If you run an IT or technology services business, you already know that one security breach can destroy years of client trust overnight. But here's what surprises most tech entrepreneurs: the lawsuit from that breach might be what actually puts you out of business. Without the right insurance, a single professional mistake or data breach can drain your bank account through legal fees alone—long before you even get to court.
This checklist breaks down exactly which coverages you need, which ones are optional but smart, and when to add them as your business grows. Whether you're a solo consultant or running a growing IT firm, this guide will help you protect your business without overpaying.
Essential Coverage: What Every IT Business Needs
These aren't optional. If you operate an IT or technology services business, you need these four coverages starting day one:
Professional Liability Insurance (E&O): This protects you when your professional services cause a client financial harm. Maybe the software you developed had a glitch that wiped out a month of billing data. Or the cloud backup system you installed failed, and your client lost critical files they can't recreate. Tech E&O insurance covers your legal defense and any settlement or judgment. Average cost? About $67 per month. Most client contracts will actually require you to carry this coverage with limits of at least $1-2 million.
Cyber Liability Insurance: This is arguably the most important coverage for tech businesses in 2025. Cyber insurance covers data breaches, ransomware attacks, regulatory fines, and notification costs when client or customer data is compromised. The coverage has two parts: first-party protection for your own losses (forensic investigations, business interruption, breach notifications) and third-party coverage for client claims. Tech businesses pay an average of $148 per month for this coverage. Here's the wake-up call: 60% of small businesses that experience a cyberattack close within six months. Can your business survive a six-figure breach response without insurance?
General Liability Insurance: Even if you work remotely, you need general liability. This covers bodily injury and property damage claims. Say you're installing equipment at a client's office and accidentally knock over an expensive server. Or someone trips over your laptop bag during an onsite consultation and breaks their arm. General liability covers these scenarios, including your legal defense. At an average of $30 per month, this is affordable peace of mind. Many commercial leases and client contracts require minimum coverage of $1 million per occurrence.
Workers' Compensation Insurance: If you have even one employee, most states require this coverage. Workers' comp covers medical bills and lost wages when employees get injured on the job—from carpal tunnel syndrome developed by programmers to back injuries during hardware installation. The cost varies by state and your employee count, but skipping this coverage can result in severe penalties and personal liability if someone gets hurt.
Optional Coverage Worth Considering
Depending on your specific situation, these coverages can fill important gaps:
Business Owner's Policy (BOP): This bundles general liability, commercial property, and business interruption coverage into one policy, typically at a lower price than buying them separately. At around $32 per month, a BOP makes sense if you have an office with equipment and furniture you need to protect. Business interruption coverage is particularly valuable—it replaces lost income if a covered event (like a fire or theft) forces you to temporarily close.
Commercial Auto Insurance: If you or your employees use vehicles for business purposes—driving to client sites, picking up equipment, making deliveries—you need commercial auto coverage. Personal auto policies typically exclude business use. Many contracts require commercial auto with at least $1 million in coverage per accident.
Employment Practices Liability Insurance (EPLI): Once you have employees, EPLI protects against claims of wrongful termination, discrimination, harassment, and other employment-related issues. Even if you do everything right, defending against an employment claim can cost $50,000 or more in legal fees alone.
When to Add or Increase Coverage
Your insurance needs evolve as your business grows. Here are key moments when you should review and adjust your coverage:
Signing major contracts: Before you sign, check the insurance requirements. Many enterprise clients require higher liability limits or additional insured endorsements. It's much easier to adjust your policy before signing than to scramble afterward.
Hiring your first employee: Workers' comp becomes legally required in most states. Also consider adding EPLI at this point.
Expanding service offerings: If you add new services—cloud hosting, managed security, software development—notify your insurer. Some activities carry higher risk and may require higher limits or specialty coverage.
Significant revenue growth: As your revenue increases, so does your exposure. A $100,000 mistake is more likely when you're doing $1 million in annual revenue than when you're doing $100,000. Review your liability limits annually.
Annual Review Checklist
Insurance isn't a set-it-and-forget-it purchase. Set a calendar reminder to review these items annually (ideally 60 days before your renewal date):
Update your cyber security practices: In 2025, cyber insurers are requiring stronger security to qualify for coverage. Make sure you have multi-factor authentication on all external systems, annual security awareness training for employees, endpoint detection and response systems, and regular backups. Without these, you may not be able to get cyber coverage at all.
Review your coverage limits: Are they still adequate for your current revenue and client contracts? A good rule of thumb is professional liability limits of at least 1-2 times your annual revenue.
Notify your insurer of major changes: New systems, remote work policies, mergers and acquisitions, or changes to your service offerings can affect your coverage. Tell your insurer proactively—finding out you weren't covered after a claim is filed is too late.
Update contact information: Make sure your insurer, IT team, and legal counsel all have current contact information. In a cyber incident, every minute counts.
Compare quotes: The insurance market changes. Get quotes from at least two other carriers to make sure you're getting competitive pricing. For 2025, cyber insurance rates are expected to continue decreasing, so shopping around could save you significant money.
Getting Started: Your Action Plan
If you're starting from scratch, here's your action plan: First, get quotes for the essential four coverages—professional liability, cyber liability, general liability, and workers' comp if you have employees. Many insurers offer package policies for tech businesses that bundle these at a discount. Companies like The Hartford offer general liability starting at $17 per month and professional liability at $88 per month for tech businesses.
Second, review your client contracts to identify any specific insurance requirements. Many contracts require you to add the client as an additional insured or to provide certificates of insurance—make sure your policy can accommodate these requests.
Third, implement the security requirements for cyber coverage before you apply. Multi-factor authentication, security training, and endpoint protection aren't just insurance requirements—they're good business practices that actually reduce your risk of a breach. The few hours it takes to set these up can save you thousands in premium costs and potentially millions in breach response expenses.
Bottom line: insurance for IT and technology services businesses isn't optional. It's the difference between a manageable problem and a business-ending disaster. Start with the essential coverages, add optional policies as your business grows, and review everything annually. Your future self will thank you.
