What Is IT Insurance?

Information technology (IT) provides the backbone for information transfer that supports businesses. Managers and entrepreneurs in IT must stay abreast of developing technologies and handle ever-increasing risks. 

Cybercrime and malware attacks happen regularly, bringing down some of the world’s biggest corporations. So, how do you protect your business from financial loss, claims and legal costs? The answer lies in carefully considered insurance coverage. Here’s what you need to know about IT insurance for your business.

Understanding Information Technology (IT) Insurance

IT insurance protects organizations from risks and damage in the IT sector where technology is a primary operational component. Using IT insurance, businesses can try to fend off a wide range of risks and legal exposures. IT insurance may cover general business needs and IT-specific requirements.  

Who Needs IT Insurance?

Every business in the technology sector that uses technology as a critical operational component needs IT insurance. These include:

• Software developers
• IT service providers
• Computer consultants
• Programmers
• Web designers
• Systems integration companies
• Database administrators and designers
• Data storage providers and management companies
• Integration specialists
• Application service providers
• Telecoms

What Type of Insurance Does an IT Business Need?

IT businesses need general business and industry-specific insurance. Here are several insurance types to consider.  

Technology Errors and Omissions Insurance

Errors and omissions (E&O) insurance is a class of professional liability insurance. All service providers, from lawyers to insurance agents and IT providers, need this insurance. E&O insurance provides professionals, businesses and their employees with coverage for negligence or inadequate performance claims. 

The insurance covers legal costs to defend the claims and resulting settlements. 

Cyber Insurance

Cyber liability insurance protects businesses from cyber-related financial losses. It covers the costs of restoring files lost or damaged files because of malware, viruses or data breaches. It also covers the legal defense costs for claims. Cover your business for ransom payments arising from malware attacks and business interruptions caused by attacks.   

Additional Coverage to Consider

Aside from specialized IT insurance for technology and communication, IT businesses face the same risks as any other. For this, consider the following insurance types: 

General Liability Insurance 

General liability insurance provides coverage for risks arising from general business operations. These may include injuries to site visitors and third-party property damage. In the case of injury, the insurance will cover medical costs, legal fees and claim settlements. Property damage may include vehicles, computer equipment damage and fixed property. 

General liability insurance will also protect your business against product liability claims, where there is a claim for financial damage caused by defective or malfunctioning equipment. 

Commercial Property Insurance 

Commercial property insurance covers company property and assets. It will protect against theft, fire, vandalism and natural disasters. 

BOP 

A business owner’s policy (BOP) is tailored to the needs of small and medium businesses. The BOP offers small business owners a cost-effective way to protect themselves against common risks. Typically, a BOP combines different coverage types in a single package. Coverage may include property insurance, general liability insurance and business interruption insurance.

Workers’ Compensation

Workers’ compensation insurance is mandated in almost every U.S. state. If workers are injured or contract an illness at work, workers’ compensation will cover their medical expenses, lost wages and rehabilitation costs. Workers’ compensation also provides employees with disability and death benefits. 

Employment Practices Liability Insurance (EPLI)

Even with robust human resources (HR) policies, employers may face accusations of employment-related transgressions. Typical claims include discrimination, harassment and wrongful termination. An EPLI policy protects employers against the risk of financial loss in these cases. It covers legal defense costs, claim-related settlements and judgments.

Directors and Officers (D&O)

Directors and officers (D&O) insurance is liability insurance. D&O insurance covers company directors and officers against legal claims for wrongful corporate acts or decisions. This insurance directors’ personal assets from claims. This insurance also provides coverage for legal defense, settlements and judgments. 

All companies with directors or officers need D&O insurance for financial protection and peace of mind.

Commercial Crime Insurance

Commercial crime insurance protects businesses against financial losses caused by employee or third-party fraud. Small businesses of all types are vulnerable to fraud, theft and other criminal activities. In IT businesses, computer fraud and hacking might present a bigger concern. 

Commercial Auto Insurance

Any business that uses vehicles for work purposes needs commercial auto insurance. IT businesses often provide on-site client support. Commercial auto insurance protects company vehicles and their drivers. 

Average Cost of IT Insurance

Several factors influence the IT insurance cost. They include:

• Coverage type: Each coverage type comes with cost schedules.
• Coverage limits: You’ll pay higher premiums for higher limits.
• Deductibles: The deductible is the amount you pay before your insurance coverage takes over. You can lower your premium by increasing the deductible, but you'll pay more out of pocket when you file a claim.
• Business size: The size of your IT business, as measured by factors like annual revenue and number of employees, will influence the cost. Larger businesses with higher revenue and more employees will pay more.
• Industry and services: The nature of your IT business and the types of services you provide may influence costs. 
• Claims history: Your claims history is an indication of your risk, so the insurance companies factor it in.
• Location: Local regulations, crime rates and environmental risks affect your risk profile and the cost.
• Insurance provider: Shop around and compare quotes to find the best coverage at the most competitive price.

How to Apply for IT Insurance

Here is a step-by-step guide to help you with your IT insurance application:

• Assess your insurance needs: Decide the types of insurance coverage your IT business needs. 
• Research insurance providers: Find companies that provide the types of insurance you need for your IT business. Look for companies with a reputation for good customer service and claims handling.
• Gather your business information: You’ll need information on factors like legal structure, annual revenue, number of employees, client base and your insurance claims history.
• Obtain and compare quotes: Request quotes, and compare coverage options, policy limits, deductibles, premiums and terms and conditions. Make sure you fully understand what is covered and any applicable limitations or exclusions.
• Tailor your coverage: Work with the insurance provider to ensure that the policy meets your business needs. 
• Complete the application: Once you've selected a policy, complete the application. Ensure that your business information is accurate. The insurance company needs it to review your application.
• Review and sign the policy: Once your application is approved, carefully review the insurance policy. Understand the details outlined in the policy. Sign the policy.
• Pay the premium: Pay the initial premium to activate the coverage.

Compare the Best IT Insurance from Benzinga’s Top Providers

See the table below for some of Benzinga’s best IT business insurance providers.

Insurance Provides Financial Security

Every business needs an adequate risk-management strategy for financial health and security. Insurance is an essential risk-management component. IT businesses have particular needs. Still, the good news is that there are plenty of insurance products that will protect your business from destructive litigation. Carefully assess the risks and match the insurance to the distinctive needs of your business. 

Frequently Asked Questions