Do IT contractors need General Liability Insurance? Well, “need” is a funny word – and not really helpful when talking about IT contractors and their General Liability Insurance.
There is no law that requires you to have General Liability Insurance. But a client contract or office lease might require you to have this insurance. You don’t technically need to sign that client contract, but you might really, really want to. That is how you make a living, after all. And it’s often the big clients that have these insurance requirements in their contracts.
Business insurance is a business decision. And like other businesses decisions, it's about risk management, cost, and benefit. Let's examine GL Insurance from that perspective.
General Liability Insurance Basics and Benefits
General Liability Insurance may cover common third-party lawsuits that can bankrupt small businesses, including suits over…
- Bodily injury.
- Property damage.
- Reputational injury.
Say you're visiting a client's office when you trip over a power cord and pull a client's laptop to the ground, smashing it into a dozen pieces. The client could sue you for damaging their property and the expense the business incurs for lost data. When you add in your legal costs, you could be looking at a hefty bill.
General Liability Insurance can help shield you from these costs, paying for attorney fees, court costs, and settlements or judgments.
Why Clients Might Require You to Have GL Insurance
Clients may require their IT contractors to have General Liability Insurance because it…
- Demonstrates you're financially sound. Clients want to know that if a general liability lawsuit is filed against their contractor, the contractor has the financial protection to survive the lawsuit. GL Insurance shows your business is financially stable and has the resources to survive legal shocks.
- Can protect your clients in the event you damage their property, harm their reputation, or cause an injury. If something goes wrong and a client sues you for a general liability, you could be on the hook for the bill. If you damage a client's laptop, servers, or other property, they'll want to know you've got GL to help cover the damages.
- Can cover you if a client's insurance won't. Maybe you work as a long-term contractor for a client. It's almost like you're an employee, but you're just working on a single project. If that's the case, don't assume the client's insurance covers you. You have your own risks. Your clients know this and, often, they want you to have your own coverage.
General Liability Insurance Cost for IT Contractors
While costs vary from business to business, the typical tech consultant pays around $400 to $500 in annual premiums for General Liability Insurance, or roughly $40 per month. This makes it clear that GL Insurance is an affordable way to protect your business from costly lawsuits.
This information comes from our insurance cost estimates page. That page also includes cost estimates for larger tech companies.
General Liability Insurance Doesn't Cover Everything
It's important to know what General Liability Insurance doesn't cover. GL Insurance won't cover lawsuits over your professional responsibilities. If a client claims you made a mistake, Professional Liability Insurance (aka Errors and Omissions Insurance) may pay for the lawsuit. But GL won't.
Professional Liability Insurance is another common IT contractor insurance policy, but it's important not to get these policies confused. Be sure to check out our the post "General Liability vs. Professional Liability Insurance for IT Consultants" for more on what makes each different.