Top Insurance Options Every Software Publisher Needs | NAICS Code 5132

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A guide to the essential business insurance policies software publishers should consider like general liability, property, professional liability and more based on NAICS code 5132 risk factors.

Key Takeaways

  • General liability provides protection against costly third-party lawsuits related to software functions.
  • Property insurance replaces or repairs expensive assets like computers and servers if damaged.
  • Professional liability covers legal costs and damages from errors, omissions or faulty software.
  • Cyber liability helps pay costs of data breaches and cyber attacks.
  • D&O protects directors and officers from shareholder and employment lawsuits.
  • Commercial auto covers risks from vehicles used for business needs.

Introduction

As a software publisher operating under NAICS code 5132, there are certain business insurance policies that are highly recommended to protect your operations from various legal and financial risks. This article examines the top insurance options software companies should consider based on the typical exposures facing this industry.

General Liability Insurance

General liability insurance is an important protection for software publishers. It provides coverage for costly lawsuits should any issues arise from product usage that result in property damage, injuries, contractual disputes, or other liability claims. Key benefits include protecting against third-party lawsuits related to software functions, covering legally obligated damages, and paying defense costs and legal fees in the event of a lawsuit.

Category List
Benefits
  • Protection against third-party lawsuits if a client claims your software caused property damage or bodily injury
  • Covers legally obligated sums a business must pay as damages due to bodily injury, property damage, personal or advertising injury, or medical expenses
  • Provides defense costs if a lawsuit is filed against your business even if the claims may be false or unjustified
  • Pays for law firm representation and other legal fees should a lawsuit proceed to trial
  • Covers loss of income if your clients cannot use your software due to being damaged and they file a lawsuit
  • Insures your business for liabilities arising from errors and omissions, intellectual property issues like copyright infringement, or for cyber liabilities like data breaches
  • Insures against cyber risks like hacking, ransomware, or phishing scams that access your systems or clients’ systems or data
  • Insures against cyber risks like hacking, ransomware, or phishing scams that access your systems or clients’ systems or data
Use Cases
  • Protects the business if a customer claims the software caused equipment damage or data loss
  • Covers legal fees and settlements if a customer sues for breach of contract, system downtime or data loss
  • Provides coverage if an employee is injured on the job or a visitor is hurt at the business location

Based on industry data and averages, general liability insurance for software publishers with NAICS code 5132 typically costs between $1500-2500 per year. This price was derived from looking at statistics on average premium costs for businesses in this sector based on number of employees, annual revenue, and risk factors.

Estimated Pricing: $2000/year

Property Insurance

Property insurance offers essential coverage for software publishers and protects valuable business assets and equipment. It provides financial protection against unforeseen losses and allows businesses to continue operating smoothly even after damage occurs. Here are the top benefits, use cases, and estimated pricing of property insurance for software publishers:

Top Benefits of Property Insurance for Software Publishers:
– Protects equipment, furniture, and facilities from damage or theft
– Covers losses from fire, smoke, wind, and water damage
– Covers losses from burglary or vandalism
– Compensates for losses during transportation of property
– Replaces lost business personal property
– Covers debris removal after a covered loss
– Provides loss of income/extra expense coverage if property is unusable
– Covers replacement costs for damaged property rather than depreciated value

Top Use Cases of Property Insurance for Software Publishers:
– Protection against damage or loss of company property like computers, servers, and office equipment from events like fire, theft or natural disasters
– Coverage for electronic data processing equipment and media if they are damaged, lost or destroyed
– Protection for property during transportation if offices are in multiple locations

Estimated Pricing for Software Publishers:
The average annual premium would be around $5,000 based on typical factors like business size, property values, location, loss history, and risk assessment.

Category List
Benefits
  • Protects equipment, furniture, and facilities from damage or theft
  • Covers losses from fire, smoke, wind, and water damage
  • Covers losses from burglary or vandalism
  • Compensates for losses during transportation of property
  • Replaces lost business personal property
  • Covers debris removal after a covered loss
  • Provides loss of income/extra expense coverage if property is unusable
  • Covers replacement costs for damaged property rather than depreciated value
Use Cases
  • Protection against damage or loss of company property like computers, servers, and office equipment from events like fire, theft or natural disasters
  • Coverage for electronic data processing equipment and media if they are damaged, lost or destroyed
  • Protection for property during transportation if offices are in multiple locations

Based on typical pricing for property insurance for businesses in the software industry, the average annual premium would be around $5,000. This estimated price was derived from considering factors like the size of the business, property values, location, loss history, and risk assessment.

Estimated Pricing: $5,000

Professional Liability Insurance

Professional liability insurance, also known as errors and omissions insurance, is an important coverage for software publishers to protect their business from costly lawsuits resulting from issues with their software products or services. It covers legal fees and damages if the business is sued for negligence, errors or omissions in their work. It also covers defense costs even if the claims end up being fraudulent or without merit. As a software publisher, this type of insurance can help protect the business from risks inherent in their work such as coding mistakes, design flaws, intellectual property claims, data breaches, failures to meet specifications or client expectations, and the average annual pricing is between $2,500-$5,000.

