App Developer Insurance

Your specific legal requirements depend on your state and other factors, such as how many employees you hire and how many vehicles your business owns.

For example, most states require small businesses and startups to carry workers' compensation insurance after they hire their first employee, though some states have different requirements.

A workers' compensation policy covers medical expenses, rehabilitation, and disability benefits if an employee sustains a bodily injury or illness while on the job.

Additionally, if your business owns vehicles, you'll need a commercial auto policy to protect you, your employees, and your business in the event of an auto accident.

Client contracts may require proof of specific insurance policies, and app development contracting opportunities may be limited without them. Commercial leases also may request proof of insurance before they are willing to rent a storefront or office space to your business.

Certain clients may require a fidelity bond to protect their business against employee theft, forgery, or fraud.

Check with your local state and city regulations about your specific business insurance needs.

App development businesses handle large amounts of sensitive and private company data and are responsible for making major decisions that can expose their clients to security issues and liabilities.

For these reasons, app developers are strongly encouraged to carry certain insurance policies, even when they aren't legally required. Some policies and bonds may be required by clients, business partners, and landlords to sign leases, contracts, and other business agreements.

Entrepreneurs may also want to purchase coverage because lawsuits against their business can be exceptionally expensive. Clients may seek reimbursement for notification expenses, regulatory fines, legal costs, and reputational damage.

Developers often need to carry insurance to adhere to Google (Android) and Apple (iOS) security and privacy requirements. Failing to comply with these requirements can easily result in a lawsuit.

Cyber insurance protects your business from the expenses related to malware, data breaches, and other cybersecurity events caused by hackers and malicious actors. This includes costs related to forensic investigations, customer notifications, legal defense, and reputational restoration efforts.

Errors and omissions insurance, also known as professional liability insurance, provides coverage in the event that a client claims you or your employees missed deadlines, made costly errors, or gave professional recommendations that resulted in financial losses. Common E&O lawsuits against app developers include claims for lost revenue due to system failures, software bugs, code errors, and integration issues.

Tech E&O, which combines these two policies, is necessary coverage for app and software development firms that handle sensitive information, provide critical security recommendations, and implement major privacy changes. It can also cover claims of intellectual property or copyright infringement.

General liability insurance is another common and affordable coverage carried by application development firms. It covers third-party injuries and property damage, as well as advertising injuries, such as claims of libel or slander.

Many app developers opt to carry tech E&O insurance, which combines both cyber insurance and errors and omissions coverage.

Clients often request (or require) that both policies be carried before they are willing to work with you or your business.

This is because a tech E&O policy covers a wide range of common risks for app developers; carrying only one policy can leave gaps in your coverage that create vulnerabilities for both you and your client.

Failing to carry both policies could limit your future collaboration or contract opportunities and leave your business open to costly lawsuits.

For these reasons, tech E&O is one of the most commonly recommended bundles for app developers.

Professional liability insurance, also called professional indemnity insurance or E&O insurance, usually isn't required by law for app development companies.

However, app developers often choose to carry a professional liability insurance policy regardless of state requirements because it covers many of the industry's unique risks.

In an industry where even the smallest mistakes can have serious cybersecurity and privacy consequences, maintaining professional liability insurance can protect your business against a range of claims and lawsuits arising from errors, negligence, and missed deadlines.

Common protected claims for app developers include software bugs or mistakes, apps not working correctly, system failures or outages, performance issues, and copyright or intellectual property disputes. Intellectual property disputes often involve client allegations that your app infringes on copyrighted code, proprietary technology, or patented functionality.

For example, if a client sues your business, claiming one of your employees committed intellectual property theft by copying code from another business, then a professional liability policy would cover your attorney's fees and other legal defense costs. 

Even if the lawsuit is frivolous, it could still cause your business significant financial strain. An E&O policy would help protect your business from the expense of legal defense.