Why do edtech companies need insurance?
Clients depend on your edtech platform to run classes smoothly or improve student performance. A disruption in services could delay an online class and lead to a costly lawsuit. Business insurance helps cover legal fees and other expenses, such as property repairs, injuries, and data breaches. It may also be a requirement to secure business contracts and fulfill state laws.
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6 policies every education technology professional should consider
State laws, clients, and landlords may require you to carry business insurance. These policies prevent financial losses in the event of an injury, property damage, lawsuit, or data breach.
Technology errors and omissions insurance
Tech E&O insurance covers legal costs related to work performance, such as a coding error in your learning technology that leads to downtime or data loss. It includes both E&O and cyber insurance.
- Outages and downtime
- Breach of service level agreement
- Legal costs from a client's data breach
Cyber insurance
This policy helps your edtech business recover from a data breach or cyberattack. It's strongly recommended for any business that stores credit card numbers, customer addresses, or other personal information.
- Fraud detection and monitoring services
- Client notifications after a data breach
- Business interruptions from cyberattacks
General liability insurance
This policy protects edtech companies from basic third-party risks, and it's often required by contracts and leases. Bundle it with property insurance in a business owner's policy (BOP) for a discount.
- Accidental client injuries at your office
- Accidental damage to client property
- Libel, defamation, and copyright lawsuits
Workers' comp insurance
EdTech companies with employees often need to purchase this policy to comply with state laws. It also covers work-related medical bills for sole proprietors, which personal health insurance won't cover.
- Medical bills from work-related injuries
- Disability benefits while employees recover
- Workplace injury lawsuits
Commercial auto insurance
Commercial auto insurance covers the cost of accidents involving an edtech business'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
Fidelity bonds
If one of your employees steals from a client, a fidelity bond reimburses the client for the amount that was stolen. It's also called an employee dishonesty bond, and is often required for client contracts.
- Unlawful data access by your employee
- Illegal money transfer by your employee
- Other employee theft or fraud
How much does edtech business insurance cost?
Average costs come directly from policies purchased by TechInsurance customers.
General liability: $30 per month
Tech E&O: $67 per month
View more expected costs.
Factors that can influence your premiums include:
- Your services offered, such as consulting, a language learning app, or an online tutoring program
- Value of your business property and equipment
- Types of insurance products purchased
- Policy limits and deductibles
- Claims history
- Annual income
- Number of employees
- Additional endorsements, including intellectual property (IP) insurance or business interruption coverage
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Common questions about business insurance for edtech companies
Why do education technology companies need business insurance?
EdTech firms and independent consultants aren't immune to making mistakes. The right insurance policies can help protect you and your business from errors, injuries, accidents, and other unique risks that open your business to liability and lawsuits.
Professionals in the edtech industry often elect to carry both errors and omissions (E&O) insurance, as well as cyber insurance to protect against common lawsuits arising from incorrect advice, mistakes, data breaches, and other cybersecurity incidents. Insurance companies often combine these two policies into one: technology errors and omissions insurance, also called tech E&O.
For example, if you recommend the wrong learning platform to a higher education institution and it turns out to be costly and time-consuming to reinstall software across the entire network, your tech E&O policy would cover legal defense and settlement costs if the school decides to sue over the error.
Similarly, if you fail to prevent a data breach or other cyber breach at a higher institution, this policy would help cover customer notification costs, legal fees, and other related expenses.
You may also need other policies to remain compliant with your state requirements. For example, most businesses with employees need to carry workers' comp insurance. And businesses with company-owned vehicles must typically carry commercial auto insurance.
Should edtech businesses have professional liability insurance coverage?
Professional liability insurance, also called professional indemnity insurance, is another name for errors and omissions insurance. This policy protects your business from claims of negligence, mistakes, errors, missed deadlines, and poor professional advice.
While professional liability insurance is generally not legally required for edtech businesses, it is highly recommended.
Lawsuits related to professional errors, even frivolous ones, can be exceptionally expensive and drain your business resources. Having professional liability coverage will help with defense costs and settlements should your business face a lawsuit.
What coverage limits do universities require from edtech vendors?
Educational institutions, such as universities and school districts, often require edtech vendors to carry a certain level of tech E&O coverage to operate in their facilities.
