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Software Business Insurance for Developers, Engineers & Consultants

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software business insurance for developers


The Bureau of Labor Statistics reports that the growth rate of professions in the I.T. Industry from 2020 - 2030, which includes software developers, web developers, and app developers,  is 22%. 

The pay of software engineers, developers, and consultants is decent. The hourly rate for their services is $52.95, and the annual rate is $110,140 a year. Even so, exposures common in the I.T  industry can easily lead to a financial breakdown.

Carriers offer protection through software business insurance for software engineers, consultants, and developers. Stay for a while and allow us to discuss what this is. 

Software Developer Liability Insurance


Software developer liability insurance consists of policies that will pay for the cost of personal injury lawsuits, professional negligence lawsuits, and property damage lawsuits. Liability policies most carriers offer in their software developer insurance are:

  • Technology errors and omissions insurance

  • Product liability insurance

  • General liability insurance with advertising injury coverage


Technology Errors and Omissions Insurance for Software Developers


Technology errors and omissions insurance is the policy that will protect software developers from negligence lawsuits. On average,  professional negligence from low profile clients can cost $30,000 to $50,000 and those coming from high profile clients can cost $1.3 million.  Software developers commit negligence either by mistake or failing to do what was expected of them. Here are some examples of professional negligence lawsuits against software developers:

  • Travelers Insurance sued Ignition for $154,000 after the website, it commissioned the software company to make, allowed hackers to access one of its partner’s confidential information

  • Sparta, a software development firm, received a lawsuit from Copart, an online vehicle auction company, after allegedly serving the client unfinished software. Sparta lost the lawsuit and had to pay compensation amounting millions of dollars. 

So how does technology errors and omissions insurance work? Technology errors and omissions insurance gives $1 million up to $2 million so that the policyholder can pay for attorney fees, other legal costs, and compensation to the injured party. 


Product Liability Insurance for Software Developers


Defective products as a result of negligence can be covered by technology errors and omissions insurance. However, what if the product defect is not due to a software developer’s negligence but because of something else entirely? In this case, product liability insurance is what provides protection. 

Gone are the days when software developers can get away with giving half-baked work to clients. Even the slightest error in software can affect organizations.  It’s important to note that software developers have liability over any damage their defective work caused. Here’s an example:

  • In 1995, the software development company, Intuit, released TurboTax, which is an automatic tax assistance software. Sometime after the said software’s release, some users reported that there were defects in the product.  Consumers filed a complaint later on which resulted in Intuit paying less than $1,500 in a course of three years. 

Stand-alone product liability insurance gives  $1 million so that the policyholder can pay for the cost of product liability lawsuits. Understand that a software developer might have to pay $428,000 - $1,792,000 as compensation for product liability claims. And so, product liability insurance is very important. 

Sometimes, product liability insurance is included in general liability policy. A carrier that does so is The Hartford. 


General Liability Insurance for Software Developers with Advertising Injury Coverage

Every software is the intellectual property of its developers. Copyright infringement is another exposure that software developers have to be wary of. In software development,  it’s always possible to face accusations of copying someone’s work. This is why carriers offer general liability insurance for software developers with advertising injury coverage providing protection from copyright infringement lawsuits, libel lawsuits,  and invasion of privacy lawsuits.

Advertising injury coverage in general liability insurance offers $500,000 up to $1 million, which the policyholder can use to pay for attorney fees, other legal costs, and compensation to the plaintiff.  Note that the policy excludes advertising injuries resulting from a breach of contract.



Related:


Software Engineer Insurance

Some confuse software engineers with software developers. In truth, the latter has more robust functions than the former. Aside from development, software engineers work to design the functionalities of the software and test them before release.  

Since software engineers face exposures unique to them, carriers offer software engineer insurance aside from software developer insurance. The policies included in insurance for software engineers are:

  • General liability insurance

  • Product liability insurance

  • Technology errors and omissions insurance


Software Consultant Insurance

Some software developers and engineers offer consultancy services for other professionals in the software industry. They function as a trusty source of new software concepts and designs. Carriers offer software consultant insurance as protection from these exposures:

  • Giving the wrong advice to a client, which is a ground for professional negligence

  • Personal injuries, property damage, and advertising injuries

The features of software consultant insurance vary depending on which carrier offers it. Some only offer general liability policy and its optional coverages or technology errors and omissions. Others offer both to the customer. 

