4 Things You Didn't Know Business Insurance Could Cover
After years of working “for the man,” you’re finally living out your dream of owning a small IT services business. To protect what you’ve worked to build, you bought technology insurance policies – General Liability Insurance and Professional Liability Insurance (also known as Errors & Omissions Insurance). While both of those IT insurance policies offer rock-solid coverage for your IT business, they don’t cover all of your bases.
You might be leaving yourself open to unnecessary risk, depending on:
- The type of work you do.
- The clients you work with.
- Whether you have employees.
Don’t worry! There are many IT insurance policies available to supplement your business protection plan. Let’s take a look at four types of IT insurance that could be just the ticket for your small IT business.
1. Workers’ Compensation Insurance
You’re growing your IT empire and you’ve started hiring employees – which is great! Unfortunately, one of your programmers gets into a car accident on her way to a client’s office. She’s going to be okay, but she suffered serious injuries in the crash. Because the accident happened while performing work for the company, it’s time for you to foot the bill.
If you have Workers’ Compensation Insurance, it’s as simple as filing a claim. If you don’t, you could be held personally responsible for her medical bills.
Michael Carroll (@InsuringLawyer),
highly recommends investing in Workers’ Comp.
“[Workers’ Compensation Insurance] is based on payroll and number of employees. So for example, if you’re a small IT company and have one employee making $40,000 a year, you might be talking $500 to $600 a year for a million dollars of protection,” Carroll explains. “That to me is a steal.”
Not only is it a good deal, it’s required by most states. In addition to employee medical bills, Workers’ Compensation may pay for:
- The cost of physical rehabilitation.
- Lost wages.
- Death benefits for the family if the employee dies.
Even if you only hire subcontractors, your state may still view them as employees when it comes to Workers’ Compensation.
“The problem is just because I say you are an independent contractor, and you say you are an independent contractor, doesn’t mean the government is going to agree,” says
Nina Kaufman (@NinaKaufman),
business attorney and strategist for
Ask the Business Lawyer.
Every state has different Workers’ Compensation requirements. Choose your state from the menu below to read up on the requirements where you live. Costs vary, but the following are ballpark figures of what you might pay per year:
- One-person IT business / IT contractors: $641 to $1,110.
- Small IT business (2 to 7 employees): $2,441.
- Large IT business (15 to 60 employees): $11,000.
Select a state:
2. Business Property Insurance
If you have a physical space where you do your day-to-day work (and unless you live in the Matrix, you probably do), you run the risk of your property being damaged in some way. What if a violent wind storm knocked a tree onto your office, ripping a hole in the roof? Now you’ve got a ruined roof and your electronic equipment is exposed to the elements.
General Liability Insurance is a superstar when it comes to paying for third-party damage, but if you suffer first-party property damages you’re on your own – unless you have Business Property Insurance, which covers…
- Damage caused by fire and weather events, like wind or hail.
- Theft, in case some no-goodniks break in and make off with your stuff.
- Vandalism, if a rival IT professional “tags” your office.
Even better, when you work in a low-risk industry like IT, you have a good chance of being eligible for a Business Owner’s Policy, which bundles General Liability and Business Property Insurance together as a package deal, saving you money.
3. Cyber Liability Insurance
If your IT business is responsible for installing firewalls, developing the backend of an e-commerce website, or in any way held accountable for securing a client’s data, you are exposed to the potential risk of a data breach lawsuit. That’s where Cyber Liability Insurance comes in.
Bob Zeglarski (@BizLawyer),
Cutwater Law, PLLC
(@CutwaterLaw), says tech companies should consider carrying Cyber Liability Insurance to cover losses for incidents like…
- Data breaches.
- Business interruption.
- Network damage.
Additionally, most policies will cover “data destruction, if your data is stolen, if you’re being hacked, if there’s extortion involved; denial of service attacks, and crisis management activity that you have to implement in connection with a privacy breach or loss of personal customer information,” Zeglarski says.
If you have Professional Liability Insurance, you may already have Cyber Liability Insurance, depending on your policy. Every policy is different, and as
Brian Dusek (@brianjdusek),
McCullough, Campbell & Lane LLP, explains,
some insurers treat a cyber liability issue as a standard Professional Liability claim, while others require a separate endorsement to cover cyber liability.
In the case of Cyber Liability Insurance, it’s really a matter of looking under the hood of your Professional Liability Insurance policy to make sure it has all the features you want and adding an endorsement that will give you extra coverage, if needed.
4. Commercial Umbrella Insurance
What happens if, say, a client suffers an injury at your office so serious that the legal fees exceed the coverage limits of your General Liability policy? That’s where a Commercial Umbrella Insurance policy can help.
Commercial Umbrella Insurance, or Excess Liability, policies are designed to help small businesses when those worst-case scenarios occur by offering an additional boost of liability insurance, in increments of $1,000,000, that exceed the amounts provided by:
Let’s revisit that client who suffers an injury at your office. Maybe he slips and hits his head so hard that he needs extensive rehabilitation. Or maybe the two of you are riding together in your car on the way to a meeting with another colleague and you get into a serious car accident. If the judgment against your business exceeds your other policy limits, Commercial Umbrella can typically make up the difference.
Important note: Commercial Umbrella Insurance does not cover Professional Liability claims. If your client sues you for a project they think you goofed on, it won’t be covered by your Excess Liability policy.