Why do data scientists need business insurance?
Your clients rely on your data to make key decisions. An error could have tremendous repercussions—and lead to a lawsuit. Insurance can help pay for client lawsuits, injuries, and property damage. It also covers costs related to service disruptions, downtime, service level agreement (SLA) breaches, and liquidated damages.
Get the right coverage quickly
6 policies every data scientist should consider
Technology errors and omissions insurance
Tech E&O, also called tech professional liability insurance, can pay legal costs if a data scientist is sued over an error or oversight. Intellectual property (IP) and SLA breach coverage can often be added.
- Incomplete or inaccurate data
- Incorrect data-based predictions
- Failure to deliver on promised metrics
Cyber liability insurance
This policy can help your data science firm bounce back after a data breach or cyberattack. It can also cover lawsuits from clients affected by a breach.
- Fraud detection and monitoring services
- Client notification after a breach
- Lawsuits from clients affected by a breach
General liability insurance
General liability insurance protects your business from the most common liabilities faced by data scientists. To save money, bundle general liability insurance with property coverage in a BOP.
- Accidental client injuries at your office
- Accidental damage to client property
- Libel, defamation, and copyright lawsuits
Fidelity bonds
Also called an employee dishonesty bond, a fidelity bond protects your business if an employee steals from a client. It compensates the client for their loss, and is often required to sign a contract.
- Unlawful data access by your employee
- Employee embezzlement
- Other employee theft or fraud
Workers’ comp insurance
If your business has employees, you'll probably need to purchase this policy to comply with state law. It covers medical costs from work injuries and illnesses.
- Medical bills from work injuries and illnesses
- Disability benefits
- Lawsuits over work injuries
Commercial auto insurance
Commercial auto insurance covers the cost of accidents involving a data scientist's truck, van, or company car. Most states require this insurance coverage for vehicles owned by a business.
- Auto accident injuries
- Property damaged by your vehicle
- Legal costs from accidents
Data scientist insurance costs
Average costs come directly from policies purchased by TechInsurance customers.
General liability: $30 per month
Errors and omissions: $65 per month
View more expected costs.
Start a free application to see how much insurance will cost for your business.
Factors that can influence your premiums during underwriting include:
- Your data science services offered, such as insurance or healthcare data modeling
- Value of your business property and equipment
- Types of insurance products purchased
- Years of experience
- Cybersecurity measures
- Policy limits and deductibles
- Claims history
- Annual business income
"Everybody needs cyber [coverage]. Small businesses are frequently the most targeted because they have the fewest security measures in place."
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Common questions about data scientist business insurance
Why is insurance important for data science companies?
Small business insurance makes it easier for business owners in the data and computer science industry to protect their investment and qualify for contracts and leases.
Some policies are required by state law. The most common requirements are workers' compensation insurance if you have employees and commercial auto insurance if you have business-owned vehicles. For example, in New York, all businesses with full-time or part-time employees are required to carry workers' comp.
Technology errors and omissions insurance (tech E&O) is a popular policy for data scientists. It bundles third-party cyber insurance and errors and omissions (E&O) coverage.
This bundle protects your data science business from lawsuits claiming professional negligence. It also covers your business if you're sued over an error or oversight that results in a client facing a data breach. Examples of professional negligence include:
- Bugs identified in a Python-based data model
- A missed step within a workflow or methodology
- Errors or inaccuracies in data analysis
- Delayed delivery of a data model
To protect your own business from cyber incidents and data breaches, you'll need a separate first-party cyber insurance coverage policy.
How do tech E&O and professional liability insurance differ for data scientists?
Errors and omissions insurance goes by several names, depending on the industry. You will see it referred to as professional liability insurance or malpractice insurance, but they all function similarly.
Both errors and omissions coverage and professional liability protect your business from oversights, mistakes, and professional errors made by you or your employees.
For example, one of your data scientists delivers a flawed artificial intelligence automation system, leading to faulty analytics that cost a client a lot of money. Your client could sue your company to recoup their losses.
