IT Business Insurance for Web Application Developers
As a web application developer, you know just how quickly the use of web applications
(particularly for businesses) have grown over the past few years. You also know
that while many enterprises greatly benefit from the applications you build for
them, there are inherent security issues with web app development that leave both
you and your clients vulnerable to exposure and attack. This makes having a robust
small business insurance plan an absolute necessity for any web app development
business. Read on to learn about the IT business insurance coverages available to
business owners like you.
The Most Important Tech Insurance Coverages for Web Application Businesses
Not all web application businesses are the same (your company may also be an application
service provider, for example, in addition to providing development services), which
means your company may face exposures and risks that your peers do not. As a business
owner, you can customize your tech insurance policies to suit your needs—adding
extra endorsements that you need and cutting excess coverage. Below is a list of
the most commonly purchased coverages in your industry:
General Liability Insurance. This is the backbone of any solid tech insurance
plan: it protects you from the most common business liability claims: physical injury,
personal injury, and property damage. General Liability lawsuits come from people
outside your business (including clients) and helps cover expenses like legal defense,
medical bills, judgments, and settlements.
Business Property Insurance. When unexpected events (fire, theft, tornadoes)
wreak havoc on your business property (rented or owned office space, furniture,
computer equipment, software), this coverage steps in to help you pay for replacement
or repair. This policy is often bought at a discount with General Liability Insurance.
Business Owner’s Policy (BOP). If your web application business is
considered “low-risk” by insurers, you may be able to purchased General
Liability Insurance and Property Insurance together in the form of a BOP. It’s
cheaper than two separate policies and usually comes with other benefits, like
Business Interruption coverage and full-replacement Property coverage. A
Tech Insurance agent can let you know if your web app development business
is eligible for a BOP.
Errors & Omissions Insurance (E&O). As may be apparent by its name,
E&O Insurance protects web application developers in the event that a professional
error or oversight costs someone (like your client) money. Since it’s easy
for web app developers to be accused of a mistake, this is essential coverage for
Cyber Liability Insurance. All web developers need this coverage because
their products are extremely vulnerable to corruption and malicious activity. Pair
that with the sensitive information apps often need to run, and you have a recipe
for disaster. Most companies are safe with first-party coverage, but IT businesses
like yours should generally purchase third-party coverage as well.
Workers’ Compensation Insurance. This coverage is regulated by the
state and allows business owners to pay for employees’ medical bills, should
they experience a work-related injury or illness. Sometimes, employers must carry
coverage for independent contracts as well. You may work primarily as an independent
contractor, but sometimes your clients will include language in your contract that
excludes you from their coverage—making it necessary for you to buy your own.
Depending on how you run your business and what services you provide, you may want
to consider additional coverages, like
Umbrella Insurance. This coverage helps you pay for certain claims that
exceed your primary policies’ limits. Without this coverage, you would be
held responsible for making up the difference on your own. This coverage is typically
quite affordable, but to find out exactly how much Umbrella Insurance might cost
your web application business, contact a TechInsurance agent. Lastly, clients often
require you to carry a
Certificate of Liability Insurance, which you can download and print off
at any time when you work with TechInsurance.
Business Insurance Resources for Web Application Development Companies
Below we’ve collected a list of real-world resources so you can see what coverage
might look like for your web application development company:
Please note that these documents and contract templates are meant to act as guides
and nothing more. They do not stand in for professional review or legal counsel.
These sample documents are starting points—TechInsurance cannot guarantee
that they will meet the specific needs of your company as each web application business
is different and many require variant contracts for each project.
3 Ways to Mitigate Risk at Your Web Application Business
As the owner of a web application business, you probably have a pretty good idea
of the security risks associated with web app development. Because web apps are
often easy targets for attackers and because it’s difficult for service managers
to keep up with security patches, the electronic information your app uses (belonging
to both clients and users) is often vulnerable. But there are non-cyber risks as
It’s usually not enough to purchase a business insurance plan. No matter how
much coverage it offers, the best way to protect your web application business is
to prevent insurance claims before they happen. Read on to learn how you
can start developing a solid risk management plan for your company:
- Enforce strict security protocol. This probably goes without saying, but
you must protect your content in every conceivable way. For example, you should
check all input by design, even if it’s not immediately visible to users.
Be wary of any parameter, variable, or content coming from the web browser,
and thoroughly sanitize all input before use. Keep your support lists private and
always require authentication (and re-authentication) for privileged operations.
These suggestions are, of course, only the beginning—but being vigilant, even
when on a tight deadline—can prevent possible losses and costly Data Breach
- Don’t rely on personal insurance policies. Many startup web application
developers may work as independent contractors and small development companies may
run out of a home-based office and use their personal cars for work-related errands.
