Technology executives know the importance of expertise in business, and the same applies for insurance. Nearly 90% of business owners surveyed said they would value the advice of an outside expert when it comes to insurance decisions.

An independent agent who understands the technology industry is key to building a comprehensive insurance program. Independent insurance agents with technology insurance expertise can help assess and mitigate risks and create a specialized insurance coverage plan.

Here are four key risk management and coverage elements that tech startups should consider:

1. Contractual risk management. Contracts are often the first line of defense if a problem occurs. It's always a good idea to have an attorney review terms before entering an agreement. Contracts should include hold harmless provisions, warranty disclaimers and limits of liability for consequential damages, just to name a few.
2. Errors and omissions coverage. E&O is a tech company's professional liability insurance, covering financial injury to a third party caused by a company's products or services. For technology companies, this type of claim often is more likely than bodily injury or property damage claims. Protection should cover breaches of warranties or representations, network or information security and intellectual property, such as copyright infringement for software code.
3. General liability coverage (GL). This coverage can provide protection if a company is legally responsible for bodily injury, property damage or personal injury to a third party, or injury caused by advertising related to products, services or operations. However, many GL policies exclude claims related to software or programming which could leave tech companies exposed to costly, uncovered claims or out-of-pocket legal fees. Insurance carriers that specialize in insuring tech companies will not typically exclude this important coverage.
4. Property insurance coverage. Property insurance covers damages to business property, including computers, machinery, furniture and business-owned buildings. Adding business interruption and extra expense coverage can reimburse lost income and extra expenses incurred (like the cost for temporary facility) after a covered loss, and can be extended to include losses occurring at key suppliers or other dependent properties.

With so much on their minds, executives at startup technology companies shouldn't have to worry about potentially costly gaps in their insurance. By working with independent agents that understand tech business and can address these four key risk management and coverages essentials (and more), tech companies can focus more on delivering new products and less on insurance fears.

About the author

Toby Levy is vice president and leader of the technology business unit at The Hanover. A 25-year veteran to the insurance industry, Toby leads a team focused on the technology insurance market.

LC OCT 2018-474