I’m a software developer – do I need professional indemnity insurance?

The short answer is yes, every software developer should have professional indemnity insurance, but you’re going to want to know why too. You’ll probably also have questions about what type of professional indemnity you need.

Like your software development, choosing the right insurance can be complex, but we know bugs are likely to be your biggest risk and the good news is, professional indemnity can protect you.

What is professional indemnity insurance (PII)?

Sometimes called errors and omissions insurance, PII protects professionals against claims of negligence or failure to meet contractual obligations.

For software developers, that means it’ll cover your legal costs and compensation claims that arise from code that causes harm to a client’s business.

Bugs are your biggest risk

In the fast-paced world of software development, bugs are inevitable. Glitches are part of the process of building a custom application for a client, but occasionally, they result in business interruptions and financial losses that turn into legal problems.

When that happens, PII provides the safety net you need.

Imagine the scene…you’ve launched a custom e-commerce platform for your client. Everything is running smoothly but then, customers complain of double-charging at checkout.

Your client is facing angry customers, refund requests and a loss of sales, and they’re holding you responsible.

What claims will you face?

We know bugs are usually an honest mistake, but you’ll need to be able to defend yourself against a variety of claims and that will be costly.

You could be accused of negligence, breach of contract, financial loss and even damaging your client’s reputation.

What cover do you need?

A strong PII policy for a software developer will protect you from:

  • Negligence claims: If a bug or error is a result of carelessness or a failure to follow industry standards.
  • Breach of contract: When you don’t meet the terms of your agreement or fail to deliver what was expected.
  • Intellectual property issues: When you are accused of intellectual property infringement.
  • Unintentional data loss: If your software causes data corruption or loss, leading to financial or operational damage.
  • Defamation: In rare cases, if your software includes harmful or misleading content.

What to look out for when choosing your cover

As well as ensuring your main risks are covered, there are a few things to be aware of:

  • Your policy should specifically address claims related to coding errors, system failures or missed deadlines.
  • It should be in line with the size of your projects and the potential risk involved.
  • If you work with clients around the world, look for a policy that covers international claims.
  • You might need cover for claims relating to work delivered years ago (retroactive coverage).

Don’t let bugs derail your business

Not all insurance brokers understand your business so make sure you’re working with someone who does.

Brokers with expert knowledge of insurance for software developers will help you find a policy that fits your specific needs.

So, before you dive into your next project, consider professional indemnity insurance. A bug might be unavoidable, but the fallout doesn’t have to cost you everything.