Whether a business owner is creating the next big computer program that will change the world, or you are an application creator and hoping to make the next big Candy Crush, there are risks involved. As a software development professional, you and your small business are at risk anytime you are providing a professional service to a client. There are many reasons that a claim could arise that involves your business - day to day. Whether you have done it intentionally or not, some things can happen that can make a client unhappy and cause them to sue you. Copyright infringement, cyber attacks due to a vulnerability, property damage to a clients property while you are working (i.e. coffee spilled on a computer), coding errors, and failure to complete your project on time are just some of the things that can be claimed by an unhappy customer. Avoid having a significant financial loss by purchasing one of the most important insurance policies – Professional Indemnity insurance policy designed specifically for software developers.
You may also hear the words Errors and Omissions or Professional Liability when discussing Professional Indemnity insurance. The policy will cover some basic things, and as with most insurance policies, you can add on extra coverages. It is crucial that as a software developer you have a Professional Indemnity insurance policy because mistakes can happen and some customers will be unhappy no matter how you try to correct the situation. In addition to the fundamental Errors and Omissions coverage, you will also be covered for defense costs. Defense costs can end up being over tens of thousands of dollars depending on how the court case goes, and you will also be on the hook for court fees. Even if you win the court case, the attorney is going to charge you for their time so be sure to be prepared by having adequate insurance coverage. CoverWallet can discuss your unique situation and provide the best options for you.
Let's break this down into a real-life example to help you determine if you need Professional Indemnity insurance coverage. A software developer entered into a contract with a client to create a specific kind of software. Maybe they were tired or having a rough time with their personal life, or just didn't have the time and two years after the contract was signed they still hadn't completed it, and it had a lot of mistakes. The client declines to take the software at this point and ends up hiring another software developer to complete the software. Since the contract was breached, the client sues and wants to be reimbursed for the entire amount of the contract. The amount of the contract was $600,000 plus damages for wasted money spent over the two years they were waiting for the software. There was a clause in the insurance policy that said each contract would only be liable for $25,000. Unfortunately, this was deemed unreasonable and unenforceable, and the client ended up being awarded $1,400,000. If this happened to you and you didn't have the Professional Indemnity insurance for software developers, would you be able to pay the settlement?
As you can see from the real-life example mentioned above, just one claim can turn out to be very expensive. At the very least CoverWallet recommends that you carry $1,000,000 per occurrence and $2,000,000 per aggregate (policy period). You should also take into account the size of your business. The bigger your business is and the more employees you have, the bigger your exposure to risks. Some other business insurance policies you should think about purchasing include:
CoverWallet can help you sort through your insurance needs. Contact us today to discuss your situation and receive a no-obligation quote, or apply online. You may even save some money by bundling all of your policies.
The cost of Professional Indemnity insurance for software developers can vary depending on many factors. If you are an individual and have an average limit of $1,000,000 per occurrence, then you can expect to pay $500 annually at a minimum. If you have employees, this can significantly increase the price of the policy. Some other factors to take into consideration are annual revenues, past claims history, location, and deductible if you choose to have one.