How a Lack of Liability Insurance Could Cost Your Business Big Bucks
Gambling can be fun, like on a weekend trip to Las Vegas – as long as you don’t go too crazy and bet your life savings on that can’t-lose hand of poker.
But if you own a small IT business, one gamble you can’t afford to make is on lawsuit protection for your business. Without liability insurance coverage, though, gambling is exactly what you’re doing.
The Impact of Lawsuits on Small Businesses
A lawsuit can have a devastating effect on small businesses. Legal issues cost small businesses in the United States more than $100 billion each year, according to a U.S. Chamber of Commerce report.
Small businesses are also a frequent target of frivolous lawsuits (they’re more likely to settle a case for a smaller amount rather than spend thousands more tied up in litigation). As a result, small businesses pay about $35.6 billion out of pocket to settle claims each year, according to a National Federation for Independent Business article.
A report by the Court Statistics Project found that…
- The average premises liability lawsuit costs $54,000.
- A contract dispute suit will set most business owners back $91,000.
- A malpractice lawsuit, which can include professional negligence, averages at $122,000.
The issue for many small IT businesses isn’t if you are going to get sued, but…
- When your business will be sued.
- What type of lawsuit it will be.
- How much it will cost you.
The Rise of Cyber Crime
If you own a small IT business, another major risk is the potential for cybercrime. While your business may not be a target, your customers’ businesses might be, and if you are in any way involved with setting up security or otherwise charged with protecting their data, you could be found liable if they experience a data breach.
Symantec, a global leader in cyber security, recently released a study, which found that in 2015…
- Almost 3 in 4 websites were exposed to risk due to unpatched vulnerabilities.
- Cybercriminals launched more than 1 million online attacks.
- Ransomware attacks increased by 35 percent, with targets spreading beyond PCs to include Linux systems, Macs, and smartphones.
Cleanup costs from a data breach can get expensive. According to a study [PDF] by Kaspersky Labs, an antivirus software and Internet security provider, the average small business data breach costs $38,000, with indirect recovery costs running an additional $8,000.
4 IT Insurance Policies That Can Help Change Your Luck
The bad news: sooner or later, odds point to your IT business being hit with a lawsuit. The good news: you minimize the financial impact on your business with IT insurance.
Since IT is considered a fairly low-risk industry, coverage shouldn’t set you back too much. You may want to consider the following policies:
- General Liability Insurance can help cover your legal expenses if you are sued for third-party bodily injury, property damage, or advertising injury. It typically costs between $500 and $900 per year and can provide $1 million in coverage for each lawsuit, with up to $2 million in total annual coverage.
- Professional Liability Insurance protects your business against professional goofs, such as making a mistake or missing a deadline. The cost will depend on the size of your business, but as an example, if you’re a freelance IT consultant, a Professional Liability policy might fall between $1,000 and $1,500 per year.
- Cyber Liability Insurance can help pay for the cost of a data breach. If you own an IT business, look for third-party Cyber Liability coverage. It can pay for legal expenses if one of your clients suffers a breach and sues you. Third-party Cyber Liability is included in many technology Professional Liability Insurance policies, making it an even better deal.
- A Business Owner’s Policy, or BOP Insurance, saves money for low-risk businesses by offering General Liability and Property Insurance coverage bundled together in one policy.
If you need help choosing the right IT insurance policies, contact us and let our talented team of TechInsurance agents guide you.