While running a business comes with many unique benefits, protecting your company adequately is essential. Buying insurance coverage is one of the best ways to do so. However, this is a complicated process that many people don’t understand.

Things become even more convoluted when insuring a business in the tech industry. Software companies regularly handle highly sensitive information.

We’ve written a guide on how to make the best decision when purchasing insurance for software companies. Let’s explore the most important information you should know.

Types of Business Insurance

To choose the best plan, you’ll need to understand the types of coverage available. General liability insurance is one of the most common policies. This protects you from libel, defamation, copyright lawsuits, and accidental damage.

It also safeguards against client injuries that occur at your office. Most businesses require general liability insurance for commercial leases and client contracts.

Errors and omissions insurance (E&O) comes into play if a software developer is sued for making a mistake. For instance, a software bug might cause a client to experience substantial downtime and lose revenue. If they sue the software firm, E&O insurance will protect the company.

If a data breach occurs, parties involved may take legal action. This is understandable, considering the average data breach cost a record $4.4 million in 2022.

Insurance can also help your business recover from a cyberattack. You may need multiple forms of coverage in certain scenarios. Working with a reputable insurance provider can guide you toward the right decision.

Risks for Software Development Companies

There’s no shortage of risk for software development companies, making insurance coverage necessary under all circumstances. Understanding potential risks will help you accommodate them in the future. Listed below are some of the most notable.

Copyright Infringement

Most software companies deal with valuable intellectual property (IP). This industry is also rife with copyright infringement.

Your competitors could also fraudulently claim you appropriated their IP. Without the right insurance coverage, you could deal with costly legal issues. Startups are particularly at risk, as they often lack the capital to handle legal problems while maintaining desired performance levels.

Cyberattacks

Hackers are constantly developing new methods to compromise sensitive business data. The tech industry offers some of the most valuable information, so it’s a high-priority target for cybercriminals. If your company experiences a cyber attack, it will likely severely disrupt your business operations.

You could even face lawsuits if hackers procure client data. For example, let’s assume that your database got hacked and someone stole hundreds of Social Security numbers.

The victims might argue that your business didn’t take the appropriate measures to safeguard this information. Legal fees can quickly add up, but insurance will help you accommodate them.

Internal Malicious Actors

Many people make the mistake of overlooking internal malicious actors. These exist in the form of rogue employees or disgruntled former workers.

To clarify, someone might apply to a software company intending to steal the company’s valuable information. They do so by leveraging the access privileges the company provides.

Former employees can also be a risk factor. When someone leaves an organization on a poor note, they could feel compelled to take revenge.

It’s common for former employees to retain access to specific systems at the organization. This is often due to an oversight on the company’s part.

Regardless of why it occurs, they’re free to wreak havoc on the organization’s systems or steal valuable information. Sometimes, they might even sell this data to an industry competitor.

There’s also something to be said about disgruntled employees filing lawsuits for wrongful termination. Even if the worker was rightfully terminated, you’ll still need time and resources to prove that no laws were broken.

Dissatisfied Clients

Clients who hire software development services are often highly reliant on the results. If the project’s outcome doesn’t meet their needs, they might feel they didn’t get what they paid for.

If the client can’t resolve with the company, they might file a lawsuit. This scenario can happen if the software developer doesn’t meet established deadlines.

In some situations, missing deadlines is entirely out of the developer’s control. Having the right insurance coverage will help you accommodate these conflicts more efficiently.

How Much Does It Cost?

Your rates will differ depending on many factors. Overall, liability plays a large role.

Newer companies and those that deal with highly sensitive information are riskier prospects for insurance providers. The type of coverage you purchase will also influence what you pay. Shop around until you find an affordable policy with the right level of protection.

Finding a Provider

Finding a provider is more straightforward than most people anticipate. Online research goes a long way toward making the best decision.

See what other people have to say about the experiences they had. Look for reviews that outline how their interactions were with the insurance company. For instance, you should be wary of reviews that mention the provider was challenging to get in touch with when filing a claim.

Look into their coverage options, as well. It’s recommended to work with someone who offers many types of coverage even if you don’t need all of them at the moment.

Ask about their pricing before moving forward. Prioritize businesses that are fully transparent about what you’ll pay. This will ensure you avoid financial issues in the future.

Don’t be afraid to look at multiple options and narrow your decision. This is the best way to make the right choice.

Don’t Overlook Insurance for Software Companies

Some people make the mistake of assuming that insurance for software companies isn’t worth the cost. It’s essential never to overlook this obligation so you can keep your business as safe as possible. This could dictate whether you’re able to overcome issues that arise.

Our team at Central Jersey Insurance Associates is dedicated to exceeding each of our client’s expectations. We have the experience, tools, and resources to ensure you choose the best coverage option. Contact us today to learn how we can connect you with the ideal policy for your needs.