Government work involves numerous risks not found in other industries. From heightened compliance hurdles to high-value liability claims, contractors are consistently exposed to financial threats that demand strong insurance coverage. However, when choosing government contractor insurance, determining which policies to select can be challenging. Choosing insurance types that do not serve your business leads to unnecessary expenditures, while failing to notice a serious gap can leave you exposed to financial risk.
While every government contractor differs, some basic types of insurance are recommended across industries and work niches. Here are the main types of insurance every government contractor should have, as well as common mistakes that contractors make when selecting insurance.
Essential Takeaways
- Government work varies greatly across sectors, but all should carry some basic insurance policies.
- The most common insurance recommendations for government contractors are General Liability, Workers’ Comp, E&O, Cyber Liability, and DBA.
- Failing to account for employee type and location, state laws, and additional insureds can leave contractors more exposed than they realize.
Types of Insurance Every Government Contractor Should Have
Government contractors operate in a wide variety of niches, and some insurance policies are typically required to address the risks specific to those niches. However, every government contractor would typically do well to carry some form of:
General Liability
One of the most common types of insurance coverage across industries is general liability, and for good reason. This type of protection shields your business from the financial repercussions of damage to third parties.
For example, suppose that your company causes property damage to a government facility. General liability insurance could help to cover the cost of fixing the damage. In many cases, entities require some level of general liability insurance to enter into a partnership with a government contractor.
Workers’ Compensation
Workers’ compensation insurance addresses the financial risk of workplace injuries. This type of policy can cover expenses such as medical treatment, rehabilitative care, or, in the unfortunate event of a worker passing away due to work-related injuries, funeral expenses, and compensation to the family.
State laws typically require a government contractor to carry at least some level of workers’ compensation coverage. Be sure to check how the policy you are considering treats 1099 employees.
Professional Liability/Errors & Omissions
Even the best contractors make mistakes, and E&O coverage can minimize the financial fallout. Also called professional liability insurance, errors & omissions addresses costs associated with errors during work. For example, if an IT team failed to properly configure a system, leading to that system being down, the contractor can be held financially responsible.
Errors & omissions insurance can benefit any industry, but it is most common in tech, engineering and design, consultancies, and staffing firms.
Cyber Liability
In the modern digital age, sensitive information is more vulnerable than ever. A single data breach could come with catastrophic consequences, which is why cyber liability insurance has surged in popularity over the last two decades.
Cyber liability insurance can cover the costs of responding to a data breach and may address third-party liability or ransom demands. It should always be customized to address the specific types of data and vulnerabilities a government contractor encounters most often.
Defense Base Act (DBA)
Many government contractors do not become aware of DBA insurance until they need it and realize they do not have it. DBA coverage functions as workers’ compensation insurance for government contract work occurring overseas. Similar to standard workers’ compensation, it can cover medical costs, lost wages, disability, and funeral costs.
Common Insurance Mistakes Government Contractors Make
Making the right insurance choices can feel overwhelming. Without working with an industry professional, some of the most common insurance mistakes contractors make include:
- Assuming general liability coverage will address professional liability concerns
- Failing to secure cyber coverage
- Attempting to use standard workers’ compensation for overseas workers
- Failing to account for the limits and specifications of each contract
- Not listing the correct additional insureds when required
- Treating 1099 employees the same as other employees when choosing coverage
Get the Insurance Coverage You Need To Operate With Confidence
Government contractors play an irreplaceable role in business, and like any business, they should carry appropriate insurance coverage. However, the distinct needs and challenges of government work can make this decision feel impenetrable. The professionals at CI Solutions have years of experience guiding government contractors to the insurance blends that are right for them. Contact CI Solutions for personalized help with your government contractor insurance mix so you can approach your next job with confidence.