Basic Insurance For Software Companies

There are three basic types of business insurance. These three types of insurance are pretty standard across every business in the United States. In fact, one of the three types is even required by law in most states.

Having all three of these is absolutely important no matter what kind of company you are running. As a software developer, there are other types of insurance that are important for you as well, but let’s start with the basics:

Commercial General Liability

General liability is the first type of insurance that we will be discussing. General liability protects you in case something happens due to your providing a product or service that you might be liable for. A common example is someone slipping and falling on a wet floor. However, as a software developer, you probably are worried about more likely things such as software that you developed causing harm to someone personally or to their business. General liability can definitely help with that.

Commercial Property Insurance

You also need property insurance any time that you have premises. When you have employees who need a place to work, then you’re going to have to have a building. You will probably have expensive equipment stored and lots of important intellectual property like the code for the software that you developed; you need to protect those things. Property insurance protects your building and can shield almost everything inside of it if you want it covered.

Workers Compensation

Any business with employees is required by law in most states) to have workers compensation insurance. Workers comp pays employees medical bills if they are injured on the job. For example, if a server stack falls onto an employee and causes serious injury, workers comp insurance may pay some or all of the medical bills as well as reimburse them for money that they would have earned had they been able to work.

Also many software company clients will require per contract for the developed to have it, even if there are no employees.

Important Insurance For Technology Companies

As a tech company, there are some other types of insurance that you should consider to fully protect your operations. Let’s take a look at some additional types of insurance for software developers that are great for tech companies to have. These types of insurance may be important for other companies as well, but when it comes to tech companies that have different liability needs than most businesses, having a little extra insurance for software developers is extremely important.

Cyber Liability: When you have access to customer data, then you need cyber liability insurance. The more sensitive that customer data is, the more important this coverage becomes. Cyber liability protects you in case of a data breach. As a software developer, you may have access to customer information, including financial information, as well as other sensitive info that could cause problems for customers if it gets into the wrong hands. Data breach coverage can protect you if that happens.

Errors and Omissions (E&O): You also should get errors and omissions insurance – commonly know as professional liability insurance. How much you need depends upon your software and what it does. If your errors and omissions with a software package could cause someone major financial damage, then professional liability is absolutely vital.

You have to make that decision yourself by looking at the software that you provide and how it is used by your customers. If you make software for others, then an error in an application’s coding could cost them millions. This type of insurance protects you from some of those problems. Following is list of the most common E&O claims that tech companies face:

• Breach Of Contract: One party does not meet its obligation from a clause in a written or verbal contract for the software development.
• Breach Of Warranty: You promise something to a software client in a warranty, and you’re unwilling or unable to keep that promise.
• Misrepresentation: A party makes a false statement or claim in to get the party to agree to the terms of a contract.
• Negligence: Happens when a software firm fails use reasonable care, which results in damage or harm to a person or entity.

Umbrella: A commercial umbrella policy gives you some additional insurance coverage that you may need is a software developer. General liability goes a long way and when you combine that with errors and omissions insurance and cyber liability, then you have a pretty full coverage plan. However, if there any gaps, an umbrella policy may be able to fill them – and it also extends the limits of your liability policies. Umbrella policies are often required contractually to get a certain project.

Other Types Of Commercial Insurance To Consider

There are some other types of insurance that you want to consider as well. These are not necessarily vital for a software developer – or any business – but they can be useful with certain types of businesses and some may even be required. Let’s take a look at three types of insurance that you may want to add on to your other insurance portfolio:

• Employement Practices Liability (EPLI): Employement practices liability insurance protects you against employees or others bringing claims against you for discriminatory practices, sexual harassment and quite a few other things. Sometimes, employees or ex-employees can bring frivolous lawsuits that have no basis in fact, but this insurance plan keeps those lawsuits from costing you money.
• Business Income: Also known as business interruption insurance, it covers the loss of income that a software development business suffers after a disaster. Imagine if a fire destroyed all your hardware. The income loss covered may be due to the closing of the business facility or due to the rebuilding process after a disaster.
• Commercial Auto: If you have company vehicles that you use, then you may need commercial auto insurance. If you are just driving to and from work, then you do not need business auto insurance. However, if you have vehicles that are specifically intended for work, or if you use your personal car for a large number of work-related activities, then you may be required to carry commercial auto insurance. Also, a type of commercial auto insurance called hired and non-owned auto (HNOA) is often contractually required.