Every SaaS company should have insurance , as any typical business should and would. However, there are a few significant differences that every SaaS company should be aware of (by the way, insurance is a form of indemnity = way to shift/move liability by contract).
1) Commercial General Insurance. This type of insurance generally protects business owners against claims of liability for bodily injury, property damage, and personal and advertising injury. But what is important, is that this type of insurance only covers ‘tangible property damage.’ Said another way, it does not cover intangible property loss or damage (e.g data and information). So you should get this insurance, but don’t expect that it will cover much for your SaaS company.
2) Workers Compensation, Auto Liability and Umbrella Policies. I am not going to spend a lot of time on these policies, other than to say get them.
- Workers Compensation: covers employee injuries caused on the job. This type of insurance is required by state law, and is usually not a big issue for SaaS companies (cuz people don’t usually get hurt around software).
- Auto Policies: you know what this covers; nuff said.
- Umbrella Policies: fills in gaps & increases limits of the other policies.
3) Technology Insurance. Ok this is where this insurance stuff gets more interesting! Every SaaS company should pay attention to–and get educated about–the variety of technology related insurance products in the marketplace today. The problem is that this insurance is super new and evolving rapidly, and there is also not a lot of consistency between these insurance policies. Here are a few things to consider.
- Does your SaaS service store or process ‘sensitive information,’ or personally identifiable information + (i) health, (ii) financial, (iii) social security, or (iv) drivers’ license information (also check if you encrypt the data in transit and at rest, and who holds the key)? If Yes, then take a hard look at Data Breach Insurance.
- Could a bug in your SaaS service cause significant harm/damage to your customers or third parties? If Yes, then take a look at insurance which covers you for bugs or glitches (yep it exists).
- Do you perform professional services (aka implementation, integration or consulting services)? If Yes, then look for Errors & Omissions Insurance. FYI, this does not cover your actual ‘software/SaaS service,’ as it typically covers services performed by people (though is changing).
So as you can see, the really important issue is what type of Technology Insurance you need, and can purchase. Pay attention to the details here, as what they cover (and don’t cover) really matters. Get ready to learn!
Related Posts: 4 Things to Know about SaaS Indemnities.
Disclaimer: This post is for informational and educational purposes only, and is not legal advice. You should hire an attorney if you need legal advice, which should be provided only after review of all relevant facts and applicable law.