Here's the situation: you've been hired by a client, but before you sign the contract and start working, you need IT contractor insurance. If you've worked as an independent contractor for a while, you've probably been in this scenario. If you haven't, you might be wondering: what is contractor liability insurance?
Usually, clients outline required policies in your contract. These typically include…
- General Liability Insurance: Coverage for third-party injury / reputational damage / property damage lawsuits.
- Errors & Omissions Insurance: Coverage for lawsuits over financial losses caused by your IT work.
These two policies won't cover all your liabilities, but they cover many of the problems you could have with clients. Together, these policies protect your finances from the overwhelming cost of a lawsuit.
Let's look more closely at what each type of Independent Contractor Insurance covers and why it's required.
General Liability Coverage: Independent Contractor Insurance for Basic Commercial Liabilities
General Liability Insurance is one of the most common small-business insurance policies, and it is especially important for IT contractors. General Liability Insurance covers basic, third-party lawsuits (filed by people outside your business) that any business could face, including…
- Slip-and-fall injuries.
- Damaged property.
- Copyright infringement.
- Reputational injuries.
This coverage is important in the IT world because IT contractors often work at client offices. Your clients want you to have General Liability Insurance because it can pay for a lawsuit if you cause an injury or damage their property.
Think about how expensive a lawsuit can be. If a deliveryman stumbles on your stairs and breaks his leg, they could sue your business for $100,000 or more. Not many IT contractors could pay for those legal expenses out of pocket.
Because General Liability covers slip-and-fall and property damage lawsuits, it protects you from unpredictable and expensive accidents that could bankrupt your business.
Clients want to know that you have insurance, because they want the reassurance of knowing you won't have to file for bankruptcy if an accident occurs.
Why Do IT Contractors Need to Have Professional Liability Insurance?
If an IT contractor is sued over their work, Errors and Omissions Insurance (also called Professional Liability Insurance or E&O Insurance) pays for their legal defense and any damages they owe the client.
Any time you install enterprise solutions for another business, you know that a thousand things can go wrong. E and O Insurance covers lawsuits over these issues. IT contractor insurance covers your "errors," but this includes more than just obvious mistakes you make. E&O also covers lawsuits over…
- Missed deadlines.
- Software flaws.
- Testing errors.
- Cloud service outages.
- Performance problems with software.
- Compatibility issues.
- Data breaches.
Yes, E & O can include third-party Cyber Liability Insurance, which pays for your lawsuit expenses when a client is hit with a data breach and sues you to recoup losses.
Data breaches can be caused by software you write or recommend, cloud services, mobile apps, and other enterprise solutions. But regardless of the cause, E&O can cover your cyber liability.
When Do You Need to Have Contractors Liability Insurance?
This article began with a scenario where a contractor needed liability insurance to sign a contract. That's a situation that many of our customers face. However, it's actually better for you to have insurance before you sign a contract and keep it active long after the contract is completed.
Errors & Omissions Insurance is a "claims-made" coverage, which means it only covers mistakes that occur while the policy is active. It won't cover mistakes from work you did before you had the policy and it won't cover lawsuits after the policy expires. You'll need to renew the policy each year to be protected from lawsuits.
Further, renewing your policy can help you keep your insurance rates low. Insurance providers increase their premiums if they see that you start and stop coverage.
If you'd like free quotes on General Liability, Professional Liability, and other types of insurance IT contractors need to sign contracts, submit an online insurance application and one of our IT insurance agents will send you free quotes on the policies of your choice.