In today’s modern, digital environment, most companies rely on some form of software to help run their businesses. As a software developer, your professional services and expertise are in high demand, but your work also comes with a number of risks and liabilities. It’s important to consider obtaining a comprehensive business insurance package to financially protect your company from risks ranging from client lawsuits to cyberattacks.

What insurance coverage do I need for my software development company?

While there are many types of coverage for companies to consider, these insurance policies are particularly important for software developers to consider:

Professional Liability Insurance

Software development can be incredibly complex, and the chance for error is high. When you develop software for clients, they expect the end result to meet their specifications. If you make a mistake in your work or the end product doesn’t function as planned, it could have a major financial impact on your clients. Clients who aren’t satisfied with your work could sue your business for damages and claim failures in services, advice, or professional work. Even if your company did nothing wrong, clients could still sue if they feel you were negligent in your work. Professional liability insurance can ensure that your business is financially protected, covering for legal and defense costs, settlements, and any judgments against your company.

Example:

• An error in code in the sales software your company developed for a client means that their sales representatives are unable to access important data for several days, resulting in thousands of dollars of lost sales. Your client sues your company for damages. Your insurer would cover the lawsuit and any damages or settlements.

Cyber Liability Insurance

As a software developer, your business heavily depends on digital systems and networks that could be vulnerable to cyberattacks. Even if you have strong cybersecurity protections, cybercriminals frequently develop new ways of exploiting security loopholes, and it’s impossible to be prepared for every new attack. If your systems or data are illegally accessed or stolen, you could be held liable, and the costs of recovering from a cyberattack are high. Cyber liability insurance can cover financial losses that result from data breaches, hacking, viruses, denial of service attacks, and other similar cyber events.

Example:

• One of your employees falls victim to a phishing email that appears to be from a coworker asking them to download a file. The file infects their computer with a virus that spreads through your company’s network, corrupting data and delaying several major projects. Your insurer will pay for the costs of hiring consultants to remove the virus and restore data. It will also reimburse you for income you lost due to the delays.

Commercial Property Insurance

If your company operates from owned or rented office space and relies on computers and other valuable property, it’s a good idea to invest in commercial property insurance. Commercial property insurance protects your company’s physical assets in the case of unforeseen accidents or natural disasters. In such events, commercial property insurance makes it easier to recover by reimbursing you for the cost of replacing damaged property. This type of insurance is particularly important for companies in the IT space that rely on expensive or hard-to-replace computer equipment. Commonly covered perils include fire, vandalism, windstorm, and water damage.

Example:

• An electrical fire starts in your office, and the resulting smoke sets off the fire sprinklers. Your building is damaged by the fire, and your office furniture and computer equipment suffer water damage from the sprinklers. Your insurer would pay to replace any property that suffered water damage, as well as repair your office building from any fire damage.

General Liability Insurance

General liability insurance can help protect you and your company from the financial burden of a lawsuit that claims personal injury, bodily injury, or accidental property damage. No matter how safely you conduct business, accidents happen. There’s always a chance that someone could be injured while visiting your offices, or that your employees might accidentally cause property damage while attending a meeting at another location. General liability helps to safeguard your business against bodily injury or property damage lawsuits from clients or third parties. It also covers personal and advertising injuries such as libel, slander, and copyright infringement.

Examples:

• Property damage: Several of your software developers visit another company’s offices to discuss a new project. While there, one of them accidentally knocks an expensive sculpture off its pedestal, destroying it. Your general liability insurance would pay for the damage.
• Bodily injury: While delivering ergonomic equipment to your company, a delivery person trips on an uneven step in your entryway and falls, injuring his back. Your general liability insurance would cover medical costs and legal costs if the delivery person sues.
• Personal and advertising injury: The artwork you use in ads for your software looks very similar to a professional artist’s work. The artist sues you for copyright infringement. Your insurer would pay for legal defense and any settlements.

Additional Coverage

• A business owner’s policy combines general liability, property, business income, and extra expense coverage into a single package. This type of insurance can help small and midsize companies save money on premiums while obtaining a wide range of coverage.
• Business income coverage will reimburse you for lost income and operating expenses if your business is unable to operate due to a covered reason, such as fire, storm damage, or other property damage.
• In most states, workers’ compensation insurance is legally required for companies with employees. It covers the medical expenses and lost income of employees who are injured or fall ill while working. For IT companies, repetitive strain injuries are common sources of workers’ compensation claims.
• Employment practices liability insurance protects your business against lawsuits by employees accusing your business of wrongful treatment such as discrimination, harassment, or other employment-related issues.

Pricing and Quotes

Pricing for business insurance will vary based on the type of insurance coverage and the risk profile of your business. Insurers consider factors such as:

• Business size
• Industry
• Location
• Number of employees
• Claims history

Businesses with higher risks will have higher premiums than those deemed lower risk. For example, a software development business with a history of frequent claims will face higher premiums. Premiums also rise as you increase the limits of insurance. Different insurance companies have different models for rating risks, so it is worth comparing pricing across different insurers.

In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer coverage for technology businesses:

Provider	General Liability	Professional Liability	Business Owner's Policy
Embroker	✔️	✔️	✔️
CoverageSmith	✔️	✔️	✔️
CoverWallet	✔️	✔️	✔️
Hiscox	✔️	✔️	✔️
Thimble	✔️	✔️	✔️

Final Word

There are many major risks that could affect your software development company. Lawsuits brought by unhappy clients, physical damage caused by a disaster such as a fire, and cyberattacks are all risks that could have a serious impact on your business. Obtaining the right insurance coverage can give you confidence that your company will be protected in the event of a catastrophe, allowing you to focus on growing your business.