Learn about technology insurance for IT companies and consultants. This coverage protects your tech business from data breaches, software errors, and malfunctioning products that can lead to very expensive, and time-consuming litigation.
Technology Insurance For IT Companies And Consultants
Google began as a small company back in the early 90s, and today they are one of the largest technology and information companies the world has ever seen. If you have just began a tech-startup company, then this is the levels you want to reach – and to do this, you’re going to need to be insured against the risks that come with the territory.
Yes, Google is insured – and if they weren’t, then there would likely have been no Google today: They would have been sunk by claims early on.
Obviously, Google is still around. If you own a tech-startup, then you should familiarize yourself with what it takes to insure and run a tech-startup early on if you want to be around in ten or more years as a company. Here’s more about why your technology startup company needs insurance – and just what kind of technology insurance for IT companies and consultants you might need to purchase.
IT Startup Company Statistics
You should know that it’s estimated that around 75% of venture-capital start-ups are bound to fail right out of the door. This is for a variety of reasons, including the business taking damage that the owners didn’t anticipate – or didn’t adequately insure for. This can sink a business immediately, especially when you are still trying to establish yourself in the industry.
Can your tech business handle to take the impact of a claim within the first six months to three years of it starting? Would you be able to get back on your feet? If you don’t have insurance, your answer is statistically ‘NO’.
The Risks To An IT Or Tech Startup
Every single industry has its risks: The risks for a baker will be different to a the risks for a company that delivers cargo on the roads in the middle of New York City traffic. You should know that your risks will also be different when you are running an IT or tech start-up – of course, you rely on your technology to work for you. Here’s some of what could go wrong:
Cybercrime – Cybercrime is more common than you think, and you are at an increased risk as an IT or tech start-up company. Cybercrime cost the US government $28 billion in costs to up cyber security – and this is an old statistic by tech standards, measured back in 2016. Can you imagine how much it is now?
Cybercrime has a broad definition, and it can include the compromising of sensitive digital data, or it can mean a hack that costs the company thousands of dollars in repairs. Cybercrime comes in many forms, which increases the likelihood that your company will be affected during its time. Can you afford to skip out on being insured when you know what the risks are?
Cybercrime can also happen within the ranks of the company – this means that it comes from the inside, and parties can easily claim for damages. Third-party claims can also arise from cases of cybercrime where others were affected by the initial event – and this can cost your business two of its most valuable commodities: Money and time.
Intellectual Property in Business – Tech companies innovate. That’s why you’re here, and that’s what you like doing – it’s what you’re good at. You should know that your intellectual property – including copyrights and patents – are properly protected. Disputes arise easily, and if you aren’t protected by your insurance then you are an open target – and an intellectual property damages claim is very serious; it can sink your company straight down into bankruptcy.
Insurance Against Risks – There are many other risks which can affect your tech startup over time: For one, what would you do if someone was injured on your business premises and decided to claim for damages and losses arising from the event? Your insurance should be able to cover your damages and their medical costs – and your business won’t feel the pain. And, if you aren’t insured, then, well…
Types Of Tech Insurance
You need technology insurance and that’s it. Right? Wrong. There are several types of insurance that your tech start-up could be benefiting from. Here’s a rundown of the basics and just what they mean for your business:
Errors & Omissions Insurance: Also called E&O insurance or professional liability, this protects you against the damages or losses arising from anyone’s omission or error or negligence when providing advice to another – as IT companies often do. If the customized software is essential to the business’s operation or used to provide safety services, the errors and omission exposure will be higher as there may be long-term consequences.
Following are some real life example of professional liability claims that tech companies face:
- Dissatisfied Client: You are an tech consultant hired to review your client’s website and network security in order to find weaknesses and correct them. A few months after the project is done, your client’s website gets hacked and they lose a lot of revenue from the site being down for 3 days. Your client accuses you of faulty work and sues you for the lost revenue. Professional liability insurance could protect you against claims of negligence and pay expensive legal defense fees – even if you haven’t made a mistake and the breach wasn’t your fault.
