There are significant risks to starting or running a SaaS or tech company. As a founder, you might have to jump ship from your secure nine-to-five role to design a new product or service. You may also need to bootstrap your business with your savings and remain unsure when you’ll hit profitability.
There’s also the risk of being sued. Imagine your SaaS product fails to function when a client needs it the most, creating a significant financial loss for your client. In this circumstance, they may sue your company for compensation.
Your startup might also hold important information relating to your clients on a CRM or spreadsheet. Suppose a hacker accesses your database and steals this information. In this case, clients may again sue you for inadequately protecting their data.
The right business insurance plan can mitigate some of your SaaS business and tech startup risks, especially regarding lawsuits and the loss of business assets.
This article details the four policies every SaaS and tech company should have, including technology errors & omissions (E&O) insurance, general liability insurance, contents insurance, and cyber liability insurance.
Technology E&O Insurance
No SaaS tool is ever perfect. Even the “Cloud Kings” of the industry face product downtime and other issues that can cause problems for users.
For example, Marketo, one of the top automated marketing software SaaS companies, faced severe outages in 2017 because they forgot to renew their domain name.
The point is that accidents happen. And, when they arise, you want to ensure that you’re not financially responsible for the downfall.
Technology E&O insurance is liability coverage that shields costs when your business is blamed for errors, omissions, and negligence resulting from your products or services. These costs may be legal or for the provision of compensation.
General liability insurance
General liability insurance protects you from day-to-day risks that could result in bodily injuries or property damage and create a lawsuit.
Suppose a client visits your office to close a deal. Papers are signed, hands are shaken, and everyone is happy. One of the clients trips on a loose cord and breaks their laptop on their way out. Because the property damage occurred on your office premises, you might be liable for replacing it.
In such a situation, general liability insurance can cover the cost of a laptop replacement.
Or, if the client had injured themselves instead of their computer, a general liability policy could pay out damages for medical costs, lost wages, and pain and suffering.
Contents insurance protects your business’ belongings and tangible assets. This includes computers, office furniture, the $2,000 coffee machine, and the ping pong table.
Suppose a fire occurs in your office. In this case, contents insurance provides the replacement value of everything lost in the office fire. The same protection applies if a remote employee has their work computer stolen. Contents insurance can replace this computer, as well.
As a result of contents insurance, your business won’t unexpectedly face costs that arise from an unfortunate circumstance. This protection ultimately removes surprises that might come your way.
Cyber security insurance
Cyber security insurance covers the cost of lawsuits and other fees related to a data breach, hacker, virus, and other cyber threats.
As a tech company, cyber security insurance is crucial. Your company lives off servers and/or the cloud. Suppose a virus infiltrates one of these systems. It may mean a lawsuit from clients who’ve placed sensitive information in your care.
Like E&O and general liability insurance, cyber security insurance covers the legal fees and damage awards if a client or third party hits you with a legal action. Such coverage prevents your business from taking on the financial brunt of an unfortunate incident.
Entreflow is here to help high-growth companies succeed. Part of success is mitigating your risks. That’s why we’ve partnered with APOLLO to offer exclusive business insurance plans.
This article was contributed by Alessia Vincelli, Accounts Manager, Partnership at APOLLO Insurance.
APOLLO is Canada’s digital insurance provider. They provide tailored business insurance plans for as low as $26/month. You can get a quote here and buy online in under 5 minutes.