Business Insurance for SaaS Companies

Types of Insurance Coverage for SaaS Businesses *

IT/Technology Liability Insurance

An IT Liability Insurance Policy combines Professional Indemnity and Public and Products Liability into the one policy, avoiding gaps in coverage which can be caused by having two separate policies. These policies have a specific wording, tailored to meet the needs of technology companies, ensuring that losses are covered, whether they relate to property damage, bodily injury, or financial loss.

This type of insurance provides protection for risks such as errors and omissions, a breach of contract, slips/trips/falls and some level of copyright infringement arising from the provision to technology products or services.

There are several technology insurers that can also include cyber insurance coverage into their IT Liability Policy.

Cyber Liability Insurance

Cyber insurance can help SaaS companies cover from losses due to a cyber event, including operational disruption, third-party remediation and legal fees, fines and penalties, reputational harm and more. Cyber Insurance is essential for SaaS companies. Many SaaS companies hold large amounts of customer data, making them targets of cyber attacks. If there was a data breach, the costs of notification, remediation, reputation damage and fines could be detrimental for the SaaS companies. Other SaaS companies act as integral service providers for their client’s, if these companies were to suffer a cyber attack causing systems to go down, the SaaS company by be up to pay the cost of disruption to their client’s businesses.

Management Liability Insurance

Management liability insurance includes is designed to protect the company and its executives for from claims relating to this mismanagement of the company. It can include coverage for workplace health and safety incidents, employment issues, tax audits/investigations, employee theft, directors and officers liability and statutory liability.

Workers Compensation Insurance

When you are employing, workers compensation is required by law. Workers compensation insurance pays financial compensation for employees when injured at work. paying yourself as a working director or in some cases utilising contractors, it’s important to check with your state legislation, as it varies between state. For example, in some states such as WA and NT, directors can opt out of cover. Whereas in ACT and TAS, directors cannot opt out of coverage.

Office Insurance

Office insurance provides coverage for office-based risks, such as damage to contents and stock, theft, business interruption, equipment breakdown and coverage for portable equipment. On a business package policy, you can opt in and out of the risks you would like to insure.

Intellectual Property Insurance

Intellectual property refers to the legal rights arising from intangible assets. This may be a piece of software, patents for creations, trademarks for brands and logos, trade secrets, customer data base or other confidential business information. Intellectual property insurance provides protection for claims relating to IP infringement, including legal expenses, damages and settlement. A classic example of Intellectual Property Infringement Claims for SaaS companies is where a software company may face allegations for copyright infringement on another companies’ software.  

How Insurance Can Help Your Business *

May Ensure Compliance – Many contracts and regulatory bodies may require insurance coverage for SaaS providers.
May Protect Business Reputation – Insurance may help manage the financial and reputational impact of legal claims and cyber threats.
May Support Business Growth – With suitable insurance, you can focus on the things that matter, innovation without worrying about unforeseen risks.

Cost Considerations & Customisation *

The cost of SaaS insurance may vary based on several factors, including:

• Business size
• Revenue
• Services provided – for example, if you are a managed service provider, premiums tend to be higher due to the related risk.
• Level of cover required
• Claims history
• Client type

Since every SaaS business is different, we offer guidance to help you find suitable insurance that aligns with your specific needs.

FAQs *

Do SaaS companies legally need insurance?

While not always legally required, certain clients, investors, and regulatory bodies may require to have insurance in place as part of certain contracts.

How much does SaaS insurance typically cost?

Costs may vary depending on business size, turnover, services, client industry, and the level of coverage required.

What’s the difference between Cyber Liability and Professional Indemnity Insurance?

Cyber Liability Insurance is designed to cover expenses related to cyber incidents, while Professional Indemnity Insurance is designed to cover claims made for financial losses due to a breach of duty, errors and omissions and professional negligence.

How has SaaS transformed business operations?

SaaS has revolutionised business operations by providing scalable, cloud-based tools accessible over the internet. This model enables businesses to innovate, streamline processes, and adapt quickly to new challenges without the need for extensive in-house IT infrastructure.

What are the common risks faced by SaaS providers?

SaaS providers may encounter several risks, including:

• Breach of Contract: Failure to meet contractual obligations, such as delivery deadlines or performance standards, can lead to claims.
• Cybersecurity Threats: Storing and processing data online exposes providers to potential data breaches and cyber-attacks.
• Service Interruptions: Software failure or external factors may cause downtime, affecting client operations and satisfaction.

Why is understanding contractual obligations important for SaaS companies?

Understanding contractual obligations is crucial because breaches are a primary source of legal disputes for SaaS companies. Contracts outline service level agreements (SLAs), security requirements, and compliance obligations, making it essential for businesses to manage their commitments effectively. For example, if a SaaS company misses a delivery deadline, and those deadlines were part of the contract, they could be up for a lawsuit.

How do SaaS providers handle data privacy and compliance?

SaaS providers implement data protection strategies such as encryption, secure access controls, and compliance with legal frameworks like the Australian Privacy Act. Many providers also undergo independent audits to ensure adherence to industry standards. Cyber Insurance is also extremely important as it can help provide compensation to clients in the event of a breach and assist in a fast resolution of a cyber incident.