- Faulty Backup: An IT consultant was contracted to backup a client’s business records, but the external hard drive being used fails – causing a data loss. The client could make a claim for using improper procedures, causing failure to deliver the backup services promised. E&O insurance could protect IT consultants if they are sued for a situation like this.
Commercial General Liability: General liability protects your IT company from third party claims of bodily injury or property damage. For example, if a client was at your office and tripped over a cord and hurt themselves. But this exposure is minimal since most client contact is done electronically or by mail. Off-premises exposures arise from sales visits, training sessions, and installation of software or hardware at the customer’s premises.
That being said, there should be policies and training regarding acceptable off-premises behavior. If the developer works on the client’s computer, the client’s property could be damaged, either the actual hardware or by corrupting code on the existing software. Personal injury exposures arise from breach of confidentiality as employees dealing with clients have access to their records.
Workers Compensation: Workers comp covers your business in the event of a claim where, for example, a worker needs to be compensated for their medical costs due to an on-the-job injury. Exposures are limited to that of an office, although there may be significant off-site work. As work is done on computers, potential injuries include eyestrain, neck strain, carpal tunnel syndrome, and similar cumulative trauma injuries that can be addressed through ergonomically designed workstations. Back sprains and strains can result from lifting and other material handling if there is any moving of computers or related equipment.
Cyber Liability: Cyber liability insurance, also known as data breach, should be an integral be part of your insurance program. In short, cyber liability insurance covers you against any hacks, breaches of information or claims that have to do with the loss or damage of private and/or confidential electronic data.
Commercial Property: Business property exposures for IT companies consist of an office operation, as well as any incidental storage and areas for service work on computers. Ignition sources include extensive electrical wiring to support computers and servers, heating and air conditioning systems, wear, and overheating of equipment. Fire, smoke, and water can cause significant damage to equipment. Fire protection should consist of chemical applications instead of water.
Although computer equipment can be included as part of the business personal property coverage, more complete protection is available under a computer or Electronic Data Processing (EDP) policy. A detailed emergency plan should be in place since downtime is not an option. Extra expense coverage is needed more than business income due to contract deadline dates and should be purchased as a part of the EDP policy.
The concentration of electronic equipment may be targeted by thieves. Appropriate security controls should be taken including physical barriers to prevent access to the premises after hours and an alarm system that reports directly to a central station or the police department.
Commercial Auto: Business auto exposure may be limited to hired and non-owned. There will likely be extensive off-premises work by sales representatives, programmers, and technicians. The developer may have a fleet of private passenger vehicles, require that employees use their own vehicles, or may use rental vehicles.
If vehicles are provided to employees, there should be written procedures in place regarding personal use by employees and their family members. All drivers must have appropriate licenses and acceptable MVRs. Vehicles must be maintained and records kept in a central location.
Commercial Crime Insurance: Crime exposure is from employee dishonesty and computer fraud. Developers may have access to private financial information of their clients, especially for billing purposes, and represent a target item for identity theft. Hazards increase in the absence of proper background checks and monitoring of the insured’s workers who may have such access.
Business Owners Policy (BOP): A Business owners policy combines two different types of insurance policies – general liability and business or commercial property insurance into a packaged policy. BOP’s also included a lot of other useful coverages. This protects both the business and the property, and makes it a popular form of insurance for many small businesses – including your tech start-up.
Technology Insurance For IT Companies And Consultants – The Bottom Line
We hope this article on technology insurance for IT companies and consultants has been informative. The minimum recommended coverage for tech companies should include: Business Personal Property, Business Income with Extra Expense, Equipment Breakdown, Computer Fraud, Employee Dishonesty, Accounts Receivable, Computers, Valuable Papers and Records, General Liability, Employee Benefits Liability, Errors and Omissions Liability, Professional Liability, Umbrella Liability, Hired and Non-Owned Auto Liability and Workers Compensation. Insurance for technology companies, technology insurance company, technology insurance company workers compensation, tech insurance, business insurance usa and hiscox business insurance.