IT contractors usually have years of experience working for a larger tech company before deciding to strike out on their own. After you started your own business, you probably found that there was a lot to learn about sales, marketing, and IT risk management. As it turns out, these three components are all interconnected. Here's why:
As you grow your IT contracting business, you'll come to a point where you need technology insurance to get more work. Some clients will require this insurance and you'll need it before you can sign some larger, more lucrative contracts. To help you sort out your insurance requirements, let's look at…
- What IT insurance is and why clients require it.
- A case study in professional liability for IT consultants.
- 3 reasons E&O Insurance is good for marketing your business.
Why Clients Require IT Consultants to Have Professional Liability Insurance
Before we go any further, we should take a minute to talk about what IT insurance does. Professional Liability Insurance, Technology Insurance, and Errors and Omissions Insurance are different names for the same coverage: an IT consulting insurance policy that can pay your legal bills if a client sues you over professional negligence or problems with the technology your install, maintain, or recommend.
If your clients sue you, IT consulting insurance can pay for…
- Lawyers' fees.
- Damages or settlements.
- Court expenses.
Why do clients require you to have Errors and Omissions coverage? From a client's perspective, this insurance helps guarantee your work and protects them from the financial losses caused by breaches, cyber attacks, data loss, and other problems with your IT. If there's a breach, clients know that they can sue you and your insurance company will be able to pay them for the damages.
Case Study in IT Consultant Professional Liability
To understand professional liability, let's examine a case study where a client's data is exposed.
You set up a VPN for a client, which allows them to securely store and access the company's private data, employee records, and customer information. But the client's network is hacked when a phishing scheme steals an employee's login credentials.
The client files a lawsuit against your business. But why would you be liable for the client's hack? The client's lawyers allege that you should have…
- Protected the network.
- Enabled two-factor authentication to secure the client's network.
- Recommended stronger security software.
With these allegations, the client sues you for losses related to the security breach – $40,000 in damages to their reputation and repair costs.
You have Professional Liability Insurance, so your insurer pays for your legal defense fees and covers the damages you owe the client. That's great news for you and your client. Clients want you to have technology insurance so that if something goes wrong and they sue you, they'll be able to recover damages.
3 Reasons E&O Is Good for Marketing Your IT Business
Whether you do a bit of freelance IT on the side or are building your own technology consulting business, Professional Liability Insurance can help you market your business in the following ways:
- Marketing your business as risk-conscious is important. Clients want to work with someone who understands cyber risk and knows how to manage it. After the big data breaches at Target and Home Depot, business owners have become increasingly nervous about their data security. By having insurance, you reassure your clients that you understand how costly breaches are and have planned accordingly.
- Clients want to work with financially secure contractors. Would you hire a contractor if you thought there was a chance they'd go out of business? Probably not. Insurance policies like Professional Liability and General Liability (another basic business insurance) show clients that your business is financially stable and protected from the cost of lawsuits that could bankrupt you. With this coverage, you signal to clients that your business is trustworthy and stable.
- Technology insurance distinguishes you from other contractors. There are thousands of IT contractors, and clients want to hire someone who is a true professional. IT insurance shows clients that you take your business (and its risk) seriously, which can distinguish you from other contractors.
If you're looking for more information on the cost of technology insurance, submit an online application with TechInsurance.