7 Things to Know Before Purchasing Web Developer Insurance
Mistakes and legal problems happen to everyone, even small businesses in low-risk industries. Many developers don’t think they need more than the basic insurance coverages, but as more and more of our lives move online, the risks in this industry increase. Software and web developer insurance provides protection for both individual freelancers and small businesses from a wide range of issues that pose financial threats. When you go shopping for web or software developer insurance, keep these important things in mind:
1. You’ll likely need 6 types of insurance.
Every business is different and getting the right coverage depends on a lot of factors, including your geography and industry to services offered. That being said, most developers need these insurance policies:
Technology Errors & Omissions (E&O)
This coverage protects you from liability when mistakes in your development services cause financial harm to the customer, user, or others. Because it covers the biggest threat your business faces—when something goes wrong with your code or product—tech E&O is the most important insurance for software developers, web developers, and web designers. It’s also the most expensive, so budget accordingly.
A comprehensive tech E&O policy will cover four main “wrongful acts” relating to: technology and professional services, technology products, media, and data and network.
The policy also protects developers from cyber attack liability, such as when data breaches or hacking incidents compromise the websites or systems you've developed.
Cyber Liability
Cyber insurance is a separate, different type of policy from tech E&O. It protects businesses from the costs and losses related to when they experience a cyber attack, including data restoration and system repair, ransomware payments, and crisis management. This is additional coverage you would purchase to protect your own systems and infrastructure, whereas tech E&O protects the systems of your clients. Although, both Tech E&O and Cyber are usually both included on the same policy.
For example, if hackers get access to your internal databases (and all the sensitive client information in them) via a phishing attack, cyber insurance would cover the costs of fighting the attack, repairing the systems, and even notifying affected customers.
Cyber coverage can also include advertising injury liability, which protects you in the event of a copyright claim. As a developer, you're often dealing with content, graphics, or software that might unintentionally infringe on someone else's intellectual property rights. That’s why many cyber policies cover advertising injury, wrapping everything into a comprehensive web and software development insurance product.
General Liability
Commercial general liability (CGL) is the most common business insurance policy in the U.S. It’s popular because the coverage is broad—it insures your business from physical injuries or property damage that could occur as a result of your operations or actions to others. For instance, if a client is injured after tripping over a cable at your workplace, CGL would cover the medical bills.
Property Insurance
While CGL protects from harm you cause (however inadvertently) to property and people, commercial property insurance protects the physical assets of your business—like office equipment, computers, and servers—from theft, damage, or disasters. Physical assets include your building, business personal property, and the personal property of others that’s in your “your care, custody, and control.” For example, if a storm causes flooding in your building that damages desks and chairs in your office and the office you sublease to another business, the cost to replace the furniture would be covered under your property insurance.
Workers Compensation Insurance
If you have employees, even a single one, you are likely required by your state to have workers comp insurance. This policy covers medical expenses and wage replacement if an employee is injured on the job. (Remember that someone you consider a freelance web developer or independent contractor may actually be viewed as an employee in the eyes of your state tax laws, so be sure to read the statues.)
Hired & Non-Owned Auto Liability
Hired and non-owned auto (HNOA) is another recommended type of business insurance for software developers, web developers and designers, and all small businesses. If you or an employee are in a car accident and cause property damage or bodily injury to someone else, HNOA would provide coverage. There are two elements to this policy:
- “Hired” means you’re covered when driving a borrowed, leased, or rented car for business; and
- “Non-owned” refers to when you or employees are driving personal cars for business
In short, HNOA protects your company from the risks on the road every time you drive to a meeting, conference, or any business function.
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2. Tech E&O isn't standardized, so read the fine print.
Because tech E&O coverage is the most important type of software and web developer insurance, it’s likely that you’ll purchase it. But what can be tricky is that tech E&O is not standardized. While general liability coverage is fairly comparable across insurance providers, E&O can be completely different products.
It might seem smart to get a bunch of quotes and compare pricing, but policies vary significantly in terms of what they cover and how they define specific terms or incidents. In other words, you may not be doing an apples-to-apples comparison. Pay attention to the policy details to ensure you’re getting the best quality coverage.
3. Your industry will affect the cost of insurance.
Even though your job itself isn’t inherently risky (no one is risking their life to code), doing software or web development in high-hazard industries will make your insurance more expensive. Industries like gambling, utilities, adult content, and cannabis pose unique risks and challenges, and insurers price their business insurance for software developers and web developers accordingly.
4. Bouncing between insurance providers can leave you with coverage gaps.
Many insurance products include a “claims made and reported” policy. This means your insurance will only cover claims that are submitted and reported during the policy period. So, if a claim arises from work done during the previous policy, your new policy might not cover it. (In comparison, a “occurrence based” policy typically states that you’ll be covered if the claim happened during the policy period, but was reported after the policy term ended.)
To avoid coverage gaps that leave you holding the bag financially, don’t switch insurance companies too often. And always be sure you know if you have a claims made and reported policy in your insurance. If you have to switch insurance providers, there are things you can do to avoid gaps, such as purchasing tail coverage. But it is always easier to get insured by a reliable carrier and renew it for many years.
5. Marketing claims of “AI underwriting” are dodgy.
Don’t trust promises of AI underwriting or similar marketing gimmicks from insurance companies. At this point in time, the technology is just not advanced enough to handle the complexity of the industry and provide quality software or web developer insurance.
It’s essential to choose an insurer based on their reputation, quality of service, confidence in their claims handling, and the tangible coverages they offer. In our experience, claims of “fast underwriting with advanced tools” like AI are made by small providers that haven’t been in the industry long and do not offer the same stability as their competitors. There are exceptions, of course, but be cautious of these marketing ploys and speak with an insurance expert about how to customize your policies for your company.
6. Your insurance provider should offer higher limits than you actually need.
Prepare for the future by choosing an insurer that has the capability to give you higher limits than what you’re currently purchasing. Sometimes, big clients or projects demand higher insurance limits and you want to be able to accommodate them quickly. Although you might not need it today, getting a higher limit should be as easy as making a quick call to your insurer, instead of the slow process of finding a new carrier while your client is waiting.
Many online insurers only offer $1-$2 million in limits and won’t go any higher. In comparison, most of our carriers can go much higher. We can also provide excess policies to get limits as high as you need.
7. You might need third-party Employment Practices Liability Insurance (EPLI) coverage.
Depending on your industry and services, you may need to purchase EPLI coverage to insure against ADA (Americans with Disabilities Act) discrimination complaints. This will be an important policy to include in web developer and web designer insurance in particular. Title III of the ADA prohibits businesses open to the public from discriminating against people with disabilities, whether it’s a brick-and-mortar location or online website. Over 11,000 people filed an ADA Title III lawsuit in 2021, which is a 320% increase since 2013. If your web development practices aren't ADA compliant (i.e., you’re creating websites that aren't accessible), this can protect you against potential lawsuits.
The Bottom Line
Web and software development is a fast-growing industry with its own set of unique risks. Having comprehensive coverage for your business, whether you’re a solo-prenueur or small company, will safeguard your finances and allow you to take on more challenging projects without worrying about making mistakes. We can help you customize your web or software developer insurance to ensure you get a quality policy at the most affordable rates. Contact us today for a free quote.
About The Author: Austin Landes, CIC
Austin is an experienced Commercial Risk Advisor specializing in property & casualty risk management for religious institutions, real estate, construction, and manufacturing.