Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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IT business insurance

Owners of tech companies often wonder, “What should I know about IT business insurance?” The short answer is, a lot!

Find an insurance policy that meets your needs and saves you money. Compare business insurance quotes from several different insurance companies at once with our insurance quote comparison tool. Simply enter your zip code above!

Managing the Risks

Business owners must constantly evaluate the state of their business. While many owners focus just on the bottom line, it’s also important to look at other factors as well. Since IT often deals with sensitive client data, it’s imperative that owners stress honest and ethical behavior in their staff.

Unfortunately, even the most ethical company can experience theft (either employee or criminal), property damage, lawsuits or equipment breakdown. Taking the necessary steps to manage these risks up front can prevent costly losses in the future.

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Start With the Basics: General Types of Business Insurance

All businesses, including IT businesses, need basic coverage in place to protect it.

– Property and Casualty Insurance

The most basic of these is Property and Casualty Insurance, or P&C. The Property part of the coverage protects against loss or damage to the physical location of the business, including the contents. Should the building be damaged by fire,  business property insurance would cover replacement cost. Should the business be in possession of any client property at the time of loss, it would also be covered. The Casualty portion of the coverage covers losses due to theft by someone outside the business. P&C coverage is typically sold as a package.

– Liability Insurance

Liability insurance provides general protection against negligence on the part of the business or its employees. Injury incurred by a visitor to the business is covered under liability insurance. Specific liability insurance, such as Errors and Omissions and Fidelity Bonds (addressed later), should also be purchased to cover potential IT liability issues.

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– Commercial Vehicle Insurance

commercial vehicle insurance

If the business has company owned vehicles, commercial auto insurance should be purchased. Commercial auto coverage protects against damage to business vehicles as well as damage caused by others to company vehicles.

– Worker’s Compensation

All states require businesses to carry Workers’ Compensation (Workers’ Comp) insurance. Workers’ Comp covers any injury received by employees while on the job. Since how coverage is obtained varies by state, business owners should either work with a knowledgeable Workers’ Comp broker or contact their state’s Workers’ Compensation office.

– Business Interruption Insurance

When an event occurs that causes the company to shut down, owners worry about how to pay their bills and maintain their business. In the event of a natural disaster or other event, Business Interupption insurance provides replacement income allowing the business to continue to operate until essential equipment can be purchased and the building repaired or replaced.

All businesses want to retain their best employees, and IT businesses often have employees with specialized knowledge that can be difficult to replace should they retire or leave for a competitor. By providing Employee Benefits such as health, life and disability coverage, business owners can design compensation packages that are attractive to both current and future employees.

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Errors and Omissions or Professional Liability Insurance

This coverage is essential for the survival of any IT business. Any business that deals with client data must consider Professional Liability

errors and omissions insurance

insurance. Professional Liability is also known as Errors and Omissions (E&O) coverage. E&O protects IT businesses in the event of a loss of a client’s data, software or system failure. It also protects against claims of non-performance by the company.

Should a company be sued and the claim result in judgment against the business, E&O coverage will pay the judgment and court costs up to the policy limits. This can prevent the business from paying on a significant judgment that would otherwise cause the business to go bankrupt.

Why Should My Company Get Errors and Omissions Coverage?

IT businesses inherently deal highly sensitive client data whether that be financial, employee or information critical to the client’s business. E&O coverage protects an IT business should it lose client data or cause a system failure regardless of whether the loss or failure was intentional.

As technology continues to evolve, such as the advent of cloud computing and other sharing services, IT business law has not necessarily kept pace. E&O coverage can provide peace of mind to cover losses imposed by the courts.

What to Look For in Errors and Omissions Coverage

All E&O policies for IT business should cover the legal costs referenced above. Coverage should extend to those employees listed as contractors as well as regular employees (contract employees are those paid by 1099 or through an agency). IT firms that develop intellectual property, such as software or systems, may want to look into obtaining optional coverage for allegations of copyright infringement. Other coverage includes business personal injury (i.e., libel) and international coverage.

If an IT business uses contractors, they should be certain those contractors carry a personal E&O policy. Contractors are not considered “employees” as strictly defined by law since the employer does not withhold taxes on their behalf. While the E&O coverage should extend to contractors, it’s prudent business practice to require IT contractors to carry their own as well.

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Fidelity Bonds or Commercial Dishonesty Bonds

Many IT firms have clients in the financial or healthcare industries. Such industries deal with highly sensitive data and often worry about theft of cash or other data by companies that have access to their information. Fidelity Bonds are a type of coverage that is triggered when there is a claim of theft by an IT business employee or subcontractor while at a client site. The bond reimburses the client for theft up to a specified amount.

Stay Protected with IT Business Insurance

It’s vital that IT companies focus their resources on developing and maintaining products and services for their customers. By having solid IT business insurance in place, owners can concentrate on profits rather than property.

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