The 3 Liability Insurance Policies Every Web Business Should Have

When you run a home-based web business, you do most of your work alone, online, and from the comfort of your own pad. But just because you work from home doesn’t mean you don’t face business risks every day.

The act of opening a business and taking on work as a small IT business owner exposes you to the potential for a liability lawsuit if something goes wrong.

I Work From Home – What Could Possibly Go Wrong?

If your typical work day involves waking up, grabbing a coffee, and settling in on the couch with your laptop to remotely repair computer snafus, create code, or design websites, it’s hard to imagine that simply doing your job might land you in a courtroom. But it happens more often than you’d think.

Not to be a Debbie Downer, but there are numerous things that can go wrong for a typical home-based IT business:

  • A client or visitor could get injured. If you meet with clients in your home office, you could be liable if they’re injured or their property is damaged. So if you have a wonky front step and a client trips and falls, your business could be liable for paying her medical bills.
  • A project could go wrong. Software research advisory firm The Standish Group released a report [PDF] in 2013 that revealed that only 32 percent of all projects are delivered on time and on budget. Forty-four percent were late, over budget, or had other issues. The remaining 24 percent failed outright. That means almost one in four projects you are hired to work on could end up tanking.
  • There could be a miscommunication. While working on a client project, there’s always a chance that the client’s expectations for the finished project won’t align with reality. And if they aren’t particularly tech savvy, communication can be even trickier – easily leading to a misunderstanding and contract dispute.
  • A data breach could happen. If you are in any way responsible for maintaining the integrity of a client’s data, and they get hit with a breach, your business is going to take some heat. Kaspersky Labs, an antivirus software and Internet security provider, found in a recent study [PDF] that the average small-business data breach costs $38,000, with indirect recovery costs of an additional $8,000. If your client is impacted by a breach, you can be sure they’ll look to you to cough up some cash to deal with the aftermath.

Online Business Insurance: A Security Blanket for Your Home-Based IT Business

The best way to protect your business is with these three web business liability insurance policies:

1. General Liability Insurance:

“I generally suggest that businesses I work with carry at least General Liability Insurance,” says Adam Scavone (@adamscavone), an attorney at Scavone Law Firm.

Good advice, considering it can protect business owners against third-party personal injury and property damage claims, as well as advertising injuries.

2. Professional Liability Insurance:

Also known as technology Errors and Omissions Insurance, this policy has you covered if you make a mistake in rendering your professional services. “As an IT business, you need to realize what your risks are and look at all the things that can happen,” says Michael Carroll (@InsuringLawyer), president of Insuring Lawyer.

If you regularly outsource work to contractors, it’s also a good idea to ensure they have their own tech E&O policy. That way, if the contractor makes an error, their policy should be able to cover any resulting legal expenses.

3. Cyber Liability Insurance:

Cybercrime and data breaches are increasingly big potential threats for any small IT business. If a project you work on for a client results in customer data being stolen, you could be looking at a substantial lawsuit.

Lawyer Nace Naumoski (@nacenaumoski), partner at Stewart Bernstiel Rebar & Smith thinks every small business, especially IT businesses, may want to have Cyber Liability Insurance. No matter how your small IT business, you can still be responsible for a major data breach, he says.

Third-party Cyber Liability coverage is often included in a technology Errors & omissions Insurance policy. If it’s not, you should be able to add it as a separate endorsement.

Still not sure whether you need liability insurance? Read our blog post “When to Buy IT Consultant Insurance” to see when it might be a good idea for your business.