Whether you are creating the next big computer program that will change the world, or you are a small app creator, there are risks involved. As a software development professional, you and your 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.
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, 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.
The best way to avoid having a significant financial loss is to contact your insurance broker and get one of the most important insurance coverages – Professional Indemnity insurance policy designed specifically for software developers.
What Does Professional Indemnity (PI) Insurance for Software Developers Cover?
You may also hear the words Errors and Omissions or Professional Liability when discussing Professional Indemnity insurance. 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 Professional Indemnity coverage, you will also be covered for defense costs. Defense costs can end up being over tens of thousands of euros 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 right insurance coverage.
Claim Examples for Software Developer
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 year 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 800 000 € plus damages for wasted money spent over the two years they were waiting for the software. 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?
How Much Professional Indemnity Insurance Do I Need?
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 Inpro Insurance specialists recommend to carry 1 000 000 € per occurrence and 1 000 000 € to 5 000 000 € 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:
Provides coverage for bodily injury and property damage. Some clients will require you to carry it to avoid possible fines.
If you have employees you should have a Employers Liability policy to cover if they are injured on the job.
Cyber Loss means any loss, damage, liability, expense, fines or penalties or any other amount directly caused by the use or operation of any Computer System or Computer Network.