As a technology company, you will likely face unique risks that other businesses don't have to worry about. That's why you need specific errors and omissions (E&O) insurance for tech companies to ensure you have the proper protection from potential liability.
What You Will Learn
- What is E&O Insurance?
- Why Do Technology Companies Need E&O Insurance?
- What Does E&O Insurance Cover?
- What Does E&O Insurance Not Cover?
- How Can I Get E&O Insurance?
What is E&O Insurance?
E&O insurance protects businesses from claims that they made mistakes or were negligent in their work. It is also sometimes called professional liability insurance or malpractice insurance. If a client sues you for damages because they claim you did something wrong, E&O insurance can also assist you in covering your legal defense and any settlements or judgments against you.
Why Do Technology Companies Need E&O Insurance?
Technology companies are at a higher risk for E&O claims than other businesses because they often provide advice or services that can significantly impact their client's businesses. If something goes wrong, their clients may hold them responsible, which is crucial since it pertains to cyber security and creating a tech economy for the future.
For example, if you are a web development company and your client's website crashes on launch day, they may sue you for the lost business revenue. On the other hand, U.S. government contractors and IT consultants also need this insurance. It is imperative, especially when their client's computer system goes down after recommending a change, since they could be on the wrong end of a lawsuit for the cost of the downtime.
E&O insurance can help protect your technology company from these types of claims. Even if the claim is false or there is no basis, defending against a lawsuit can be very expensive. E&O insurance can help you with the cost of your legal defense and any settlements or judgments against you.
What Does E&O Insurance Cover?
E&O insurance typically covers two types of risks: first, it can cover you for mistakes you make in your work, and second, it can cover you for failing to do something you should have done.
For example, if you are a web development company and make a coding error that causes your client's website to crash, your E&O insurance would likely cover the cost of repairing the website and any lost business revenue.
What Does E&O Insurance Not Cover?
E&O insurance will not cover intentional wrongdoings or criminal acts. So, if you commit fraud or steal from your clients, your E&O insurance will not cover you.
Additionally, most E&O policies have exclusions for certain types of risks. For example, many policies exclude claims from beta software or pre-release versions of products. So, if you are a software company and release a beta version of your software to your clients, which contains bugs that cause damage, your E&O insurance may not cover those claims.
How Can I Get E&O Insurance?
If you are a technology company, you can get E&O insurance from a commercial insurance company. You should shop around and compare policies to find the best coverage for your needs at the best price.