Data science companies often purchase E&O insurance in a tech E&O bundle (also called tech professional liability insurance), which includes both E&O insurance and third-party cyber insurance. This bundle protects your data science company against both claims for professional negligence and claims for failure to prevent a data breach at a client's business.
Are SLA penalties covered by data science insurance?
Service level agreement breaches are a major factor that data scientists need to consider when protecting their business. If a data scientist doesn't meet the standards set forth in their contract, they might be liable for damages or penalties.
SLA breaches can look like the following use cases:
- Weekly SQL data analytics performance reports are routinely late, interfering with your client's problem-solving workflows.
- A data science team's Python-based reporting datasets are consistently uploaded late, leaving data analysts without the information they need for statistical modeling.
- One of your senior data scientists is regularly late in delivering a customer lifecycle model, delaying a product launch.
The majority of insurance companies won't cover contractual penalties for breach of contract unless they are added as a specific endorsement.
Consult a licensed agent to ensure your policy covers everything you need if you or your company breaches a contract.
You can also add endorsements for SLA breaches and other industry risks, such as privacy claims related to the use of generative AI.
Do freelance data scientists need insurance coverage?
Consultants and freelancers face many of the same risks as big data science businesses, but with fewer protections and safeguards in place to protect their personal assets. The right insurance can help cover legal expenses, defense costs, and theft or damage to your business equipment.
For example, if a client claims an error in your machine learning predictive models caused them to lose money, the result could be a costly lawsuit. This is where insurance comes in and can help protect your business.
Policies you may need as a freelancer include general liability insurance, which helps pay for third-party accidental bodily injuries and property damage, and tech E&O, which covers claims arising from errors in predictive models, data analysis, or reporting and other forms of negligence.
Clients may require you to carry both types of coverage to gain peace of mind in the event of an accident or lawsuit. Failing to provide proof of insurance could affect their customer experience or prevent them from hiring you altogether.
Additionally, cybercriminals often disproportionately target smaller businesses with fewer defenses, making cyber insurance mandatory for freelancers and consultants.
Workers' comp may not be required for freelancers, but it's essential for protecting your physical well-being from work injuries and to guard against costly medical bills from a workplace accident.
Personal insurance policies, such as homeowners' or health insurance, usually don't cover work-related incidents, which is a major reason freelancers need commercial insurance.
What other business insurance policies do data science businesses need?
Data scientists may need additional insurance policies to protect against other exposures:
- Intellectual property (IP) insurance: This policy protects your business against the legal costs associated with IP disputes. If a client accuses your company of stealing an algorithm or data visualization model, your IP insurance would cover your legal defense costs.
- Business owner's policy: A BOP bundles general liability coverage with commercial property insurance to protect against common lawsuits and business property damage. It's often required for client contracts and commercial leases.
- Business interruption insurance: Also called business income insurance, this policy helps with lost income and other financial costs resulting from a covered incident, such as a fire or other unexpected event.
- Employment practices liability insurance (EPLI): This type of insurance covers lawsuits arising from violations of employees' rights, such as a prospective employee claiming your job description was discriminatory. EPLI can be added as an endorsement to a general liability policy or a business owner's policy.
- Directors and officers (D&O) insurance: Protect your board of directors and other key decision makers from stakeholder claims of poor management and oversight with D&O coverage.
How can you save money on data scientist insurance coverage?
It's easy for data scientists, actuaries, and other data engineering professionals to save money on business insurance through a few simple steps:
- Practice risk management. Avoid costly claims that can increase your premiums by reducing your risks.
- Shop around. Get quotes from several insurance companies to find pricing that matches your budget. TechInsurance makes this possible with one easy online application.
- Pay the annual premium. Insurers offer two options for paying your premium: monthly or annual. Paying the full annual amount usually costs less.
- Bundle policies. When you buy multiple policies from the same insurance company, it's often possible to combine coverages for a discount. The most common bundles are a business owner's policy and a tech E&O policy.
- Pick only the policies you need. Figuring out the best insurance for your coverage needs will help you save money and prevent unnecessary out-of-pocket expenses.
