The risks in IT business & how to protect your IT business wisely
The risks in IT business & how to protect your IT business wisely?
The freelance business is growing worldwide. The growth is very significant that some times in the future it is expected that freelance workforce will be bigger than its permanent counterpart. Since more and more small business emerges and operates to provide professional services and consultancy to the customers, so too the risks of professional liability lawsuits or claims will increase. IT field is not excluded in this scenario.
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In fact, IT professionals or contractors might be more prone to professional risks than any other businesses. The risk may not be obvious like a collapsed floor when a building is still under construction, or death of a patient under medical treatment due to negligence, or loss of compensation in legal action because the lawyer of the case failed to highlight certain important facts already made known to him. But a problematic line of coding can similarly contribute to software failure that cause major disruption to business, or an overlooked bug can cause monetary loss to the customers as well. Unfortunate incident like theft of project laptop can entails lots of trouble, too, especially when the deadline is very near or if it involves confidential information that can jeopardize clients’ interest and profit. Markel direct explains five reasons why IT professionals should choose to be insured professionally.
Why IT professionals need to be professionally indemnified by insurance coverage
- No insurance, no contract.
Many contracts require you to have professional indemnity insurance, limiting the cost to the employer if you do make a mistake. Clients may be reluctant (or even refuse) to hire you without professional indemnity insurance. To have the best chance of getting a contract, arranging professional indemnity insurance is a necessity.
- Claims can bankrupt IT contractors.
A claim for an error or omission in a project could cost anything from a few hundred pounds to hundreds of thousands. If you are uninsured, you will have to foot the bill for legal fees and compensation which could leave your financial situation vulnerable in the event of a claim. Read more here!
There is this one famous Malay proverb which says, “sediakan payung sebelum hujan” which means that we should provide an umbrella before the rain finally comes. So, let’s not wait until that heavy fall before looking for a good umbrella or at least a raincoat to cover ourselves from being soaked to the skin. Even though your business is small, when it involves lawsuit, no amount of money is small enough to cover for everything. It can easily cost more than 10,000 dollars even at the initial stage of the lawsuit, without court hearings yet. Imagine how much going to court might cost in the end. Tech Insurance website tries to paint some vivid pictures about the financial burden that a business might suffer when a legal case is brought against it.
Professional liability premium cost vs. cost of legal fees
The answer is different for everyone, but the costs to defend your business in a professional negligence lawsuit can add up before you step foot in a courtroom.
According to Braden Perry (@bradenmperry), a regulatory and government investigations attorney with the law firmKennyhertz Perry , even cases that get tossed out without going to trial can still cost a small-business owner roughly $10,000 to $15,000 in legal fees.
“For a case to go through the answer stage, discovery, and a ruling on a motion for summary judgment, it can cost a company roughly $50,000,” says Perry.
He adds that if a case survives a summary judgment, it could cost a small-business owner approximately $100,000 to take the case all the way to a jury verdict. Read more here!
Knowing the huge cost that might be involved in a business lawsuit, why are we still taking unnecessary risks by not paying for insurance premium? Choosing to be a securely insured business is the wisest step to take. Our business is our reputation, and our future depends largely on its success or failure. This contains more truth when we are talking about small businesses which operates on small-scale, because its capital and cash are not that big. Imagine losing a dynamic and growing business because of a silly mistake caused by a junior employee, for example. Such incidents can happen to anyone and any business, so be prepared to think beyond the ordinary. At times, it is not only negligence that can be the cause, but there is a wide range of mistakes that you never thought can sink a mighty ship like yours. An article has more to say about the probable situations that might lead to professional liabilities. The piece at Hiscox blog.
Expect more than negligence as the probable reasons for lawsuit against your business
While protection in the event of negligence forms the core of the cover provided by PI insurance, it’s important that you consider a policy that offers cover for intellectual property, dishonesty, defamation and loss of documents too.
Why? Because it’s not just claims of negligence that can harm a small business. However robust your processes are, it can be easy for you or one of your employees to slip up when juggling the day-to-day running of the business.
Perhaps an employee sends a gossipy email about a difficult client to a supplier and copies in the client by accident. Read more here!
So, really? Why the wait? Why the thoughtful look on our face, still? We must be thinking, “It might never happen to my business at all. My business is professional enough not to be smeared by this kind of lawsuits for five years already.” But luck cannot always be on our sides. When our business grow, more projects starts to pour in. We cannot wait until too late for the risk of getting a red flag, and the insurance company will deny to pay anything.
To conclude, never take the wrong risks. Be wise and protect our business as early as possible from having to pay for any expensive legal actions. At least we have something to fall back on during the hardest challenge that we have to face in the life of an IT business owner.