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Cover Your E-Tail

Only covered by standard liability insurance? That is so last century.

If you're doing business on the Net, you're taking risks that were unknown a few years ago. And these risks don't just endanger the dotcoms that do business exclusively online. Simply putting up basic Web sites or using e-mail exposes you to damages traditional insurance might not cover.

Most business insurance policies in place today were created before common Internet usage and weren't designed to protect against e-commerce losses. "The standard liability product that businesses buy covers bodily injury and property damage claims," says Steve H. Haase, 44, CEO of INSUREtrust.com LLC, a company in Atlanta that offers Internet-specific insurance policies and e-business risk-management consulting. "When you're in cyberspace, there is neither property damage nor bodily injury, but there are other potential nasty scenarios." Such as? Haase offers these examples:

  • Computer viruses and malicious code. The impact of viruses ranges from annoying to devastating. They can damage data and hardware and take down networks. The cost of system restoration and lost revenues can be substantial.
  • Data theft. Employees or outsiders can break into your network and steal confidential information for either malicious intent or profit.
  • Hackers. Skilled computer programmers break into networks for a variety of reasons, ranging from "just to see if they can" to intent to cause serious damage. No system is absolutely secure.
  • Systems failure. A poorly designed or configured system, flawed programming or poor management and inefficient policies and procedures can cause catastrophic system failures.
  • Privacy and access issues. You may suffer a damaging invasion of privacy or may be prevented from accessing the information you need.

With so much out of your hands, how do you protect yourself? Haase advises entrepreneurs to start with a thorough assessment and then determine the most appropriate solutions, such as e-commerce insurance, internal policies and procedures, electronic firewalls, and other tools. Look past the technology to the human element and consider the role your people play in protecting the security of your operation. Don't neglect proper training and monitoring; according to Haase, many losses are the result of human error or carelessness. Before all else, however, you must admit that you're at risk.

"If you're on the Net, you're exposed worldwide," says Haase. "Traditional insurance is [usually] limited to the United States, its territories and possessions. You need insurance that provides worldwide coverage."


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This article was originally published in the June 2000 print edition of Entrepreneur with the headline: Cover Your E-Tail.

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