If you are an independent contractor or run an online business, you may never have considered the need to obtain an insurance policy that covers your business activities.

Last year I acquired a new client and my contract with this client obligated me to obtain liability insurance.

With litigation becoming a common fact of life in so many countries, having a business owner's insurance policy is a smart move for anybody running a business.

Usually, a good business owner's policy covers common commercial liabilities, your property, damage you cause to others' property and bodily injury. It may even provide some protection against loss of income and out-of-pocket expenses caused by certain kinds of events.

The premiums for a business owner's policy are usually quite low and thus if your business activities expose you to any sort of liability whatsoever, it makes sense to consider obtaining a business owner's policy.

In addition to a business owner's policy, if you're running a technology-related business, you may want to look into specialized coverage that will protect you against claims that may not be covered by your business owner's policy.

For instance, The Hartford's FailSafe Technology Liability packages, which are designed for technology businesses, can cover "negligent acts, errors and omissions; failure of the technology services to perform as intended; and breach of warranties or representations."

They can also cover claims related to copyright infringement, security breaches and downtime.

Depending on the type of business you run - from a consulting service to an e-commerce website - any of these things may obviously be well-worth having some protections against.

Consider the following:

  • If you are a web developer and a client files a lawsuit accusing you of developing a website that failed to function properly, you should have errors and omissions insurance because even if your client's claims are groundless, defending against them could otherwise require thousands of dollars in out-of-pocket legal expenses.
  • If you run an e-commerce website and a security breach leads to the exposure of customer data, a specialized e-commerce insurance package may protect you from significant damages.
When looking into obtaining an insurance package, here are some pointers:
  • Understand that the coverage that is available to you and the costs of that coverage will vary depending on your country and the specifics of your business. Your premium is based upon the calculated risk of insuring your business so recognize that there are many factors beyond your control. That said, there are factors that are in your control so be sure to ask your insurance agent if there are any steps you can take (i.e. installing fire alarms at your location) that may help lower your premium.
  • Always shop around for the best premiums. Ask multiple insurance agents to provide quotes and make sure the quotes cover multiple insurance carriers.
  • Don't be afraid to ask questions. A good, competent insurance agent will be happy to explain things to you.
  • Talk to your insurance agent in-depth. The more he/she understands the specifics of your business, the better able he/she will be able to make recommendations.
  • Be honest. If you lie on an insurance application (i.e. in an effort to reduce your premium, etc.) and it's discovered when you file a claim, don't expect to have your claim covered, which defeats the purpose of insurance in the first place.

Although an additional business cost, no matter how small, is probably as undesirable to you as it was to me, the peace of mind of knowing that I have insurance which will protect my business has been well worth the cost.

As they say, don't be "penny-wise, pound-foolish."


Published 1 August, 2008 by Patrick Oak

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Comments (1)


Steve Sherlock

Resent research shows that over a third of new businesses are not insured at all. In an increasingly litigious world this leaves these businesses exposed to significant claims for damages and costs which could cripple or even close the business.

Professional Indemnity insurance ( the name now commonly given to Errors and Ommissions) is one of the key products anyone providing professional services should consider. This is particularly so for consultants in the e-commerce and IT sectors, where projects involving software, hardware and data can be high value in terms of cost and impact (should something go wrong).

You can find out more about Professional Indemnity Insurance at http://www.coverzones.com/policies/professional-indemnity-insurance as well of other types of insurance you may need for your business.

about 10 years ago

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