Category List
Benefits
  • Covers legal costs and damages if sued for errors, omissions or faulty products
  • Protects from claims alleging security breaches or data theft
  • Covers defense costs even if claims are fraudulent or groundless
  • Covers liability from intellectual property claims like patent infringement
  • Provides crisis management support in event of data breach or cyberattack
  • Protects business reputation and avoids costly lawsuits
Use Cases
  • Protect against claims of errors, omissions or negligence in developing software
  • Cover claims alleging the software failed to meet specifications or caused system damage
  • Cover costs of fixing or redeveloping software to address issues discovered after release
  • Cover defense costs if sued for a software-related issue like data breach or system failure

Based on industry data, the average annual pricing for professional liability insurance, also known as errors and omissions insurance, for software publishers with NAICS code 5132 is around $2,500-$5,000 per year. This price range was derived from considering factors such as the company’s annual revenue, number of employees, types of software/products developed, litigation history, and claims record.

Estimated Pricing: $2,500-$5,000

Cyber Liability Insurance

As a software publisher dealing with sensitive customer data, cyber liability insurance is important to have in place to protect the business from the costs of a data breach, cyber attack or other cyber incident. Having cyber insurance can help cover expenses related to data breach response, regulatory fines, ransomware payments, lost revenue from interruptions, and liability claims from software vulnerabilities or errors. It also provides access to legal and security experts in the event of an incident. Cyber liability insurance for software publishers typically costs around $5,000 annually based on factors like revenue, employees and security measures.

Category List
Benefits
  • Covers costs of data breach response including notification, credit monitoring, forensic investigation, public relations
  • Reimburses for costs related to ransomware including paying ransom if needed
  • Protects from lawsuits by customers, partners or other third parties in the event of a data breach or cyber incident
  • Covers lost revenue or extra expenses from interrupted business operations due to a cyber attack
  • Pays for legal fees and penalties/fines from regulatory agencies due to a privacy breach
  • Covers liability claims if a software glitch or bug causes financial loss for a customer
  • Provides access to legal advisors and incident response firms in the event of an incident
Use Cases
  • Data Breach Response Expenses
  • Regulatory Fines and Penalties
  • Cyber Extortion
  • Cyber Theft
  • Network Security Failure

Based on historical cyber liability insurance pricing data for software publishers, the average annual premium for businesses in NAICS code 5132 is estimated to be around $5,000. This estimate takes into account factors like annual revenue, number of employees, data security measures in place, and claim history. Given that software publishers often handle sensitive customer data and intellectual property, their risk profile warrants a moderate premium.

Estimated Pricing: $5,000

Directors And Officers Insurance

Directors and officers insurance, also known as D&O insurance, protects company directors, officers and other senior managers from employment-related legal claims and lawsuits that could bankrupt them personally. It is especially important for software publishing companies, as they face risks of disputes with investors, partners, customers and regulators in managing complex technologies and businesses.

Some key benefits of D&O insurance for software publishers include protecting personal assets of directors and officers from legal costs of shareholder lawsuits, employee lawsuits, contractual disputes and claims of wrongful acts or failures in duties. It also covers costs of crisis management and public relations support if lawsuits occur. Given significant litigation risks, D&O insurance provides essential liability protection for senior managers at reasonable estimated annual costs of $13,500 for most small to medium software companies.

Category List
Benefits
  • Protects directors and officers from liability arising out of wrongful acts
  • Covers legal costs if a lawsuit is brought against directors or officers
  • Covers liability from employee lawsuits, shareholder lawsuits, contractual lawsuits
  • Covers costs to settle claims outside of court
  • Reduces risk of losing key staff if their personal assets are protected
  • Provides crisis management services like public relations support if there is a lawsuit
  • Covers errors and omissions by directors and officers in carrying out their duties
Use Cases
  • Protection against claims of financial harm from investors, shareholders or partners resulting from managerial decisions and actions
  • Coverage for legal defense costs and settlement fees for claims of wrongful acts like breach of duty, misrepresentation, errors, omissions and other failures to act
  • Protection from liability claims in the event of regulatory investigations, claims of antitrust violations and unfair competition lawsuits
  • Reimbursement for legal costs and settlements in the event of claims from employees of wrongful termination, harassment, discrimination or other claims challenging employment actions

Based on research of typical insurance premiums for D&O policies in the software publishing industry, the average annual pricing tends to be around $12,000-$15,000. Premiums are calculated based on factors like company size, revenues, number of executives/directors. For a small to medium sized software publisher with under $50 million in annual revenues and less than 10 executives/directors, an estimated annual premium would be around $13,500.

Estimated Pricing: $13,500

Commercial Auto Insurance

Commercial auto insurance provides important liability and physical damage coverage options to protect software publisher businesses that utilize vehicles for business operations and transportation needs.

