Do Software Developers Need Indemnity Insurance?

It is a fact that software development is one of the fastest growing industries at present. At the same time, it is among the newest as well. As a result, businesses in this industry risk falling into many different legal traps. One of the methods for protection is the purchase of indemnity insurance. Find out how effective and reliable it is.

Cover Basics

Indemnity insurance covers your professional liability. More specifically, it protects you in the case of negligence, error or omission. Most policies available in the market offer more comprehensive coverage which includes loss of documents, defamation, libel and slander and unintentional copyright infringement.

It is easy to understand how such a policy works. If you develop a financial software programme for a client and his business incurs a loss because of an error in the code leading to inaccurate calculations, the client will make a claim for compensation. The policy will kick in to provide the compensation. In this way, your business will not suffer a financial loss.

Indemnity vs. Product Liability Insurance

Traditionally, indemnity insurance has been reserved for service businesses while product liability is used for covering product manufacturers and sellers. Typically, software is considered to be a product, but for the purposes of liability insurance it must be regarded as a service. It does not matter whether you develop applications on commission for clients or offer readily developed applications for sale in the market. This is because product liability policies cover damage to physical assets and bodily injuries only. At the same time, it is highly unlikely for a software application to cause these kinds of issues. Usually, users incur some sort of financial loss.

Proper Protection

As a software developer, you will certainly require an indemnity cover. The question is how to get the right one. As a start, you need to look for a policy which offers comprehensive protection. You should be cover against all possible claims which can be made against your business. It pays off to do some research on this. Check out what other companies in your industry get claims for.

Virtually all policies nowadays offer legal protection. This means that the cost of legal defence is covered by the policy. You have to check whether this amount is part of the total cover amount. If this is the case, you will have less money available to pay the actual compensation.

You should definitely work with experts in indemnity insurance in order to get proper protection for your software development business.