There are also a few which offer other policies such as fidelity bonds, cyber liability, and business interruption. These, by the way, are the best option for software consulting firms. 

What Is The Most Important Insurance for Freelance Software Engineers, Consultants, and Developers?

Freelance software engineers, consultants, and developers should always have technology errors and omissions insurance, general liability and products liability insurance.  Having these is a contractual requirement. And so, without these policies, freelance software engineers, consultants, and developers might have difficulties finding clients in e-commerce and other industries. 

Should Software Engineers and Developers In Toptal, DevTeam, and Other Freelancing Sites Get Insurance?

Toptal, DevTeam, and other freelancing sites treat freelance software engineers and developers as independent contractors. As a result,  they won’t provide company insurance coverage in case of trouble. 

Software developers and engineers in freelancing sites should at least get their own technology errors and omissions insurance.  There are two options - get 1-year technology errors and omissions insurance or short-term technology errors and omissions insurance. 

Short-term technology errors and omissions insurance is available in on-demand liability insurance that companies like Hiscox, Thimble, and The Hartford offer.

Having technology errors and omissions insurance is enough as gigs in freelancing sites don’t work through contracts, which often require the contractor to have technology errors and omissions and product liability insurance. Instead, software developers and engineers in freelancing sites get work by bidding or by receiving direct requests from clients. 

How Can Software Developers, Consultants, and Engineers Insure Their Personal Work Computer?

Software developers, consultants, and engineers don’t use the generic computers most professionals use. Designing, building, and testing software needs a lot of processing power. And so, many software developers, consultants, and engineers invest in $2,000 computers or something more expensive. 

With that said, replacement can be costly. And so, those who don’t have the budget decide to get their personal work computers insured. The question is, “how?”.

Software developers, consultants, and engineers can insure their personal work computers by qualifying for commercial property insurance for software companies with equipment breakdown coverage. Equipment breakdown in commercial property insurance will provide coverage if the computer developer, consultant, or engineer’s work computer is damaged because of fire or any accidental loss. 

There are instances where equipment breakdown can’t apply even if the work computer is damaged and needs replacement or repair. The exclusions are as follows:

  • The work computer got damaged as a result of a cyber attack

  • The work computer got damaged because of using fraud or counterfeit software

  • The work computer got damaged because of defects in components such as the graphics processing unit, central processing unit, AIO cooler, and random access memory

Aside from insuring their work computer through commercial property insurance for software companies, some software industry professionals get coverage through their homeowner's insurance.  There are carriers that treat work computers as one of the home appliances covered. And so, if one is already enrolled in homeowner’s insurance,  it’s best to ask the details from the carrier before proceeding to get commercial property insurance with equipment breakdown coverage. 

Compare Software Business Insurance Quotes Online

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Software Business Insurance Cost

  • Software business insurance that combines general liability policy and technology errors and omissions policy is $62.5 a month or $750 a year

  • Stand-alone technology errors and omissions insurance for software professionals is $37.5 a month or $450 a year

  • General liability having product liability insurance will cost $43.16 a month or $517.92 a year

  • Stand-alone product liability insurance is $40 a month or $480 a year

  • Commercial property insurance for insuring a work computer is $68 a month or $816 a year

Here's a breakdown of the costs from the best carriers for software company insurance:

CompanyMonthlyYearlyBest for
Coverwallet$19$228Online software business insurance quote comparison
Thimble$26$312Freelance software business insurance that lasts for an hour, days, weeks, or months only
NEXT$29$336Independent software industry professionals and small software companies
Hiscox$22.50$270Big software companies

Rank and Review Insurance Companies

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Best Software Business Insurance Companies


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CoverWallet Software Business Insurance

Insuranks rating10/10
Best forOnline software business insurance quote comparison
Average Cost$19
Year FoundedSeptember 2015 and acquired by AON at 2020
CEOInaki Beringuer (former)
Headquarters101 Avenue of the Americas 18th Floor New York, NY 10013 United States
Customer Support(646) 844-9933
AM Best RatingA ( excellent)
BBB RatingA+
Number of Complaints158

Why Get Insured by CoverWallet?