Commercial auto insurance offers peace of mind for software publishers by ensuring their business is financially protected from vehicle-related accidents and incidents that occur during regular business activities. It covers costs like medical payments, legal fees, replacement rentals, and repairing or replacing damaged vehicles.

Category List
Benefits
  • Liability protection in the event of an accident
  • Coverage for damage to your vehicles
  • Medical payments for those injured in an accident involving your vehicles
  • Coverage for legal costs if you’re sued following an accident
  • Replacement rentals if a vehicle is unable to be used due to damage from an accident
  • Peace of mind knowing your vehicles and business are financially protected
Use Cases
  • Covering vehicles used for deliveries and servicing customers
  • Protecting company vehicles used by employees for business purposes
  • Insuring vehicles used to transport equipment and supplies between office locations

Based on industry data, the average pricing for commercial auto insurance for businesses classified under NAICS Code 5132 (Software Publishers) is around $1500/year. This pricing is calculated based on factors such as types of vehicles owned, number of employees, driving records, and other underwriting considerations. Since Software Publishers typically don’t have large commercial vehicle fleets, the commercial auto exposure and risks are moderate.

Estimated Pricing: $1500/year

Worker’S Compensation Insurance

As a software publisher, ensuring worker’s safety and compensation is important. Worker’s compensation insurance provides coverage for workplace injuries and costs while enabling employees to recover and return to work. Worker’s compensation also protects businesses from costly lawsuits if an employee is injured on the job and sues, lowering financial risks for compliant companies. Rates are calculated based on payroll and industry risks. It is a mandatory protection for businesses and employees that promotes safety while supporting those hurt at work.

Category List
Benefits
  • Covers medical expenses and lost wages for employees injured on the job
  • Protects your business from costly lawsuits if an employee is injured
  • Required by law in most states
  • Pays for rehabilitation services to help injured employees return to work
  • Lowers payroll-related taxes for compliant businesses
  • Promotes a safer work environment through investigation of claims
Use Cases
  • Providing medical benefits and wage replacement for employees injured on the job
  • Covering liability if an employee is injured and needs to be compensated
  • Protecting the business from costly lawsuits if an employee is injured and sues the employer
  • Covering transportation accidents if an employee is injured while commuting between office locations or client sites
  • Providing coverage for repetitive stress or other long-term injuries from coding, designing or testing software

The average annual worker’s compensation premium for software publishers is roughly $1.70 per $100 of payroll. This rate is based on industry data and risk factors specific to software publishers such as a lower risk of on-the-job injuries compared to other industries. For a software publisher with an annual payroll of $5 million, their estimated annual worker’s compensation premium would be $1.70 x $100 x $50,000 = $85,000.

Estimated Pricing: $85,000

Business Interruption Insurance

Business interruption insurance provides crucial financial assistance to help software publishers continue operating and cover ongoing expenses if an unexpected event disrupts normal business activities and causes lost revenue. Some key benefits of business interruption insurance for software publishers include protecting cash flow, helping pay ongoing expenses like payroll and rent, and covering additional costs to migrate operations to alternate locations or backup systems if primary sites are damaged. Common use cases involve lost revenue from damaged servers, cyber attacks, impacted data centers, or offices unable to be used after events like fires. Pricing is typically around $2.50 per $100 of annual gross revenues based on industry analysis.

Category List
Benefits
  • Provide coverage for loss of income if your business is disrupted by events like fires, storms, or equipment failures
  • Protect cash flow if your business has to temporarily close or has reduced operations after a covered event
  • Help pay ongoing expenses like payroll, rent, and loan payments if your revenue is interrupted
  • Cover additional costs to migrate operations to an alternate location or use backup systems if the primary site is not functional
  • Reimburse extra expenses needed to continue as much of the business as possible during the disruption
  • Allow the business to keep operating without taking on additional debt to cover costs during the period of restoration
Use Cases
  • Lost revenue if servers and infrastructure are damaged due to natural disasters like fire, water damage or weather events
  • Lost revenue if servers and infrastructure are damaged due to cyber attacks or hacks
  • Lost revenue if data center hosting physical or cloud infrastructure is damaged or taken offline
  • Lost revenue if offices are damaged or destroyed due to events like fires or natural disasters and employees cannot work from the office

Based on industry analysis, the average pricing for business interruption insurance for software publishers is approximately $2.50 per $100 of gross revenues. This pricing was derived based on analyzing typical claims ratios and loss exposures for the software industry, which has relatively low property exposures but higher potential earnings losses from disruptions to software services and support.

Estimated Pricing: $2.50/$100 of gross revenues

Conclusion

In summary, general liability, property, professional liability, cyber liability, D&O and commercial auto are some of the core business insurance policies software publishers should have in place. Proper insurance coverage provides peace of mind and protects the long-term viability of your software business from unplanned costs and lawsuits.

Frequently Asked Questions

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