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Why do subcontractors need insurance?

An IT subcontractor can be sued and held liable for damages, just like other contractors and small businesses. Having insurance protection in place is critical.

When can subcontractors need insurance?

When hired, IT subcontractors are typically not covered under their employer's insurance policies. Since they are not employees, the employer is not required to provide for or protect them in the same way. Instead, subcontractors must purchase their own small business insurance.

As a tech professional, it’s essential to protect against risk with the proper insurance policies. Subcontractors are not shielded from liability by their employers. Instead, working as a subcontractor can expose you to new chain liability risks if the business or contractor you work for attempts to shift blame when named in a lawsuit.

Plus, having a certificate of liability insurance can give you an advantage when bidding on projects. Because the contractor who hires you could potentially be held liable for your actions, many prefer to hire subcontractors who carry their own coverage.

Business insurance protects subcontractors from unexpected lawsuits, workplace accidents, and property damage. The specific insurance policies you need depend on the specialized IT work you do, the clients you work with, and other exposures to risk.

Subcontractor insurance requirements

Each state and industry has different laws on what insurance subcontractors are required to carry. But many companies won’t work with subcontractors unless they carry their own insurance.

So while it may not be required by state law, holding a policy can make you more appealing to future employers. Most will expect that you at least have general liability insurance.

Your employer will likely include insurance requirements in their contract. They may ask to see proof of coverage, typically in the form of a certificate of liability insurance, and may require that you name their company as an additional insured on your liability insurance policy.

Not sure which policy you need? Talk to an insurance agent at TechInsurance today to find out what’s required.

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Types of IT subcontractor insurance

Independent contractors should consider carrying the following policies:

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Errors and omissions insurance (E&O)

Also called professional liability insurance, errors and omissions insurance protects you if you make an error on the job or fail to deliver a promised service. Mistakes happen, but they sometimes have financial repercussions in the form of a costly court battle.

If the company you are working for is sued, you are not protected under their policy and need to carry your own coverage. It’s not uncommon for employers to require you to carry an E&O policy. Your employer might ask for it in your contract and request proof of coverage.

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General liability insurance

General liability insurance is a type of subcontractor liability insurance that protects against lawsuits over third-party bodily injuries and client property damage. Many small companies won’t work with subcontractors unless they carry their own general liability insurance.

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Business owner's policy (BOP)

A business owner’s policy combines general liability insurance and commercial property insurance, usually at a discount. General liability insurance does not protect your own business property, just the property of a client. Having both is recommended for more complete protection against risk.

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Workers' compensation insurance

Your employer may require that you carry insurance to protect against on-the-job injuries. If you are moving heavy equipment or doing any laborious work, it’s a good idea to get workers’ comp coverage to guard against potential medical expenses. If you don’t have coverage, your employer may add you to their policy, but pass the costs on to you as part of your agreement.

Reasons why you need subcontractor insurance coverage

IT contractors face a number of common risks. Here are several examples of risks you might encounter and the subcontractor insurance policies that can help:

Destroyed client computer. An IT consultant is working at an employer’s office performing usability tests for a a new third-party app. He bumps into a desk, and a monitor and tower fall to the floor and break. Fortunately, the IT consultant has general liability insurance and his policy covers the resulting costs.

Smoke and water damage. A fire in a large office building damages essential networking equipment belonging to a web hosting subcontractor. While the landlord's insurance takes care of physical damage to the building, the subcontractor turns to his business owner's policy (BOP), which includes commercial property insurance, to replace his belongings.

Bodily injury. While installing a new server, a networking subcontractor drops heavy equipment on her foot. She's seriously hurt, but her workers’ comp insurance pays for her medical bills, including physical rehabilitation.

Professional oversight. A contracted cybersecurity expert performs a security analysis for an employer, but fails to notice a weakness that eventually results in a data breach. Her technology errors and omissions insurance, which includes cyber liability coverage, covers the cost of the lawsuit.

Get free insurance quotes and compare policies

TechInsurance helps IT and tech business owners compare business insurance quotes with one easy online application. Fill out our free application today to find the right policy at the most affordable price for your business. Our insurance experts are happy to discuss your options and help you find the right policy for your unique needs and situation.

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