Software Development Business Insurance
Getting insurance for your software development business is essential.
This is because you will need to protect yourself against a number of risks, such as those that relate to trademark infringements, contract violations, and indemnity claims.
Depending on the size of your business, it will likely also be a good idea to purchase workers’ compensation insurance in order to protect yourself against employment law-related disputes.
We’ll help you find the most personalized and affordable coverage for your unique business.
Recommended: Next Insurance is dedicated to matching small businesses with the right policy at the best price.
Best Insurance for a Software Development Business
General liability insurance is — generally speaking — one of the most important insurance policies for software development businesses.
Some of the risks general liability insurance covers are:
- Bodily injury
- Property damage
- Medical payments
- Legal defense and judgment
- Personal and advertising injury
Even so, you will likely benefit from purchasing additional coverage. This is because a general liability policy will not be able to protect you from all of the risks that your company will be privy to.
All in all, we recommend considering the following coverage options in addition to a general liability policy:
- Intellectual property insurance — Covers you against trademark or copyright infringements.
- Workers’ compensation insurance — Protects you against employee injuries and disputes.
- Commercial property insurance — Covers the cost of repairing and/or replacing your business’s property (e.g., work computers, furniture, etc.).
You will also need to spend some time in order to find the right business coverage provider for your needs.
Even though there are several great options available, we recommend going for an online provider as a small business.
This is because online providers use AI in order to offer personalized coverage — instead of a live insurance agent — and thus benefit from having lower operating costs. This allows them to offer more affordable rates.
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Cost of General Liability Insurance
On average, software development businesses in America spend between $350 - $900 per year for $1 million in general liability coverage.
Compare the average cost of general liability insurance for a software development business to other professional industries using the graph below.
Several factors will determine the price of your policy. These include your:
- Location
- Deductible
- Number of employees
- Per-occurrence limit
- General aggregate limit
You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner’s policy (BOP) rather than as a standalone policy.
A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.
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Common Situations That General Liability Insurance May Cover for a Software Development Business
Example 1: While visiting your office to discuss a new project, a client slips on wet flooring in the restroom, breaks an arm, and decides to sues you for damages. General liability insurance policy would pay for your legal defense.
Example 2: Another software development business files a libel lawsuit against your company. General liability insurance would cover your legal defense costs.
Example 3: As an employee walks around a corner in your office, she accidentally runs into a visitor and knocks him to the floor. He breaks a wrist in the fall and asks you to pay for his medical treatment. General liability insurance would cover his medical expenses.
Other Types of Coverage Software Development Businesses Need
While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some of the most common types of coverage:
Product Liability Insurance
While you strive to design software products that satisfy your clients, there’s always a chance someone might decide your product caused them injury. In the event of a lawsuit, product liability insurance would cover your legal fees and any required settlement.
Workers’ Compensation Insurance
Most states require businesses to carry workers’ compensation insurance for their part-time and full-time workers. This coverage protects your developers and other employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover, but also any disability or death benefits stemming from a workplace accident.
Commercial Property Insurance
You made a major investment in the equipment, supplies, hardware, software, and real estate needed to run your business. In the event of a fire, theft, or natural disaster, commercial property insurance would cover the cost of repairing or replacing your business-related property. This includes structural damage to your building and the business materials stored there.
Commercial Umbrella Insurance
While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.
Additional Steps To Protect Your Business
Although it’s easy (and essential) to invest in business insurance, it shouldn’t be your only defense.
Here are several things you can do to better protect your software development business:
- Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
- Set up an LLC or corporation to protect your personal assets. (Visit our step-by-step guides to learn how to form an LLC or corporation in your state.)
- Stay up to date with business licensing.
- Maintain your corporate veil.
Software Development Business Insurance FAQ
Yes, absolutely. You will need to first get a quote from an online business insurance provider like Next Insurance. Next allows you to then purchase a policy immediately and your coverage will be active within 48 hours.
A typical business owner’s policy includes general liability, business interruption, and commercial property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company’s needs.
"Business insurance" is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.
Even though you will likely not “need” it, it is recommended.
This is because you will want to purchase your business insurance before any liability arises, and the safest way to go about this is to ensure that it is done before you begin interacting with customers, purchasing equipment, or hiring employees.
Not necessarily. Certain exceptions may be written directly into your software development business insurance policy, and some perils may be entirely uninsurable.
Yes, an LLC is meant to create a legal barrier between your business and your personal assets and credit. If you haven’t formed an LLC yet, use our Form an LLC guide to get started.
An LLC doesn’t protect your business assets from lawsuits and liability– that’s where business insurance comes in. Business insurance helps protect your business from liability and risk.