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When to Buy IT Consultant Insurance

When to Buy IT Consultant Insurance

Friday, December 1, 2017/Categories: consultant-liability

While helping thousands of IT professionals over the last 20 years, insurance specialists at TechInsurance have often encountered the question: “At which point should I find IT consulting Insurance?"

As with many things related to insurance, there is not always a clear-cut answer, but an underlying theme is to start exploring your options early. Let's take a look at four instances that signal it's time to get covered:

When You Start Your Business

Opening your own business is exciting. Between hustling to round up clients and rushing to finish projects, your new liabilities as a business owner may be the last thing you're thinking about, but the day you start a business is the ideal time to get started on securing liability insurance. The longer you do business without coverage, the more you're at risk.

For example, you can be sued over your work months – or even years – after a job is over. Professional Liability Insurance may not cover you unless you had the policy in place at the start of the job.

When You Rent Commercial Space

If you are planning to rent office space from a commercial landlord, you might need insurance to sign the lease. Lease agreements often require:

  • General Liability Insurance. This policy can cover lawsuits over third-party injuries and property damage. Many landlords require you to have it to limit their own liability.
  • Property Insurance. This policy can help pay to replace your business's physical property when it's damaged or lost by fire, theft, windstorm, or vandalism.

Even if you're not required to have these policies, they are a smart investment in the future of your business. A third option is a Business Owner's Policy, which bundles General Liability and Property Insurance at a discounted rate.

Another important note: if you work from home, your homeowner's insurance might not offer any protection for claims related to your business. To get adequate coverage for third-party injuries, you may need a separate General Liability Insurance policy.

When You Land a Client (or Want to Land Clients)

Errors and Omissions Insurance and Cyber Liability Insurance show that you have the means to address professional mistakes and data breaches, which reassures clients that they can trust you.

"Eventually IT consultants are going to need liability insurance, including Cyber Liability Insurance, if they want to be competitive in the marketplace," says Nace Naumoski, an attorney focusing on insurance coverage and a partner at the law firm Stewart Bernstiel Rebar Smith. "More and more companies are requiring all of their vendors to have insurance, and the IT consultants who can show that they are being proactive about obtaining insurance will have a competitive advantage."

As Naumoski notes, "The fact that [IT consultants] obtained insurance means not only that they are serious about protecting their own business, but that they are also serious about protecting the business of their customers."

When You Hire an Employee or Contractor

When you become an employer, you may be required by state law to have Workers' Compensation Insurance. Some states require every employer to have it, while other states exempt very small businesses with few employees.

Usually, you don't have to carry Workers' Comp for your contractors because they aren't employees. However, make sure they have their own coverage for their employees before they start work on your behalf. 

Get a free quote with TechInsurance and consult with one of our specialists to learn more about the specific requirements in your state.

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