What Type of Insurance Do Software Developers Need?

Software developers play a pivotal role as the architects and builders of the digital world.

Their work is fundamental to virtually every facet of daily life, powering a vast array of systems and services that we often take for granted.

But it comes great risk. Software devs also face many liability risks related to their work that could result in expensive lawsuits and third-party damage claims, which is why software development insurance, including professional liability insurance and cyber liability insurance, are crucial for protecting tech developers in Canada.

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What Liability Risks Do Software Developers Face Without Insurance?

There are a few common liability risks software developers face that they could be held financially responsible for, including:

• Errors, mistakes, missed deadlines, subpar work, or failing to meet specifications required by a customer you’re designing software for.
• Cyber incidents, like a cyber-attack or data breach, that compromise your systems, software, and data as well as your customers’ confidential data or access to their networks.
• Allegations of intellectual property (IP) infringement could land you in the real world of legal trouble if, for example, you use open source software code without proper licensing.
• Not meeting your contractual obligations to customers that causes them financial harm.
• Third-party liabilities such as injuries to others on your business premises, or if an end-user claims the software you wrote caused them financial or physical harm.

What Does Software Developer Insurance Cover for Developers & Freelancers?

A typical software developer insurance policy may include the following types of coverage:

Errors and Omissions (E&O) Insurance: Also known as professional liability insurance, technology E&O insurance for devs covers claims for mistakes or errors in their work, the advice they provide to their clients, allegations of professional negligence, and failure to deliver a service as promised.

As a developer, the work you do for your customers is expected to be flawless. But if a customer claims the code you wrote for them was full of bugs, triggered significant downtime, and resulted in them suffering a financial loss, they could sue you for damages. E&O insurance for developers and programmers is designed to help cover your legal defence expenses and potential compensation to the affected customer.

Cyber Liability Insurance: No independent professional or small business owner using technology or operating online should be without cyber liability insurance, and that includes software developers.

This type of coverage is designed to cover damages or losses resulting from data breaches and cyber-attacks, like a ransomware attack, that may affect both the developer’s system and their customers’ confidential information.

Data shows an estimated 59% of Canadian organizations were hit by a ransomware attack last year, with an average initial ransom demand of $2 million.

General Liability Insurance: General liability insurance is another vital coverage to include in a software developer’s or IT contractor’s insurance policy. It covers costs related to third-party bodily injuries or property damage that occur on your business premises or that may arise from your usual services.

Often called slip-and-fall insurance, general liability insurance provides devs with financial support if someone is injured on your property and demands reimbursement for their medical expenses.

What Optional Insurance Coverages Should A Software Developer Have?

Depending on the size and scope of your software development business in Canada, there may be other types of insurance your policy should include to form a comprehensive policy, such as:

Commercial Property Insurance: Commercial property insurance is what protects your office or workspace, business contents (including electronics), expensive servers, development equipment, and inventory or merchandise from unexpected damages or losses caused by fire, water, natural disasters, theft, and vandalism.

Business Interruption Insurance: Often included with commercial property insurance, business interruption insurance is what covers your lost income and overhead expenses following an insurable loss.

For example, if a fire damages your office and contents and you’re forced to close temporarily while repairs are underway, this coverage kicks in to cover your expenses until your office is reopened, up to the policy’s coverage limit. You have to have commercial property insurance, however, to purchase this coverage.

Directors and Officers (D&O) Insurance: D&O insurance covers costs associated with indemnification, losses or legal defence against an individual serving as a director or officer for the board of a corporation, whether it’s for-profit or non-profit, public or private.

Also called management liability insurance, it’s designed to protect business leaders, senior executives, and board members from personal financial losses related to claims of wrongdoing from employees, shareholders, regulators, or creditors. If your software development company has a board of directors, the organization could benefit from this coverage.

If you’re not sure what coverages your policy should contain, speak to a Zensurance broker who can advise you on what your options are.

How to Get Software Development Insurance in Real-Time

Zensurance is Canada’s leading small business insurance provider, helping small business owners, independent professionals, and entrepreneurs get the comprehensive, low-cost coverage they need in real time, including software development insurance.

Complete our online application in just a few minutes for a free insurance quote.

You’re online all the time, and so are we! Let our team of knowledgeable insurance brokers shop our partner network of over 50 insurers to get the right coverage to suit your software dev business, customize it to suit your budget, and issue your policy documents and a certificate of insurance in 48 hours or less.