

Ask HN: Business Insurance for an Enterprise Software Co. - aagha

My startup is starting to take off enough for me to start thinking about business insurance.<p>We sell software for SaaS and e-tailers to measure in-product&#x2F;on-site customer satisfaction in a unique way and then provide this information back to our customers in the form of reports&#x2F;dashboards.<p>We collect end-customer data: You&#x27;re a SaaS app using our product and <i>your</i> users interact with our software, where they provide experiential feedback.  The data is stored on a 3rd-party&#x2F;cloud provider and we use the data for our analysis, and also keep anonomyzed data.<p>I&#x27;m not sure where to start with regards to business insurance: How much coverage?  What kind? Who from? How much to expect to pay?<p>Thanks in advance for the help.
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patio11
You're looking for an Errors and Omissions insurance policy, likely from an
insurer who has a special product line for tech businesses. Word to the wise:
many of these insurers, despite having that product line, are effing clueless
about technical reality. The best reason to have an agent representing you is
that you won't have to educate an underwriter on the difference between on-
premises and off-premises SaaS. (I have someone I can recommend -- email me if
you want her contact information. Her assistance was very sanity-saving during
the process.)

Your E&O policy may be bundled with a General Liability policy. GL protects
you if someone slips and falls at your office, E&O if your software breaks and
causes damage to customers' businesses. The fact that GL involves vastly more
work, exclusions, and cost should tell you something _very instructive_ about
the insurance industry's estimation of the likelihood of having to actually
pay out on your E&O insurance. [+]

You're going to use the fact of this insurance policy to drum up additional
business for yourself. Given that, it makes sense to pick a nice round number.
I'd suggest $1 million, which you'll find is the practical minimum anyhow.

Kalzumeus Software and Appointment Reminder share an E&O/GL policy, with an
extra (priced) endorsement for data breaches and regulatory defense (i.e.
HIPAA). The policy was priced based on a combination of how we earned revenue
(consulting vs product income vs training, etc), how large we were in employee
count, what industries we worked in, and our gross revenues.

Our policy costs on the order of $2,000 a year. Speaking with business buddies
of mine, you'll find that that is roughly ballpark for most firms with less
than 10 or so employees engaged in, roughly, "our line of work."

You'll find that who actually insures you is treated as a boring
implementation detail, particularly if you buy through an agent, since they'll
come up with a few quotes and you get to pick on a price vs. features
comparison. The name on our policy is Warren Buffet's professional liability
company, US Liability Insurance.

[+] So I checked my policy. Although this was not how it was explained to me,
the policy describes roughly 15% of premiums going to GL and 85% going to E&O.
Assuming that is accurate, that means they -- sensibly -- think I'm more
likely to be sued for nuking a server than for dropping a Macbook on someone's
foot.

