As an IT consultant, you hold a key role in providing technology systems, software, and guidance to your clients. With this responsibility, however, comes risk. If there are mistakes or failures on your part, a client could potentially sue for damages. Legal defense can be expensive, and if your company is found to be a fault, settlements can be costly. In addition to these professional risks, your company could be held liable for risks common to most companies, such as property damage, cyberattacks, or an injury that occurs at your offices.

It’s critical to consider purchasing business insurance policies that will protect your company from the risks you face in your work. Having the right coverage in place can give your company the financial security it needs to continue operating in the event of a catastrophe.

What insurance coverage do I need for my IT consulting company?

While there are many types of coverage for companies to consider, these insurance policies are particularly important for IT consultants:

Errors and Omissions Insurance

When you provide professional advice and assistance, you could be held liable for any perceived mistakes in your work. This makes errors and omissions insurance one of the most important coverages for IT consultants to obtain. Many modern companies rely heavily on their IT systems, and they in turn may depend on high-quality service and guidance from outside consultants. If your firm makes any mistakes that lead to financial damage for your clients, you could be sued, which can be a costly affair, even if your firm is not at fault. Errors and omissions insurance can protect your company from the risk of lawsuits brought on by dissatisfied clients alleging failures in services, advice, or professional work.

Example:

• A client hires your firm to help them select and implement a new software stack to streamline their billing and invoicing system. After the software is implemented, the client claims that the system is unable to handle the volume of invoices that they are receiving, causing severe delays and lost orders. The client sues, alleging that you were negligent in your work.

Commercial Property Insurance

Your IT consulting company may rent or lease office space, and your work likely relies on expensive computers and other technology. If an unexpected disaster damages your equipment or office building, it could be costly and time-consuming to complete repairs or obtain replacements. Commercial property insurance can help you recover more quickly by reimbursing you for the cost of replacing damaged or destroyed property. Commonly covered perils include fire, vandalism, windstorm, and water damage.

Example:

• A severe storm damages your company’s roof, causing it to leak and damage the contents of your office building, including computer equipment and furniture. Your commercial property insurance would provide funds to repair the roof and replace the damaged property.

General Liability Insurance

General liability insurance can protect your firm from the financial fallout of accidents that cause third-party injury or property damage. If your company hosts clients at your office or visits clients at their worksites, you may want to consider general liability coverage. Even in industries that are not considered physically hazardous, accidents can still happen, particularly in an office setting. General liability insurance covers third-party bodily injury and property damage risks, as well as personal and advertising injury, which covers risks including libel, slander, and copyright infringement.

Examples:

• Bodily injury: A repair technician visits your offices to fix your company’s broken vending machine. While in your office, she trips on some loose carpet and falls, fracturing her arm. Your general liability insurance would cover the technician’s medical fees and any settlements if she sues
• Property damage: One of your employees visits a client’s offices to supervise the implementation of new server software. The employee accidentally damages one of the client’s web servers. Your general liability insurance would cover the damages.
• Personal and advertising injury: In an ad campaign promoting your IT consulting services, you use a logo that looks very similar to another company’s logo. The other company sues you for copyright infringement. Your insurer would pay for legal defense and any settlements.

Cyber Liability Insurance

As an IT consulting company, you are keenly aware of the dangers cybercriminals could pose to your company. Although you work hard to keep your digital network safe, there’s always a chance that you could fall victim to a new type of attack or that a lapse in security could enable outside hackers or even former employees to gain access to confidential data. Clients could sue if their information is compromised, and the sheer cost of recovering from a cyberattack is high. Cyber liability insurance can provide financial assistance to help your company deal with the first-party costs of recovering from a cyberattack and third-party costs if your firm is sued.

Example:

• A virus spreads through your company’s computer network, deleting or corrupting key data and causing delays to several important projects. Your insurer will pay for the costs of removing the virus and restoring data. It will also reimburse you for income you lost due to the delays.

Business Owner’s Policy

If your IT consulting company is a small or midsize firm, a business owner’s policy (BOP) could be a helpful choice. These policies combine general liability, property, business income, and extra expense coverage into a single convenient package. A business owner’s policy can be a good way to obtain a wide range of insurance. It can help smaller companies avoid coverage gaps for a lower cost than buying each policy individually. To qualify for a BOP, your company would typically be required to operate from a physical business location, employ fewer than 100 people, and make less than about $5 million in sales per year. Exact requirements can vary based on the insurer.

Example:

• A toaster in your IT consulting company’s break room catches on fire, causing your fire sprinkler system to activate. The water destroys several of your computers and monitors. The property coverage of your BOP would provide funds to replace the damaged machines.

Additional Coverage

• Employment practices liability insurance protects your business against lawsuits by employees accusing your business of wrongful treatment such as discrimination, harassment, or other employment-related issues.
• Business income insurance will reimburse you for lost income and operating expenses if your business is unable to operate due to a covered reason, such as fire, storm damage, or other property damage.
• Workers’ compensation insurance is legally required for companies with employees in most states. It covers the medical expenses and lost income of employees who are injured or fall ill while working. For companies in the IT industry, repetitive strain injuries are commonly a cause of workers’ compensation claims.

Final Word

There are many risks that could harm your IT consulting business, from physical threats like a fire to lawsuits brought by dissatisfied clients. Business insurance can provide financial protection that will help your business cope in the event of an unexpected disaster. When you purchase the right coverage, you and your clients will feel confident in the knowledge that your company will continue to operate even if a major incident arises.