Proof Of Insurance: What Clients Look For When Hiring An IT Contractor
Dan Levenson March 30, 2016
If you operate an IT staffing agency, you won’t be able to get clients without proof of insurance. While you may wonder if all the coverage is necessary, the truth is, the insurance your clients requires you to have will benefit you in the long run—and it’s affordable.
Not only will insurance be needed to get clients, it also could protect your company against possible lawsuits if your equipment or something you do damages a client’s equipment, or if a client claims something you did or failed to do causes a business loss for him or her.
Here are some of the kinds of insurance you might need to protect your IT staffing agency.
General Liability Insurance
General liability insurance covers injury to people and damage to property, including medical expenses for third parties injured at your business. This is often the first insurance a company buys and would protect you from lawsuits over property damage and third-party bodily injury, lawsuits for libel and slander, product liability lawsuits, and advertising injury lawsuits (including copyright infringement).
Benefits include settlements, court costs, attorney fees, immediate medical expenses, and judgments, if you’re found liable.
Professional Liability Insurance
Professional liability insurance for IT recruitment agencies works like malpractice insurance does for doctors. This is also called E&O, or errors and omissions insurance. Potential clients will want you to have this, because they know people are human and make mistakes.
Suppose someone you send to work at a large company makes a mistake that causes a client to lose data valued at tens of thousands, perhaps hundreds of thousands of dollars—your client might sue you. Without the insurance, your expenses could mount quickly.
You could be sued for even such things as oversights and honest mistakes, as well as incomplete, shoddy, or incorrect work, negligence in rendering professional services, and failure to provide services you promised.
Workers’ compensation insurance can protect your most valuable asset—your employees. If one of your employees is injured on the job, this can cover medical expenses and related costs, such as lost wages.
The law often requires this, but even if you are in a state that does not, a client in such a state will probably require the coverage. You will need the insurance to meet state requirements if you have W-2 employees, and some states require it for 1099 workers.
Many states also require you to have this coverage for failing to prevent or causing an injury or illness at work. This can pay for partial lost wages, medical costs, funeral expenses, ongoing care and rehabilitation, and death benefits. You face huge out-of-pocket expenses without workers’ compensation, and the coverage usually pays for $1 million worth of expenses per occurrence.
One example of something covered would be carpal tunnel syndrome, which many workers get if they must repeatedly do the same hand motions during a day. It also covers falls, broken bones, back injuries, and allergic reactions.
Cyber Liability Insurance
Cyber liability insurance protects businesses against data breaches. There is first-party cyber liability insurance and third-party cyber liability insurance. Third-party insurance would be more useful for staffing firms, as it covers data breaches on third-party networks, while the other coverage would cover your own network. If a client sues you, this covers court costs, damages you owe, attorney fees, and costs for settling out of court.
Fidelity bond coverage, sometimes called employee dishonesty coverage, will pay your client if you or one of your steal property or money on the job. Your clients will want you to have this if they are banks or financial service industries, because they give you personal account information, such as Social Security numbers and account numbers. A settlement in a data breach case can often reach almost $1 million.
If you have any questions about why you need proof of insurance, the kind of insurance you may need, or anything else, feel free to contact us.