D&O) Liability Insurance
If your online business has a board of directors or other key decision-makers, directors and officers (D&O) liability insurance is an important coverage to consider. This policy protects the personal assets of your company's directors and officers against claims of mismanagement, breach of fiduciary duty, or other alleged wrongful acts.
D&O insurance can cover legal fees, settlements, and judgments stemming from lawsuits brought by shareholders, customers, competitors, or regulatory bodies. Typical policy limits range from $1 million to $10 million per claim, with aggregate limits up to $20 million. Annual premiums typically fall between $2,000 and $10,000.
8. Workers' Compensation Insurance
Even if your online business has a fully remote workforce, workers' compensation insurance is a legal requirement in most states. This policy provides coverage for medical expenses and lost wages if an employee is injured or becomes ill due to a work-related incident.
Workers' comp coverage can pay for things like hospitalization, rehabilitation, and disability benefits. Typical policy limits are set by state laws, and annual premiums are based on your payroll and industry classification. Expect to pay between $500 and $5,000 per year for workers' compensation insurance, depending on the size and nature of your online business.
9. Commercial Property Insurance
While an online business may not have a physical storefront, you likely have valuable property that requires protection, such as computers, servers, furniture, and other equipment. Commercial property insurance can cover the cost of repairing or replacing these items if they are damaged or destroyed by events like fires, storms, or theft.
Typical policy limits for commercial property insurance are based on the replacement value of your covered assets, with coverage limits ranging from $50,000 to $1 million or more. Annual premiums typically fall between $500 and $5,000, depending on the value of your property and your location.
10. Commercial Auto Insurance
If your online business operates company-owned vehicles, such as delivery vans or sales vehicles, commercial auto insurance is a necessity. This policy provides coverage for bodily injury and property damage liability, as well as physical damage to your company's vehicles.
Typical policy limits for commercial auto insurance range from $500,000 to $1 million per accident for liability coverage, and up to the actual cash value of your vehicles for physical damage. Annual premiums typically fall between $1,000 and $5,000, depending on the number and type of vehicles you insure, as well as your driving record and claims history.
11. Inland Marine Insurance
Inland marine insurance, also known as bailees coverage, provides protection for goods and equipment that are in transit or temporarily stored away from your primary business location. This is an important coverage for online businesses that ship products or rely on mobile equipment.
Inland marine insurance can cover the cost of repairing or replacing items that are lost, stolen, or damaged while in your care, custody, or control. Typical policy limits range from $50,000 to $1 million or more, depending on the value of your covered property. Annual premiums typically fall between $500 and $5,000.
12. Umbrella Liability Insurance
Umbrella liability insurance provides an additional layer of protection above the limits of your other liability policies, such as general liability and commercial auto insurance. This coverage can pay for claims that exceed the limits of your primary policies, helping to safeguard your online business against catastrophic losses.
Typical umbrella liability policy limits range from $1 million to $10 million or more per occurrence, with annual premiums typically falling between $1,000 and $5,000. This coverage is particularly important for online businesses with significant liability exposure or high-value assets to protect.
13. Errors and Omissions (E&O) Insurance for IT Professionals
If your online business provides any kind of IT or technology-related services, such as web development, software engineering, or IT consulting, errors and omissions (E&O) insurance for IT professionals is a must-have coverage. This policy protects you against claims of negligence, mistakes, or failure to deliver the expected level of service.
Typical E&O policy limits for IT professionals range from $1 million to $5 million per claim, with aggregate limits up to $10 million. Annual premiums typically fall between $1,000 and $5,000, depending on the nature.
14. Key Person Insurance:
- This policy provides coverage in the event of the death, disability, or critical illness of a key employee or owner of the business.
- It helps to mitigate the financial impact of losing a valuable individual who is crucial to the company's success and operations.
- The payout can be used to cover the costs of finding and training a replacement, as well as to maintain business continuity.
15. Data Breach Insurance:
- This type of insurance covers the expenses associated with a data breach or cyber attack, such as notification costs, credit monitoring services, legal fees, and potential regulatory fines.
- It helps online businesses protect against the financial consequences of a data security incident that compromises customer or employee information.
- Coverage can also include business interruption losses and the cost of restoring compromised data.
16. Business Income Insurance:
- Also known as business interruption insurance, this policy replaces lost revenue when a covered event, such as a fire, natural disaster, or equipment breakdown, disrupts the normal operations of the business.
- It can help online businesses maintain their cash flow and cover fixed expenses like rent, payroll, and other ongoing costs during the period of restoration.
- This coverage is often included in a Business Owners Policy (BOP) or can be purchased as a standalone policy.
17. Intellectual Property Insurance:
- This insurance protects online businesses against claims of copyright, patent, or trademark infringement.
- It can cover the legal defense costs and any settlements or judgments awarded to the claimant.
- This coverage is particularly important for businesses that rely heavily on their intellectual property, such as software, digital content, or unique branding.
18. Fidelity Bonds:
- Also called employee dishonesty coverage, fidelity bonds protect online businesses from losses due to theft, forgery, or other fraudulent acts committed by employees.
- This can include the misappropriation of funds, the theft of equipment or inventory, and the unauthorized use of company resources.
- Fidelity bonds can help online businesses mitigate the financial impact of employee dishonesty and maintain the trust of their customers and partners.
19. Inland Marine Insurance:
- This policy covers goods, equipment, and other business property during transit or while stored off-site, such as in a temporary warehouse or during shipping.
- It can protect online businesses that rely on the transportation of physical products or need to move valuable equipment or inventory.
- Inland marine coverage can be purchased as a standalone policy or added to a Business Owners Policy (BOP).
20. Hired and Non-Owned Auto Insurance:
- This insurance covers liability for vehicles that are used for business purposes but are not owned by the company, such as personal vehicles of employees or rented vehicles.
- It can provide protection in the event of an accident involving a non-owned vehicle used for business activities, such as making deliveries or attending off-site meetings.
- Hired and non-owned auto insurance can be a valuable addition to the insurance portfolio of online businesses that require their employees to use their personal vehicles for work-related tasks.
