IT Insurance: Cost, Coverage & Providers

IT insurance is a collection of insurance coverages that protect against third-party liability claims for consultants and businesses focused on delivering technology, computer, or IT services. The two main tech insurance coverage types are professional liability and general liability insurance. The cost of IT insurance ranges between $1,100 and $2,000 per year.

Getting the best solution for your IT business requires a business insurance provider who doesn’t just have the policies but works with small business owners to erase insurance-speak. The Hartford has a team of experts to help you decipher what your exact technology insurance needs are, and they’ll help you get covered without overpaying. Get your free, no obligation quote in minutes.

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IT Insurance Providers

Like any small business insurance company, tech insurance providers must be able to address the ever-changing risks IT companies face. While a solid general liability policy is essential for any IT company, every tech provider should have professional liability coverage available for different types of risks, including server creation, tech infrastructure, and security measures.

Top IT Insurance Providers

Here are five of the top providers to consider for all IT insurance needs:

The Hartford

The Hartford is a large insurance provider that caters to the needs of small business owners with one of the most comprehensive business owner’s policies (BOP) on the market that includes general liability, property insurance, and business interruption coverage. While The Hartford is well-known for its BOP, it has standalone policies to better serve IT business owners of various sizes and risk.

The Hartford is the right choice for IT companies exposed to claims where websites go down due to hacks, connectivity problems, and online content libel issues. The Hartford also has specialized coverage for computer system restoration for IT firms targeted by malware or that experience systems failure.

Embroker

Embroker is a hybrid insurance provider of specialty insurance products that brokers out other more generalized products. Embroker specializes in tech and startups, and has developed the first IT professional liability insurance product that includes cyber liability, making the coverage comprehensive and affordable.

Embroker is the right choice for IT firms that provide software as a service (SaaS) services to small and mid-sized business owners. Their comprehensive tech errors and omissions (E&O) policy covers the gaps for developers who build both software and infrastructure solutions that are prime targets for cyber crimes and attacks.

Hiscox

Hiscox is an insurance carrier that specifically focuses on small business needs, developing big business solutions at a price small businesses can afford. Hiscox offers most small business policies, including general liability, business owner’s policies (BOPs), and professional liability. Many IT businesses can bundle tech errors and omissions (E&O) with cyber liability through Hiscox to prevent gaps in cyber coverage.

Hiscox is the right choice for IT consultants who don’t have employees and don’t perform coding or infrastructure work personally. As consultants, the need for professional protection is critical because everything the consultant does is regarding advice and oversight.

Travelers

Travelers has a long history of providing insurance solutions to businesses, including the tech industry. From standalone general liability policies to bundled tech coverage through their proprietary CyberFirst program, their insurance products for small business owners are customized to fit their unique needs.

Travelers is the right choice for IT firms building internal networks and providing security solutions for companies of all sizes. This insurance provider also takes the extra step to advise clients on international risks such as kidnapping and ransom, and offers specialized policies for the IT firm with employees traveling the globe.

CoverWallet

CoverWallet is an online insurance broker that helps small business owners shop for insurance policies. As a broker, CoverWallet has access to many top-rated insurance providers, eliminating the need for small business owners to get quotes from multiple agents. CoverWallet does it all for the small business owner in one simple online application.

CoverWallet is the right choice for IT firms that have higher-than-average data protection risk. Whether the IT firm or their clients are a target for cyber crimes, CoverWallet is able to source the right insurance carrier that can properly cover the risk for the best possible price.

How IT Insurance Works

IT insurance is designed to pay for losses defined in each policy. General liability covers third-party claims not related to rendered services (e.g., slip-and-fall accidents), while professional liability pays claims that professional services were negligent. One major gap IT professionals find is not having cyber liability insurance, thinking it is automatically covered in professional liability.

It is paramount that IT professionals understand that there is not one all-encompassing policy for IT risks. They need to evaluate their risks and then work with an agent to find the policies that cover them.

Who Needs IT Insurance

As an IT professional, whether you’re an independent consultant or a firm owner with employees, you have exposures that need protection. While there are no state or federal small business insurance requirements that demand an IT businesses get insurance, coverage does make you more marketable to clients who want to know they are working with professionals.

The list of those who need IT insurance include:

• Website developers
• IT consultants
• Hardware installation experts
• Application service providers
• Database administrators
• Software developers
• System designers
• Integration specialists
• Programmers and coding experts
• Computer consultants

If you are an IT professional contracting with government agencies and major corporations, you will most likely need to provide a certificate of insurance (COI) to the hiring entity to finalize your contract. Most contract work requires $1 million in liability coverage that names the entity as an “additional insured.”

Risk Exposures Tech Insurance Needs to Cover

Assessing your risk is the first step in determining which tech insurance policies you need and how much coverage is required. While an insurance agent can help, every small business owner should learn to assess the exposures that could financially harm the company.

