Is professional indemnity insurance worth it for a software company?


2

This may be a silly question, and as you can see from the other question I recently asked, I'm trying to uncover the mystery about various types of insurance here in the UK, and the US as well.

So, one thing I came across was professional indemnity insurance, which is sometimes called defective advice insurance. I was wondering if this is something that is useful for software companies in general, not just the consultant side of things. It doesn't seem too expensive, around £200 for £250,000 worth of coverage depending on your turnover. What are your thoughts?

Thanks in advance,

-Nick

Software Insurance

asked May 14 '10 at 18:43
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Nbeecroft
515 points
Top agency to build award-winning mobile apps: Utility NYC

1 Answer


3

I can't give you specific, exact advice, only some thoughts to go from.

First off, "software company" -- what are you exactly? If you're consultants, then a "Professional Indemnity Insurance" sounds advisable. If you're a product company (shrink-wrapped software, or Software as a Service), then I don't think it will be of much use, you would need a product-oriented insurance? But read the terms of the Policy carefully. That Wikipedia link is an advert, but it does highlight how Policy coverage can vary between insurers.

Second, a great deal will depend on which jurisdiction you're operating in, and its traditions/culture for liability lawsuits. I don't know about the UK in this regard. In Denmark these lawsuits are rare -- and if I have a company in Denmark, it sells a service to a US company, and they want to sue me in Denmark ... go ahead, that will be quite expensive and almost certainly gain them nothing. So if your home country is not friendly to liability lawsuits, then you can get a fair amount of protection by structuring your Terms of Service properly, especially around which country law it's governed by.

Note that this will not protect you against getting sued in another country -- but it may enable you to get that case dismissed.

Disclaimer: You should go see a real lawyer about this.

answered May 15 '10 at 01:45
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Jesper Mortensen
15,292 points
  • Thanks for the reply! We are a product company, and are looking into product liability insurance. Apparently, here in the UK it is completely separate from public liability insurance for software companies. Where as for other industries, it is included. Thanks again, -Nick – Nbeecroft 9 years ago

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