Key takeaways:
- Software businesses face unique risks
- Software liability insurance offers coverage for defects that injure people or property
- Software liability isn’t the same as general liability
- Businesses need a well-rounded insurance portfolio for the ultimate protection
Small errors can unfortunately cost you big. Software liability insurance should be an essential part of your insurance portfolio.
Technology comes with many benefits but it also comes with risks. If something defects with the software your company’s built and it injures clients or property, the resulting lawsuits could ruin your business.
The typical risks faced by software companies include property damage caused by you or your employees, copyright infringement, and failure to meet customer specifications. So, what do you need to protect your business and your livelihood? We will explain why software liability insurance is very important coverage to have if you work in the technology industry.
Why you need software liability insurance
A software business is a manufacturing concern and mistakes are a risk that all manufacturers face. If your software product is alleged to be defective in application or design, it can cause losses for your clients in a variety of ways, including business interruption.
That can mean lawsuits for things like security and privacy issues or mistakes in the code that cause a loss of business income for your clients.
Software liability insurance is coverage for errors and omissions
Software liability insurance helps protect your company from charges related to negligence, errors, omissions, or mistakes in your products and services.
Let’s say you’ve just developed a wonderful new software product. You install it and a bug causes your client’s entire system to crash, leading not only to a loss of business but also to high repair costs. The next thing you know, your client is calling their lawyer and you’re facing a court date.
Another scenario involves what could be considered negligence – a missed deadline after you and the client have agreed on a schedule. If your software installation team misses a key date and causes a significant slowdown or a halt in operations, you can be held liable for any associated costs.
Adding software liability insurance could spare you from these headaches and possible devastations. It helps cover the costs of lawsuits, attorney’s fees, court costs, settlements and judgments, and a plethora of other costs, including those from mistakes that lead to data breaches.
As a software developer, you likely design and make products to fit clients’ unique needs. If your customer says that your software didn’t meet his/her required specifications or you violated any part of the contract, you could face a lawsuit.
What if you deploy a standard piece of software without modification but something went wrong during QA? Your customer could sue you, alleging that your product is defective or does not perform as they expected. Or let’s say you sold and installed an out-of-date version of your software and did not tell the customer. If they find out, you could be sued for the omission of information.
While software liability insurance covers these types of occurrences, there are other incidents it does not.
Software liability insurance doesn’t replace a general liability policy
It is important to note that while software liability insurance covers errors and omissions, negligence and, mistakes, it does not cover the same issues as a general liability policy.
General liability coverage helps protect you from expenses from property damage, bodily injury, and medical payments.
It covers everything from a client slipping and falling on your property to damage or injury to users if the software is critical to the proper functioning of manufacturing equipment or vehicle operation.
A general liability policy tailored to a software company can also protect you from claims related to intellectual property, such as infringement of copyrights for code or images, advertising snafus, and both slander and libel.
Other insurance you might consider
Comprehensive business insurance coverage is important to protect your business and your personal property. In addition to software liability and general liability insurance, your well-rounded insurance portfolio should include the following:
- Business interruption insurance – to protect your company from income lost due to a temporary interruption of business.
- Commercial property insurance – to protect against physical damage or loss of business assets.
- Cyber liability insurance – to manage the risks that come with managing customer data.
If you have employees, you’ll also need worker’s compensation insurance and employment practices liability insurance.
Your company might also have unique business needs and special endorsements can be added.
We understand your unique insurance needs
Your software company needs the protection software liability insurance gives you. Risks are lurking everywhere and new ones develop all the time in our fast-changing world. We’ll develop the perfect insurance portfolio to minimize your exposure.
We will help you get the proper coverage at the best rate. At Avante, we’re always standing by – contact us today.
This blog and website are made available by the publisher for educational and informational purposes only. It is not to be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state.