The Types of Liability Insurances That Are Essential for Information Technology Firms

In the economic scenario of the 21st century, every business needs information technology one way or another. Most companies rely on software for their day to day transactions these days. As an IT firm owner, you do your best to provide your clients with the best possible products and services. But sometimes things don’t go according to plan despite your best efforts. There might be bugs in the program that you did but foresee, or you might have a misunderstanding with the client. There are a thousand possible scenarios which can leave a client displeased, and result in a lawsuit against you.

There are other types of risks associated with running an IT firm as well. Your hardware might sustain damages in an accident or a natural disaster. A client visiting your office can trip on a loose wire and get injured. In all such situations, bills and costs of damages can pile up. Having the right policies can provide adequate liability insurance against claims made in such scenarios. These are some of the business liability insurances that you must have in your pocket.

General Liability Insurance

Bodily injury or property damage can occur regardless of whether you operate on your own or you have an office premise for business. For example, your employee visits your client’s office for scheduled maintenance and damages their server. The client can sue you for these damages and the business loss incurred as a result of these damages. Commercial general liability insurance can provide you coverage for these costs.

Professional Liability Insurance

Professional liability insurance is also called Errors and Omissions (E&O) and can provide coverage in case of a claim filed by a dissatisfied client. As we mentioned before, clients can be unhappy with your product or services for several reasons, such as:

• Errors or bugs in a program.
• Delays in product or service delivery.
• Ineffective or incomplete software.
• Infringement of intellectual property.
• Mismanagement or neglect of a project.
• Crashes in software or server.
• Data breaches or infringements.

Professional liability insurance policies are designed to provide you coverage if you or your firm faces such a lawsuit. Clients might sue you even if you were not at fault. For example, one of your former clients faces a beach in their data because they did follow adequate cybersecurity practices.

Yet they might sue you claiming that the breach occurred because your firm made a programming error in their security protocol. Even though you might be able to prove your innocence in the court of law, you will have to incur the legal costs initially.

Commercial Property Insurance

Property insurance will provide insurance coverage if your office premises get damaged due to violent activities or an accident. If your servers, computers, and other electronic equipment get damaged, the insurance covers the costs of replacing them. Property insurance will also provide coverage if your property gets destroyed by a natural disaster, such as earthquakes or hurricanes. Your landlord might require you to purchase property insurance as part of your lease or rent agreement. Many insurance companies often combine general liability insurance and property insurance into a single plan called a business owner’s insurance policy.

Workers’ Compensation

Workers’ compensation is a legal requirement of most American States and it mostly depends on the number of employees you have. Most American states require any business to purchase adequate workers’ compensation if they have more than 3-4 employees. These numbers vary between the States, so it is best to check with local authorities and your insurance provider. Workers’ compensation will cover the medical bills and loss of earnings for your employees if they get injured while at work.

There might be additional insurances that you might consider purchasing, depending on the location and size of your IT firm.

Commercial Auto Insurance

If you have business vehicles, you are required by the law to purchase commercial auto insurance. Commercial auto insurance will provide coverage for damage or theft of these vehicles.

Directors and Officers Insurance

If you have a large firm with a few directors or higher management positions, the insurance can provide coverage for their misconduct or errors.

Umbrella Insurance

Umbrella insurance is to ensure that you have a backup plan when your coverage falls short. For example, your general liability insurance might not be able to cover the medical bills of your client who got injured at your workplace. Umbrella insurance can cover the additional costs so that you don’t have to pay them. Check with your insurance provider the coverages before you purchase an umbrella insurance policy.

There are a few other business insurances that you might need, depending on the size and nature of your IT business. It is best to check with a reputable insurance advisor to understand your insurance coverage requirements. Different companies provide different options for insurance coverage. That’s why you should compare the options and choose your policies carefully.