What kind of Product Liability Insurance should a software startup have?


5

So where does one look for insurance to make sure that they are sufficiently covered and what type of agent and research should a founder do prior to looking at insurance for covering liability of their product?

Have an idea of the cost for protecting the liability of lawsuits? What types of attributes are an insurer going to review prior to underwriting?

Thank you for feedback and thoughts.

Insurance

asked Dec 22 '10 at 03:56
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John Bogrand
2,210 points

3 Answers


2

some customers have asked us for proof of life & limb insurance before they will allow our trainers on site. Trade shows often ask for proof of $1m liability insurance before letting us exhibit. Mainly to do with slips and falls.

The product liability depends on your business. We sell software and the license agreement limits our liability to the price they paid for the software.

Be aware that lawyers typically look for deep pockets.

If you are in the US call around a few insurance brokers and see what they quote.

answered Dec 23 '10 at 17:08
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James
1,231 points

0

No insurance is required to have a startup. Insurance policies you may require as you grow are Workers Compensation Insurance (for employees), property insurance for your place of business and material possessions.

If you are worried about liability of lawsuits, then dont. Lawsuits are an ugly part of business. You want to do what you can to make sure you are not subject to lawsuits, but you will get the ambulance chaser, disgruntled employee, or client that does not pay.

Find an attorney with fair rates you can rely on.
You could also use a paralegal for advice which is a lot cheaper, and then fall back on an attorney when required.

answered Dec 22 '10 at 05:53
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Frank
2,079 points
  • unhelpful. There are some cases where one must have insurance for a business to get a contract/job/client/etc. – Tim J 8 years ago
  • Tim, how does that apply to a software startup? That may be the case for legal, construction, manufacturing, but I have never seen such placements on startups. – Frank 8 years ago
  • I have no idea how it applies, just that I have seen insurance requirements. Ask the attorneys who drafted it - I am not the one who made it up. We have successfully avoided that in the past, but it keeps coming up. – Tim J 8 years ago
  • Asking a paralegal for legal advice actually is illegal in the US and is immediate grounds for them to loose their ability to work in that field (along with having to pay fines and penalties). Paralegals only know how to do the research but it's up to the attorney for applying that information. – Theonlylos 8 years ago

0

This question is very broad and hence not easily answered.

At first, beside mandatory insurances (i.e. worker's compensation if you have employees, car insurance if he company owns cars etc.), it really depends on the risks and liabilities that you might occur.

One of the questions would be, is your company a sole proprietorship or incorporated. In the first case the liability is personal and you might want to see if there are possibilities where there is a big risk of liabilities. For example, what happens if your software might damage (delete or corrupt data) at your client's computer. What are the contractual and licence agreements?

Another issue might be if you or your employees work on client's computer systems and something is damaged during the access. What are your agreements for that?

Only with this in mind, can you make a proper assessment if there is any business insurance that could be beneficial for you.

answered Dec 23 '10 at 07:23
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Txwikinger
227 points
  • Looking for the product liability kind of insurance. Underwriting the business itself not insurance for employees which is easier to find information on. – John Bogrand 8 years ago

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