Risk exposures to help determine which types of IT insurance you need include:

• Interactions with non-employees: Third-party claims can be slip-and-falls or accidentally spilling coffee on a client’s server, leading to bodily injury or property damage, respectively.
• Business assets: Tools of the trade for IT professionals can be expensive and include computer hardware, software, books, installation tools, and materials. Furniture and office necessities are also considered business assets.
• Financial harm to a client: Professional errors might include a website migration error that leads to a client losing sales after their site is down for hours.
• Data breach and cyber risks: Whether the data breach is in the IT professional’s own database or their client’s, exposed records are a major risk for in the tech industry.
• Employees: Most states require workers’ compensation to pay for injuries and lost wages to employees hurt on the job; more employees increase the risk of accusations and claims.
• International exposure: While most insurance companies offer worldwide coverage for U.S.-based companies, many do not insure companies if a large percentage of revenues come from an international office.
• Amount of personal data stored: The more protected personal information (PPI) you maintain, the higher your premium typically is because there is more risk for data breach losses.

Knowing your unique mix of these risk exposures helps you prioritize the IT insurance policies your business needs. Professional liability and cyber liability are potentially the two most important policies because the claims they cover are often the most expensive.

Common Types of IT Insurance

At the very minimum, IT firms should have professional liability and cyber liability. The reality is that one claim from a large client can cost hundreds of thousands of dollars in regulatory fees alone. Adding a business owner’s policy (BOP) is a cost-effective way to cover most standard business risks. BOPs combine general liability, business property, and business interruption insurance into one policy.

Most Common Types of IT Insurance

Professional Liability Insurance

IT companies need a specialized professional liability insurance policy designed to work with the ever-changing risks in the tech field. Sometimes called tech errors and omissions or tech E&O, professional liability helps cover the costs of liability claims customers make against your technology business for damage caused by your mistakes or negligence.

For example, if your client’s server crashes due to your negligence, causing them to lose data and valuable work time, they may sue you for damages. Your E&O insurance can help cover your legal costs. Even if you are not responsible for the crash, your insurance typically pays the legal defense and any settlement, if necessary.

Commercial General Liability

Commercial general liability insurance covers non-employee bodily injury, property damage, and related legal costs. General liability can also help cover certain claims of slander and libel against your technology business. However, general liability does not cover liability claims directly arising from the services you provide.

For example, let’s say you are working on location at your client’s office. While working, you accidentally bump into an expensive piece of art and it smashes into pieces on the ground. Your general liability policy covers the cost of the damage.

Commercial Property Insurance

If you have an IT firm that works out of one primary location, you need commercial property insurance to cover the building if you own it plus other physical assets, such as computers, tools, equipment, and office furniture. This coverage protects against losses due to common perils, such as fire, theft, vandalism, and extreme weather. Most IT firms add commercial property insurance to a BOP rather than buying standalone coverage.

For example, theft is a top risk exposure for small businesses, and your gear is not only expensive but crucial to the ongoing success of your work. Commercial property insurance helps cover the cost of replacing items stolen from your premises.

Cyber Liability & Data Breach Insurance

Cyber liability insurance covers losses resulting from cyberattacks or data breaches, and this coverage is needed in addition to professional liability insurance. It covers both first-party issues for an IT firm that falls victim to a cyberattack and covers breaches in servers and systems created by the company for clients. It works hand-in-hand with tech E&O to fill a coverage gap of client lawsuits for systems failure.

Additional Types of Tech Insurance

Depending upon the size of your IT firm, you may need additional policies on top of the most common IT insurance coverage types. Having employees usually requires workers’ compensation, while increasing liability coverage on multiple policies is often cost-effectively done with an umbrella policy.

Here are two additional insurance policies IT businesses may need:

1. Workers’ Compensation Insurance

For IT consulting firms with employees, workers’ compensation is required coverage in all states except Texas. Workers’ compensation insurance provides benefits to your employees in the event of work-related injuries or illnesses. Premiums for workers’ compensation for most IT firms depend on payroll costs and the exact nature of work. Someone running cable in a building will pay more than someone sitting at a computer coding all day.

For example, if an employee has a light or ceiling tile fall on him while installing networking cable and it knocks him off of his ladder, workers’ compensation insurance can cover medical bills, wages from lost work time, and more.

2. Umbrella Insurance

Commercial umbrella insurance extends coverage on certain liability insurance policies when their limits have been surpassed. For example, if your IT firm has a $1.2 million general liability claim and your policy only covers $1 million, your umbrella coverage can pay the remaining $200,000 toward the claim.

Policies work with general liability, employee liability, workers’ compensation, and cyber liability coverage and are usually the best way to increase liability limits on multiple policies for the lowest rates. It’s important to note that umbrella insurance can’t be applied toward your professional liability (E&O) insurance.

