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IT Business Insurance for Silicon Valley

To say that Silicon Valley is the tech center of the United States would be the understatement of the year. It has the most millionaires and billionaires per capita of any U.S. metro area. Almost half of all venture capital funding is invested in Mountain View, Palo Alto, Sunnyvale, Cupertino, and the string of cyber cities that make up Silicon Valley.

Risk Management in Silicon Valley for Small Tech Companies

And yet, in the middle of all the Facebook and Google hoopla is you – an entrepreneur who's trying to get their own tech venture up and running. It might be too early to talk about IPOs, angel investors, and VC funding, but it's not too early to talk about managing financial risks.

Small business insurance protects you from the unexpected costs of lawsuits, workplace injuries, property loss, and data breaches. By paying yearly premiums, a Silicon Valley startup or small business gains some cost certainty. You'll know that your insurance company can pay for many common lawsuits that would otherwise bankrupt your business.

Silicon Valley contractors and small-business owners should consider the following policies:

General Liability Insurance

Customers, clients, vendors, and other third parties can sue your business for many incidents: physical injuries, damaged reputations, copyright infringement, and property damage. General Liability Insurance covers these lawsuits, paying for your attorney’s fees, witness fees, court costs, and any damages a judge may order you to pay. GL coverage can also help you pay for settlements, if you can resolve the dispute out of court.

Business Owner's Policy(BOP)

The advantage of a BOP is that it offers more coverage at lower premiums. A BOP is a packaged insurance policy that contains General Liability and Property Insurance. Insurance companies only sell BOPs to small businesses with lower risks, but most IT companies qualify. The Property Insurance in a BOP covers nearly any commercial property your business owns: computers, technology, network supplies, equipment, buildings / offices, etc. If this property is lost or damaged by fire, theft, vandalism, or covered weather events, your insurer will reimburse you for the damages.

Errors and Omissions Insurance / Professional Liability Insurance

Many IT contractors, freelancers, and Silicon Valley startups have to purchase E&O Insurance before they can work with a client. It's often required in IT contracts. Why is this policy so important? Say you make a mistake in your work. The client sues you, claiming you cost them tens of thousands of dollars. E&O Insurance can cover lawsuits exactly like this and those relates to other professional liabilities such as software testing errors, professional negligence, data breaches on client computers, and other disputes about your work. Because this coverage protects business owners even if a client makes an unfounded claim, an E&O policy is crucial for IT companies and developers.

Workers' Compensation Insurance

California requires employers to purchase Workers' Compensation Insurance (also called “Workers' Comp” or “Workman's Comp”) to cover their employees in case of a work injury or illness. If an employee falls down the stairs or develops a condition such as carpal tunnel, Workers' Comp covers their medical expenses and lost wages. Most policies also come with Employer's Liability Insurance, which covers your legal bills if your company is named in a Workman's Comp lawsuit. However, if your business doesn't have any employees other than yourself (or other corporate officers and executives), you aren't required to purchase this coverage. But as soon as you hire your first employee, you'll need Workers' Comp.

Cyber Liability Insurance

Most IT companies won't need Cyber Liability Insurance (commonly called “Cyber Risk Insurance” or “Data Breach Insurance”), because it only offers protection from a type of data breach less common among IT businesses: cyber attacks on your own network. IT companies generally are more concerned with attacks on their client's network (and E&O Insurance covers these lawsuits). However, some tech companies – web hosts, e-commerce companies, data analysts – might store a lot private data on their own networks. If that's the case with your business, you should consider Cyber Risk Insurance. If your company is hacked or its data is exposed, the insurance company covers the cost of credit monitoring services for people affected by the breach as well as a host of other identity-theft prevention expenses.

For a detailed quote on IT business insurance for Silicon Valley startup companies and contractors, call 1-800-668-7020 or submit an online insurance application.

Snapshot of IT Small-Business Owners in Silicon Valley

  • 66% of businesses owners in San Jose, Sunnyvale, and Santa Clara operate from their homes.
  • The average San Jose tech business makes $371,685 in annual revenue.
  • The average business in the Oakland-Fremont-San Francisco area subcontracts 40% of its annual work to third parties