Starting a software company can be a very lucrative venture. However, in order to protect your business, it is important to have the proper insurance in place. In this article, we will discuss the different types of insurance that are available for businesses and provide tips for choosing the right policy.
Software Business Insurance Policy Options & Cost
The four most common types of insurance for software businesses are as follows: general liability, commercial property, workers’ compensation, and business insurance.
- General liability insurance protects you from lawsuits arising from injuries or property damage that occurs as a result of your business activities. General liability insurance can also help protect your software business’ assets in the event of a lawsuit. Average costs are $500-$2000 per year.
- Commercial property insurance can help reimburse you for lost or damaged property caused by fire, theft, or other covered events. Typical costs are $500-$2000 per year.
- Workers’ compensation insurance helps software businesses cover the costs of employee injuries or illnesses. This type of insurance can help businesses pay for medical expenses, rehabilitation costs, and other related expenses. Workers’ compensation insurance is required in all states except Texas. Workers’ compensation insurance typically costs between 1% to 1.5% of your total payroll costs.
- Business income insurance is sometimes called business interruption insurance or business continuity insurance. This insurance helps businesses recover from certain losses caused by events such as property damage, theft, or business interruption. This type of insurance can help businesses cover the costs of not being able to operate for a while. It can also help businesses pay for employee salaries, rent, and other ongoing costs. Average costs are $500-$2000 per year.
Other types of business insurance to consider based on the specifics of your software business include:
- Product liability insurance helps businesses protect themselves from lawsuits that may arise due to products that they sell. Average costs are $1000-$5000 per year.
- Professional liability insurance, also known as Errors and Omissions (E&O) insurance, helps professionals protect themselves from lawsuits. Average costs are $500-$2000 per year.
- Employment practices liability insurance, also known as EPLI, helps software businesses protect themselves from lawsuits that may arise from the way they employ their staff.
- Cyber liability insurance protects you from lawsuits that may arise from a data breach or other cyber incident. Average costs are $500-$2000 per year.
- Business identity insurance protects your business from theft or misuse of your company name or logo.
- Commercial auto insurance and commercial fleet insurance protect you from lawsuits that may arise from accidents involving employees while driving for work.
- Key person insurance or key man insurance protects your software business from losses that may arise from the death or illness of a key employee,
- Equipment breakdown insurance can help pay for the cost of repairing or replacing damaged equipment,
While this list of insurance options covers most software businesses, you may be required to purchase additional coverage depending on the specific nature of your software business. It is important to speak with an insurance company to determine which policies are right for your business.
The cost of business insurance will vary depending on the type and amount of coverage you purchase. However, business owners can expect to pay a few hundred dollars annually for general liability insurance.
It is essential to talk to your insurance company to ensure you have the right coverage in place for your software company.
How Much Insurance Should a Software Business Have?
This is a difficult question to answer, as the amount of insurance you need will vary depending on the type of products/services you offer and the size of your company. That being said, most insurance experts recommend that business owners purchase enough coverage to protect their assets in the event of a lawsuit.
When shopping for liability insurance, ask your insurance company about the coverage limits and available supplemental coverage options.
In summary, business insurance is an essential consideration for any software company. There are a variety of insurance policies available, and the amount of coverage you need will depend on the specific nature of your business. Be sure to speak with an insurance company to determine which policies are right for you.