Tech E&O vs Cyber Liability

Errors and omissions insurance (aka professional liability) works differently for tech companies than it does in other industries. The distinctions are important for the IT professional to understand so he is adequately protected. Tech E&O covers the business’ specific services and contractual obligations but doesn’t cover lawsuits by clients resulting from their cyber data breaches. For that, you also need cyber liability insurance.

Let’s consider a couple of scenarios for an IT company that developed and installed an internal network for an investment firm. If the internal network fails during trading hours, the investment firm could lose hundreds of thousands of dollars in transactions. This is not a cyberattack and no data was breached; the server simply couldn’t be accessed for the day. As a result, this is a professional liability, or tech E&O claim.

In a different scenario, the IT company sets up the investment firm’s firewall, which is then breached. Now the investment firm is paying a ransom and fines for exposed records while also dealing with public relations issues for not having properly secured client data. While it may be a result of a professional error by the IT company, the scenario is covered by cyber liability insurance. Without a cyber liability policy, only the work to create the firewall is covered and not the resulting financial losses.

IT Business Insurance Cost

Annual IT insurance costs range from $1,100 to $2,000. The cost of tech insurance depends primarily upon the types and number of policies needed coupled with revenues and type of data maintained. Most small business technology firms should maintain professional liability and commercial general liability at the very least.

Tech Insurance Costs by Policy

A business owner’s policy is a cost-effective policy that combines general liability with commercial property insurance. All other policies may be bundled for convenience and discounts in some cases, but are generally sold as standalone policies.

Tips on Applying for IT Insurance

With so many caveats to consider when buying IT insurance and protecting both your business and your customers, you need to do some homework before making your final insurance selection. Policies can be adjusted at any time, but you don’t want to be left wishing you had more coverage during a claim.

Here are four tips when applying for IT insurance:

1. Confirm Coverages in All Policies

Because IT insurance is a mix of several types of insurance policies, buying only one policy could leave a company with gaps. If you are not getting multiple policies to start with, consider the biggest risks and ask your insurance agent what isn’t covered so you can take measures to reduce those risks where possible.

2. Get Multiple Quotes for Technology Insurance

Whether you get quotes online, over the phone, or in person with an agent or broker, it’s wise to get at least three quotes. This way, you can compare and contrast providers so you learn more about the coverage you need and the best pricing on a policy. Ultimately, this information can help you make the final choice of provider.

3. Standardize Client Contracts to Set Expectations

When it comes to professional liability, insurance companies want to know how contracts are created with clients and whether or not they are standardized. Standardization helps reduce the chance of confusing project expectations and getting sued over not rendering services per contract terms.

4. Risk Exposures Tech Insurance Needs to Cover

Being in technology often means you may provide any number of services for clients. Your operations may be comprised of a single consultant or hundreds of developers or installation technicians. The makeup of your company, where you do business, and how large you are (in people and revenues) determine exactly what you need to consider when buying IT insurance.

The application process for any insurance policy is to review the company profile, including revenue, number of employees, physical locations, and business property. The goal is to define the overall risk exposure. IT insurance goes beyond the general risks associated with these attributes and considers characteristics common in the IT industry—those that create additional risk such as international operations and the total amount of protected personal information (PPI) your firm maintains.

IT Insurance FAQs

IT insurance has many facets to it, with multiple policies to cover a variety of risks. Below are several common questions small business owners have when buying IT insurance.

What does cyber liability insurance cover?

Cyber liability insurance covers the first-party and third-party claims a business experiences after a breach of data due to cyberattack or hardware failure. First-party claims are the costs associated with restoring systems and paying regulatory penalties, while third-party claims are the lawsuits and client monitoring that happen after personal and private data is breached.

Does my IT insurance cover client data breaches?

Not every IT insurance policy covers data breaches, particularly if they are the result of a cyber crime or systems failure. An IT company should have both tech E&O insurance as well as cyber liability insurance to prevent any gaps in coverage should their own company data or client’s data be breached.

Is it mandatory to have business insurance?

It is not mandatory to have business insurance, but there are two very important reasons to get it. First, uninsured claims could cost tens of thousands of dollars to an IT professional, potentially putting them out of business. Second, many major corporations and government agencies require proof of insurance before they will contract with small businesses.

Bottom Line

Small business insurance is a necessity for the technology industry because of the many unique risks that professionals in the tech industry face every day. Data breaches, software errors, and programming mistakes can lead to costly lawsuits. Therefore, finding the right tech insurance is an integral part of business success.

Before getting a policy, an IT business owner should find an insurance company well-versed in the evolving risk environment of tech. With more than 30 years as a leader in tech insurance, the experts at The Hartford can help you identify the right type of tech insurance for your specific needs. Get started today with a free, no obligation quote.

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