This makes it easy to assume that your business property is protected under your
Homeowner’s Insurance policy and that your car and person are safe when driving
to and from a client’s office in your personal vehicle. More often than not,
this simply isn’t true. Homeowner’s policies generally exclude business
property from coverage. Likewise, your personal Auto Insurance policy probably won’t
cover accidents that occur while you are conducting business. This makes, at the
very least, a basic
Business Property Insurance plan and a
Hired & Non-Owned Auto plan an important part of an independent
contractor’s business insurance plan.
- Always keep clients in the loop. As a web app developer, you often work with
clients who have no idea what goes into writing an application for the web. It’s
easy for clients who are unfamiliar with the technology to assume that anything
is possible—and that simply isn’t the case. In order to prevent Professional Liability
claims, be sure to communicate clearly and honestly with your clients. At the beginning
of the project, make a collaborative outline of goals and benchmark deadline dates.
When client expectation flies too high, gently explain what is and is not possible.
These ideas are just the beginning in a long list of ways that you can develop an
effective risk management plan for your web application business. But remember:
investing in proper risk management now will prevent claims (and higher insurance
Web Application Developers: Examples of Common Tech Insurance Claims
Business owners don’t like to go down the rabbit hole of all the terrible
things that could happen to their web application companies and result in an insurance
claim. It’s understandable. But it’s important to see what a claim might
look like and understand how easily it can happen—if for no other reason than
to justify the money you spend on business insurance.
As you will see, claims can arise from the most innocuous interactions—some
not even directly related to web app development. It’s also important to realize
that small businesses like yours are often the target of fraudulent insurance claims.
A seasoned litigation lawyer understands that a small web application company might
not have the money (or time) to fight when they can settle and get on with their
lives. That still costs money, however, which is why it’s so important to
carry IT business insurance that will help you out, even when the claims are unfounded.
For example, a General Liability claim might look like:
- You rent an office on a quiet street in your neighborhood. Earlier in the day, a
client stopped by with his child who promptly dropped his ice cream cone on the
floor. After little sticky-fingers left, you wiped up the mess and get back to work.
A few minutes later, the client returns, slips on the wet floor, and gets a concussion.
When he comes to, he promises to file a lawsuit for medical costs, since there was
no clear indication of the puddle on the floor.
- You assign a project to an eager new employee who seems to be doing very well. He
completes the coding in record time, and you are impressed with his work ethic.
Once the app goes live, you get word that another web application company is suing
you—for copyright infringement. Your new employee didn’t think anyone
would notice that he was cribbing someone else’s code.
A Property Insurance claim might look like this:
- It’s been a weird winter—unseasonably warm—and now spring has
finally arrived, full of storms. You’ve lived in this part of the country
your whole life, and never once have you heard the tornado sirens sounds—but
there it is. You grab your three kitties and head for the basement, but when you
resurface your home office and a large portion of the living room is completely
gone. Thank goodness you can file a Business Property Insurance claim to replace
all your damaged computer equipment and lost software, since you know your Homeowner’s
policy won’t cover it.
- Your web application business has been growing steadily since you first started
it, and you’ve just purchased a small office in a high-rise downtown. Unfortunately,
some shenanigans a floor below results in a fire—one that creeps into your
office, destroying most of your furniture and electronic equipment. You file a claim
to recover your losses.
An Errors & Omissions claim could look something like:
- A returning client asks your company to develop a complicated web application for
his new business venture. While difficult, you think your burgeoning business (which
consist of you and a pot of coffee) can handle it. Together you come up with an
outline of dates and deadlines and you get to work. Unfortunately, you discover
you have spread yourself a little thin—and things keep going wrong. You miss
most of the deadlines, which means your client can’t launch his website on
time. He sues for breach of contract.
A Cyber Liability claim could easily result from:
- A hacker remotely notices a vulnerable pattern in one of your web applications and
promptly attacks. Sensitive customer data and user information are compromised,
and you are looking at a hefty Cyber Liability lawsuit.
- Ah, the dreaded server crash. It happens to your web app business and lots of project
progress and client information is lost. You’ve backed up your data, but your
clients’ information has still been comprised, and your need to file a Cyber
Liability claim in order to afford damage control, stat.
A Workers’ Compensation claim could result from a situation like:
- As part of a company appreciation day in the office, you provide a potluck, including,
apparently, a frozen fruit salad that was contaminated with hepatitis during packaging.
An employee who ate the salad becomes very ill and is in need of an extended hospital
stay. He sues for personal damages and the cost of his hospital bills.
Just owning a small business is a liability—and an insurance claim can pop
up at any time. An effective business insurance plan can make sure you’re
able to afford the resulting expenses that might otherwise sink your business.
Contact a TechInsurance agent to start building your plan today.