Last week you learned about "3 Things to Consider Before
Starting an IT Business," namely when to take the plunge and the importance of marketing. Now let's shift our focus to how IT business
insurance can help protect the company you are working so hard to build.
If you own a tech and IT business, these
are the six policies you may most likely need.
1. General Liability Insurance
Purchasing a General Liability Insurance policy is kind of a no-brainer for most IT business owners. In fact, it's usually the first policy any business owner buys. That's because it covers common
things that might go wrong:
- Third-party bodily injuries.
- Third-party property damage.
- Advertising injuries, including libel and slander.
That means if a deliveryman slips and falls on your front step, or you accidentally drop and break a client's laptop, your General Liability
Insurance can pick up the tab.
2. Errors & Omissions Insurance
If you're like most IT business owners, the second policy you'll buy is Errors & Omissions
Insurance. The coverage provided by E&O will have your back if an angry client thinks you screwed up and decides to sue. Think of it as
insurance for your professional expertise. It can help cover the costs of a lawsuit if a client claims that you:
- Were late on a task.
- Didn't complete the agreed-upon work.
- Delivered incomplete or incorrect projects.
- Were somehow negligent in your services.
Basically, if a client feels you did not deliver as promised, E&O Insurance is the policy you can rely on to pay for your legal fees. In
fact, many clients won't do business with you unless you have this coverage. That's because they know if you don't do the work they hired you to
complete, they can recoup their losses.
3. Cyber Liability Insurance
Cyber Liability Insurance is becoming an important policy for small-business owners. That's because
a data breach costs small businesses an average of $36,000 to $50,000 in recovery expenses, as reported by
financial services company First Data. The report also found that 90 percent of data breaches impact small businesses.
IT business owners are especially vulnerable to the effects of a data breach. That's because in addition the potential threat their own
business faces, they could also be on the hook for customers' data breaches. If you are responsible for protecting a customer's data and they get
hacked, you can be held responsible for the fallout.
Third-party cyber liability coverage is usually included in an IT E&O policy. This can cover legal expenses when you’re sued over a
customer’s breach that you failed to prevent. You may also want to purchase a first-party Cyber Insurance policy to cover a breach at your
4. Business Owner's Policy
A Business Owner's Policy can help you save money on essential coverage. It combines two different
policies – General Liability Insurance and Commercial Property Insurance – in one
convenient, discounted package.
Commercial Property Insurance protects the physical gear you need to run your business, such as:
- Office furniture.
If your business property is stolen or damaged in a covered event, your policy can cover the costs to repair or replace your stuff.
5. Worker's Compensation Insurance
When you launched your business, it may have just been you in the trenches. But once you can't do it all yourself anymore, it may be time to
hire some help.
Most states require you to purchase Workers' Compensation Insurance once you have employees.
This policy can pay for an employee's medical bills if they are hurt on the job. The rules regarding Workers' Comp are decided at the state
level, so check on the laws in your state.
6. Commercial Auto Insurance
Commercial Auto Insurance can come in handy even if you only have a personal vehicle. If you use your own car
for company business, like driving to client meetings, your personal auto policy may not cover those trips or the accidents that happen during
A Commercial Auto policy can cover both company-owned vehicles and personal vehicles used for work purposes. It can help pay for:
- Medical expenses for anyone injured in an accident.
- Third-party property damage.
- Legal expenses if your business is sued over an accident.
Curious about the policies your fellow IT professionals choose? Check out our TechInsurance Market Index
report, which provides an analysis of the policies other IT business owners buy.