A new insurance for a new economy

By Mye-Yun Lee

No matter what the pundits may claim, the Internet is not going away. Opportunities to use the Internet to help grow your business continue to abound. A word of warning, though, these new business opportunities do come with their own set of risks.

The scary truth is that your e-business and its "digital assets" (i.e., information stored on computers), which could be the lifeblood of your business, are most likely not covered under typical business insurance.

Property insurance might cover your costs if your computer is damaged in a fire. But what if a virus wipes out all your data? Unfortunately, information stored electronically is not considered physical property.

To address such risks and exposures, which are getting to be more common these days, more and more brokers are offering Internet insurance. Also known as "hacker" or "e-commerce" insurance, this can involve either purchasing new policies or sometimes merely extending already existing coverage.

How do you know if you need Internet insurance? It's worth looking into if your business uses e-mail or has a Web site that hosts transactions, posts content, hosts advertising for other businesses, or contains confidential information. Essentially, if there is any conceivable way that a client could contend that the performance of your Web site, products, or services affected his or her business and sue you for it, you need to think about Internet insurance. There are a few types of coverage generally offered.

Liability coverage protects your business if you fail to provide the services and security promised to your clients as a result, for instance, of viruses or hackers.

Liability insurance, however, does not protect you from any injury that has been incurred because of your error or omission. For this kind of coverage, you would purchase an errors and omissions policy, which addresses any of your Web-based or software products' failures that affect third parties. These liabilities typically extend to any company that hosts, services, or designs Web sites, or designs software intended for use by other businesses.

Content/media coverage protects your business if any problems arise when you write, publish, or post content or advertise for other businesses on your site. Problems can include copyright infringements, defamation, illegal use of content or other intellectual properties, and false advertising, to name a few.

The cost of Internet insurance can vary depending on a number of variables, such as the size of your business and how heavily it relies on the Internet for revenues. Also, the actual risks and exposures specific to your business can affect your premiums. A company that uses a Web site to compliment a brick-and-mortar business, for example, will have lower premiums than an e-business or dot-com that relies heavily on its Web site. Internet insurance can cost anywhere from $2,500 to as much as $15,000 a year.

Even if you decide not to get Internet coverage, take a moment to check what coverage you get with your existing business insurance. There's nothing worse than assuming that you have your bases covered and to learn that you didn't after all.

Quick tips