Developing software programs that make our working lives easier is a cornerstone of effective business. Whether you’re operating a business with only a few people or a large software corporation, you need insurance to protect you against the risks that come with developing software.
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In addition to protecting yourself against the typical risks that come with running any business, insurance for software companies is designed to help you deal with potential lawsuits associated with your software.
Who Needs Software Business Insurance?
- IT consultants
- Application service providers
- Software developers
- System designers
- Website developers
- Computer programmers
- Hardware installation experts
- IT project managers
How Is Insurance for Software Companies Different?
If you work in the software industry, you’re probably familiar with securing contracts for certain development projects. Many contracts specifically address indemnity.
If your software product causes a glitch that makes the company lose business and revenue, you can be held responsible. Make sure that you read the contract carefully before signing.
If you’re not fully protected with the right kind of insurance and enter into a contract that places full responsibility on the software company, your business can be at risk financially.
Software business insurance provides a protection net that lets you conduct business confidently. This financial protection can cover legal claims against you and help you to keep your business running.
There are several types of coverage you may want to consider as you determine the best way to manage your risks.
Insurance for Software Companies: Forms of Coverage
When running a business, you’ll have standard insurance needs similar to any other type of business, as well as specific needs associated with your industry and niche.
Making sure that you have the right combination of both will provide the most comprehensive protection. Some common forms of coverage that every software company should have include the following:
- Data breach coverage: If customer data is stolen, this policy will help you address legal liability and expenses. This form of coverage can also help you meet legal regulations.
- Commercial property insurance: This form of insurance will help protect your brick-and-mortar building as well as all business collateral. Purchasing the right amount of coverage will ensure that you can rebuild if necessary.
- Loss of business income insurance: If your company must shut down due to a covered claim, this can help replace income so you can keep paying business expenses.
- Workers' compensation: Depending on your state regulations, this coverage is typically required if you have employees. If an employee experiences a job-related illness or injury, this policy can help pay for medical expenses and lost income, and can also protects you from a lawsuit.
While your software business insurance provides protection for many different circumstances, one issue that is very important to address is your liability risks.
The Importance of Liability Insurance
As a software company, you must deal with general and specific liability issues. Ask your independent insurance agent which liability policies are best for your company.
- Professional liability insurance: This is also known as errors and omissions insurance, and will cover you if your performance doesn’t meet the client’s expectations. Ask your insurance agent if software copyright infringement can be added to your policy.
- General liability insurance: Accidents happen and this policy can protect you if you’re held responsible. If a client slips and falls while on your property, you’re accused of libel or slander, or you cause damage to someone else’s property, this insurance can provide compensation to the damaged party or cover your legal defense and fees.
- Business owners policy: Commonly referred to as a BOP, this combines general liability insurance with property damage coverage.
Let’s look at a few situations where your business liability coverage can cover the specific risks of software companies.
- A software vendor provides hardware and software responsible for recording employee hours. There’s a glitch in the system and employee hours aren’t recorded. Some employees are overpaid while others are underpaid. The time clocks must be replaced, resulting in a claim against the software provider.
- A network management team is hired to upgrade an infrastructure and misses the deadline because of a breakdown of management. Due to a resulting loss of revenue, the client sues the service provider.
- A store claims a software company sold a defective system that didn’t include the right security precautions. A hacker breaks into the customer database and steals private information, and as a result, the store sues the software company.
Even with safety precautions in place, liability insurance is the best way to deal with unexpected circumstances. Make sure you set the right coverage limits to protect your company assets.
Finding the Right Software Business Insurance for You
Insurance for software companies is complex, and selecting the right coverage for your specific business risks can be a challenge. You will need to take a close look at how you operate, and the particular exposures your business needs to cover.
Make sure you're working with some helpful professionals who can advise you.
Whether you're using colleagues, a lawyer, a financial adviser, or an insurance agent to get information about your options, you will still need to make sure you're checking several quotes before you buy to make sure you're buying an insurance product that is right for your business needs.
TrustedChoice.com Article | Reviewed by Jeffrey Green
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Insurance Expert Jeff Green