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General Liability vs. Professional Liability Insurance for IT Consultants

General Liability vs. Professional Liability Insurance for IT Consultants

Wednesday, December 30, 2015/Categories: business-liability-insurance

There are many different types of IT liability insurance, and technology and computer consultants may have questions about which small business insurance policies make sense for them. Let's start with two basic insurance policies:

Let's examine how each of these technology policies works and learn how they can work together for your IT business.

General Liability Insurance: Fundamental Business Coverage

General Liability Insurance is bread-and-butter coverage for most small-business owners, covering some of the most common risks your business may face. General Liability Insurance may cover the cost of lawsuits when a third party (a non-employee) sues you over:

  • Property damage.
  • Bodily injury.
  • Reputational harm.

General Liability can help cover attorneys’ fees, legal expenses, and damages. In addition to these costs, GL can also cover the immediate medical expenses of people injured on your property. Why would it do that?

Most insurance carriers want to prevent these third-party accidents from turning into lawsuits. By covering immediate medical costs (e.g., ambulance ride, ER visit, hospital bills), insurers hope they can avoid a more expensive lawsuit and insurance claims.

Professional Liability Insurance: IT E&O Exposures

General Liability covers many of your basic risks as a business owner, while Professional Liability Insurance helps cover the risks associated with your work as an IT professional. What's an IT liability risk?

Say a client is upset with your IT services and claims their company’s needs were not met, resulting in lost productivity. This is an IT liability that may be covered by Professional Liability Insurance. Other common IT professional liability claims include…

  • Missing a deadline.
  • Making an error or omission.
  • Recommending faulty software.
  • Creating incompatibility issues.
  • Causing an outage.

Like General Liability, Professional Liability coverage may pay for lawsuit costs incurred from a covered claim. For helpful risk management strategies, see "One Thing You Can Do Today to Reduce Your Professional Liability Risk.”

IT Contracts: Coverage May Be Required

General Liability and Professional Liability Insurance can help protect you from the cost of lawsuits, but there's another reason they're popular with IT consultants. These policies may be required by contracts, including…

  • IT consulting contracts. When you sign a consulting agreement, clients may require you to have Professional Liability Insurance because they want the reassurance of knowing that if something goes wrong, your insurance can pay for damages.
  • Lease agreements. General Liability Insurance is a common requirement from landlords because it can cover a lawsuit if you damage the landlord's property. If your business is responsible for a fire that damages the building, GL can help cover the damages you owe the landlord.

Learn more about how contracts can keep your business healthy, read “4 Contracts Every Tech Startup Should Have on Hand.”

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