  • CoverWallet offers personalized customer service including live chat with agents

  • Provides instant proof of insurance

  • Instant quotes online

  • Partner of top carriers for software business insurance

  • Affordable rates

  • Online policy management through the MyCoverWallet app

Why Take CoverWallet with a Grain of Salt?

  • Not a carrier but a digital online quote comparison platform where you can directly buy insurance policies


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Thimble Software Business Insurance

Insuranks rating9.5/10
Best forShort term software business insurance that lasts for hours, days, weeks, or months
Average cost$26
Year Founded2015
CEOJay Bregman
HeadquartersNew York City
Customer Supporthello@verifly.com
AM Best RatingA+  ( excellent)
BBB RatingA+
Number of Complaints53

Why Get Insured by Thimble?

  • Excellent customer service

  • Provides on-demand general liability and professional liability policies online for as low as $8

  • Thimble provides software business insurance quotes online instantly

  • Affordable

  • Excellent choice for freelancers and part-timers

  • Free online certificate of insurance

Why Take Thimble with a Grain of Salt?

  • Doesn’t offer bundled general liability, professional liability, and commercial property insurance for freelance software industry professionals


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Hiscox Software Business Insurance

Insuranks rating9.5/10
Best forBig software companies
Average cost$22.50
Year Founded1901
CEOAki Hussain
HeadquartersPembroke Parish, Bermuda
Customer Support1-866-424-8508 and customer.relations@hiscox.com
AM Best RatingA - excellent
BBB RatingA-
Number of Complaints12

Why Get Insured by Hiscox?

  • Direct online quoting and purchase

  • Coverage can be customized

  • Hiscox is available in all 50 states

  • Offers general liability, professional liability, and business owners policy

Why Take Hiscox with a Grain of Salt?

  • Hiscox doesn’t offer coverage to software consultants


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Next Software Business Insurance

Insuranks rating9.5/10
Best forIndependent software industry professionals and small software companies
Average Cost$22.50
Year Founded2015
CEOGuy Goldstein
Headquarters75 California Ave, Palo Alto, CA 94304, United States
Customer Support1-855-222-5919 and support@nextinsurance.com
AM Best RatingA-  (excellent)
BBB RatingA+
Number of Complaints13

Why Get Insured by Next?

  • Online policy management

  • Free online certificate of insurance

  • Allows a customer to purchase software business insurance in less than 5 minutes

  • Allows for a 10% discount when bundling insurance policies

  • Next has business owners policy, stand-alone workers compensation insurance, and commercial auto insurance for software companies, engineers, consultants, and developers

Why Take Next with a Grain of Salt?

  • Some customers report that Next’s rates can be very expensive in select states

Compare Software Business Insurance Quotes Online

Get all the best quotes from leading providers in a click of a button!

References:

U.S. Bureau of Labor Statistics. (2021, September 8). Software Developers, Quality Assurance Analysts, and Testers: Occupational Outlook Handbook. U.S. Bureau of Labor Statistics. Retrieved February 7, 2022, from https://www.bls.gov/ooh/computer-and-information-technology/software-developers.htm#:~:text=8%25-,Employment%20of%20software%20developers%2C%20quality%20assurance%20analysts%2C%20and%20testers%20is,the%20average%20for%20all%20occupations. 

Technology errors and omissions insurance. Technology Errors and Omissions Insurance (Tech E&O) | Insurance Glossary Definition | IRMI.com. (n.d.). Retrieved February 7, 2022, from https://www.irmi.com/term/insurance-definitions/technology-errors-and-omissions-insurance 

What is covered by standard homeowners insurance? III. (n.d.). Retrieved February 7, 2022, from https://www.iii.org/article/what-covered-standard-homeowners-policy 


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