What type of insurance does an online payment business need?


I'm offering an online payment solution that other business will build upon. I'm going to have a service agreement that will promise certain things such as quality of service, uptime, etc. I will charge a transaction fee for every transaction that goes through my system.

  1. Should I purchase E&O insurance or any other type of coverage?
  2. What risks am I assuming that I need coverage for when processing payments? Do I have to have coverage for fraud?
  3. How should I calculate how much coverage I need? Should this just be a multiple of my revenue over a period of time.
  4. Does anybody know what type of coverage other payment services like Chargify have?

Insurance Payments

asked Sep 10 '10 at 09:03
Javid Jamae
347 points

1 Answer


Here are some suggestions:

  1. Yes, you should have an E&O Insurance or other insurances, if they are covering anything what might happen, if payment processing goes wrong with your System.
  2. Yes, your Insurance should cover fraud, as you could not be save by believing that the Card Issuer will indemnify you. The Risks I see is that, the System might be compromised by hijacking transactions or that stolen or invalid cards are used. But I don't know your System. You will know it, though you could make a list of potential Risks, think about your System from the view of a criminal. From a coding perspective, check if user input is verified by your System, to prevent malicious code to be processed. Also check if the data is processed to the right destination (Merchant Gateway).
  3. Well, as you might not have Sales at the moment, you'll need to have a plan about how much payments you think you will process. Furthermore, think about a reasonable number of cases, where something goes wrong and you might get condemned to pay for. Let's say it's 10% of your Sales what goes wrong, then I would take this percentage from the Sales you plan as the starting Insurance Cover. However, the insurance company or broker may provide you with more information or requirements. Just ask there as well.
  4. Sorry, no clue about that. Ask Insurance Companies or Brokers about more information about insurances for your field of business, it's better then to rely on what others do.

Hope this helps a bit.

answered Nov 25 '10 at 23:07
371 points

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