FAQ: Do IT Staffing Firms Need Business Insurance?
Dan Levenson October 22, 2015
Business insurance is almost always necessary. In the context of a company that places tech or IT professionals where their services are needed, there are usually contract requirements that will need to be met before starting a job.
Each contract is different, but they will often include transferring the liability and risk from that client company to you. The business owner will want you to be responsible in every way he can think of for any issue or action that will happen when you have someone placed there.
While contracts can vary from client to client, the types of insurance that are applicable remain the same across the board. They can include:
Almost every state requires your business to have it, and no matter what a contract says, you will surely need to provide workers’ compensation. This will cover the rehabilitation and medical costs of employees injured on the job.
When you have such insurance, an injured person typically gives up the right to sue the company for whom he or she is working. It benefits workers because they know they can get paid when they are unable to work and recover expenses for medical bills without litigation.
Employee dishonesty insurance, a fidelity bond, or theft bond protects a business from fraud and employee theft. Almost any contract involving an IT staffing firm would probably require just such insurance.
Statistics from the Association of Certified Fraud Examiners show that losses at companies from employee dishonesty range up to millions of dollars a year at any one business. Nationwide, about $400 billion is lost annually, often by companies that can’t afford expensive safeguards.
Such policies often protect against computer and credit card fraud, two protections that might seem especially appropriate for an IT or consulting firm. In addition, policies protect against burglary, employee thefts, safe burglaries, and money order and counterfeit fraud. People covered under such policies would typically include all formercurrent employees, members, partners, trustees, volunteers, and temporary and seasonal employees.
Any special wording that is obviously designed to transfer the risk from the other company to you. Insurance professionals can determine any type of specific insurance necessary.
General Liability Insurance
Almost any type of contract for almost any type of company would probably call for general liability insurance. It protects company against fraudulent or real claims of negligence or wrongdoing, as well as protecting against physical or bodily injury that might occur on your premises.
Professional Liability Insurance
This might be the most important kind of insurance for an IT staffing firm.
Professional liability insurance protects you and your business from potentially catastrophic litigation caused by charges of professional negligence or failure to perform your professional duties.
This could include omissions and errors, resulting in the loss of client software, data, or system failure—appropriate coverage for this type of business. It could also include a claim of negligent oversell or non-performance.
If you have a subcontractor working on a client site, a contract will likely require proof of such insurance.
Cyber Liability Insurance
Designed to protect against the expenses and liability from the theft or loss of data, as well as from a breach of data security or privacy, this is important, especially when sensitive client information is involved.
Coverage protects against a large number of issues, including disclosure of confidential information, denial of service attacks, cyber extortion or terrorism threats, and loss of data or digital assets, whether accidental or malicious.
This covers after the loss or theft of first-party and third-party data, whether the breach happens directly to the company you are working with, or to the professional you placed there.
Companies will often push hard to make no changes to a contract, but exceptions are sometimes allowed. Basic coverages may not be altered, but higher limits may be put in place. Our highly trained IT contract specialists can examine your contract and find alternatives to properly insure your company. For more information, contact us.