You've been working for the "man" for years and moonlighting as an IT freelancer on the side. You're tired of living a double life. You're an IT guru, not a spy! So you take the leap and start an IT consulting business.
But before you break out the champagne, you have some boxes to check – like buying tech business insurance. Without coverage, your fledgling IT business is vulnerable to lawsuits and losses. Let's take a look at the common insurance policies you may need.
1. General Liability Insurance
If you're like most small IT business owners, you'll probably buy General Liability Insurance first. That's because it covers some of the most common accidents that lead to lawsuits. Think of it as a shield that can protect your business if (or when) Murphy's Law strikes.
General Liability Insurance can help pay for legal expenses when you're on the hook for:
Third-party bodily injuries.
Third-party property damage.
Advertising mistakes (like libel or slander).
So say a client visits your office. You're still setting up shop, and they trip over a box, dropping their laptop and breaking their wrist in the process. General Liability coverage can help cover their medical bills and repair or replacement costs for the damaged laptop.
2. Errors & Omissions Insurance
Even if you're a next-level tech ninja, there will inevitably come a time when you mess up. It could be as simple as a missed line of code or as serious as deleting an entire server. No matter how minor or major the goof up, a client may sue.
Luckily, Errors & Omissions Insurance can help. It provides coverage if a client claims you…
Made a mistake.
Delivered a project late or incomplete.
Were somehow negligent.
Even if you didn't make a mistake, clients can still sue. But if you have E&O coverage, your insurance company, not you, can foot the legal costs.
For tips on reducing the chance of professional mistakes, read "5 Ways Technology Consultants Can Manage Their E&O Exposure."
3. Business Owner's Policy
If you own a business, you probably bought a lot of stuff to help you run your business, such as…
Fax machines (just kidding).
If there's a fire or someone steals your computers, who would pay? Unless you have Commercial Property Insurance, the answer is probably… you. That's because homeowner's insurance policies don't typically cover business property. This would leave any home-based business in the lurch if the worst happens. And if you rent an office, your landlord's policy covers the building, but not your damaged or lost personal business property.
That's why IT business owners often purchase a Business Owner's Policy. It combines General Liability Insurance and Commercial Property Insurance in one bundled package, typically at a cheaper price than if you purchased them separately.
4. Cyber Liability Insurance
One of the biggest liability issues many IT business owners face is the threat of data breaches and cyberattacks. If a client's computer systems and data and get hacked, you could face a serious lawsuit. If you are sued, third-party Cyber Liability Insurance can help cover your attorney fees and settlements or judgments.
You may need first-party Cyber Liability Insurance if your own computer system is hacked. This can help you pay for data breach cleanup costs if your customer's sensitive data is exposed. For more on the difference between the two types of cyber coverage, read "Third-Party Vs. First-Party Cyber Risk Insurance: Protect Your IT Firm Right."
5. Workers' Compensation Insurance
Once your business picks up steam and you hire some employees, you'll probably need Workers' Compensation Insurance, depending on where you live. Each states has its own Workers' Comp regulations, but most require this policy once you have even one employee. Check the laws in your state.
Workers' Comp can cover medical expenses and partial lost-wage reimbursement if employees are hurt on the job. Without this coverage, your employees could sue you over their work injuries, which can be pricey. Plus, if you live in a state that requires this coverage and you go without it, you could face additional fines and penalties (including jail time for serious offenses – yikes!).
Original article posted here
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