Insurance for government IT contracts

Insurance requirements are a common reason small firms can't bid on a public contract, or find out too late that they need more cover. They're easy to fix if you check early.

The policies you'll be asked for

• Professional liability, also called errors and omissions or professional indemnity: covers claims that your advice or work was faulty and caused loss. The most important one for IT services.
• Commercial general liability, or public liability: covers injury and property damage, such as an accident at the buyer's office.
• Cyber liability: covers data breaches, ransomware and related costs. Increasingly required where you handle personal data or connect to the buyer's systems.
• Workers' compensation or employer's liability: required by law in many places when you have employees.
• Automobile liability: sometimes, if you'll drive to sites.
• Product liability: if you supply hardware.

Typical levels

Cover levels vary by contract size and risk. For small and medium IT contracts, buyers often ask for one to five million in local currency for professional and general liability. Large or high-risk contracts can ask for more. Read the tender: the levels are usually stated, and sometimes a lower level is acceptable at bid time with proof you'll increase it on award.

Read the small print

• Per claim or aggregate? "$2 million per occurrence" and "$2 million aggregate" are different.
• Additional insured. Many buyers want to be named as an additional insured on your general liability policy.
• Notice of cancellation. Some require your insurer to notify them if the policy is cancelled.
• Duration. Professional liability may need to continue for several years after the contract ends.
• Match with liability caps. Your insurance should broadly match the limitation of liability in the contract. See contract terms explained.

Getting it in place

1. Tell your broker the contracts you plan to bid on and send them the insurance clauses.
2. Get a certificate of insurance showing the policies and limits.
3. Store it in your bid library and set a renewal reminder.

Common questions

Do I need insurance before bidding on a government contract?

Often you need to show you have it, or confirm you'll get it if you win. Some tenders ask for a certificate with the bid, others only before the contract starts.

How much does professional liability insurance cost for an IT firm?

It depends on revenue, services and claims history. For small IT firms it's often a few thousand a year, but cyber cover and higher limits add more. Ask a broker.

Is cyber insurance required for government contracts?

Increasingly, yes, especially for contracts involving personal data, hosting or access to the buyer's network.