The required amount can vary, but it's often around $2 million to 5 million per occurrence. Some institutions may also require general liability, often with a $1 million per occurrence and $2 million aggregate limits.
Some contracts may require higher or lower limits, depending on the project's risk factors and scope.
If you're taking on an exceptionally risky project, you may want to consider purchasing commercial umbrella insurance, which can increase the limits of your underlying general liability, employer's liability, and commercial auto policies.
Should edtech independent contractors get business insurance?
Independent contractors and consultants take on many of the same risks as bigger businesses, but with fewer assets to pay for a costly lawsuit or injury. Business insurance can pay for medical bills, attorney's fees, and expensive repairs that you might otherwise have to pay for out of pocket.
Additionally, you may need insurance or a bond to sign a commercial lease, qualify for a loan, or fulfill the terms of a contract. For example, many contractors are required to carry general liability insurance in order to obtain a business loan or sign a lease.
Other policies, like tech E&O, are also crucial, as they can cover legal costs if a client blames your edtech company for financial losses or a data breach.
While it's not required by law for most sole proprietors, workers' compensation covers job-related bodily injuries that your personal health insurance won't cover, such as carpal tunnel syndrome.
Additionally, contractors often buy business insurance because homeowner's insurance and other personal policies don't cover incidents related to their work.
Lastly, you may need a fidelity bond in order to sign a client contract.
What's the difference between first-party and third-party cyber insurance?
Cyber insurance, also called cyber liability insurance, protects your business from the high response, recovery, and legal defense costs if you or your clients suffer a data breach, ransomware attack, phishing, and other cyber incidents.
There are two kinds of cyber insurance, both equally important for edtech businesses:
- First-party cyber insurance protects against data breaches and cyberattacks that affect your edtech company directly, such as a DDoS attack that overwhelms your network. This coverage is essential if your company handles personally identifiable information (PII) or other sensitive customer data.
- Third-party cyber insurance helps pay for legal costs when a client blames your edtech company for failing to prevent a data breach or cyberattack at their business. For example, a vulnerability in edtech software that your clients depend on could expose their customers' sensitive information.
When you buy tech E&O, it includes third-party cyber insurance, along with errors and omissions insurance to protect against other lawsuits from dissatisfied clients. To protect your own business from cyber incidents, you'd need to purchase a standalone cyber insurance policy for first party cyber coverage."
What other business insurance policies should edtech startups buy?
Education technology companies may need additional insurance policies to protect against other risks, such as a fire that damages their office or equipment.
These additional policies include:
- Hired and non-owned auto (HNOA) insurance: If you or your employees use personal, leased, and rented vehicles, you'll need HNOA coverage. Personal auto insurance typically denies claims for accidents that occur during work-related activities.
- 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: This policy, also called business income insurance, helps your edtech company recover financially from a temporary closure tied to a fire, storm, or other covered property claim or natural disaster. It's often included in your property insurance or BOP.
- Employment practices liability insurance (EPLI): A type of management liability insurance that covers lawsuits arising from violations of employees' rights, such as wrongful termination or discrimination. This policy can be added as an endorsement to a general liability or business owner's policy (BOP).
- Directors and officers insurance (D&O): This coverage pays for legal costs when a board member or officer is sued for a decision they made on behalf of your edtech company. D&O coverage can often be bundled with an EPLI policy and other types of management insurance.
- Electronic data processing (EDP) insurance: EDP coverage protects your computer equipment from events that typical commercial property insurance will deny. This includes data corruption, breakdowns, electrical surges, and other events.
- Intellectual property (IP) insurance: This policy covers your business if you are sued over copyright, trademark, or patent infringement or theft.
Having the right policies for your business is an important part of risk management and protecting your business from major financial losses.
How can you save money on business insurance for edtech companies?
It's easy to save money on business insurance through a few simple steps:
- Shop around. Get quotes from several insurance companies to find pricing that matches your budget. TechInsurance makes this possible with one easy online application.
- Bundle policies. When you buy policies from the same provider, it's often possible to combine coverages for a discount.
- Pay the annual premium. Paying the full annual premium on your policy usually costs less than the monthly payments.
- Avoid claims that increase your premium. Reduce your risks by removing loose rugs and other tripping hazards, setting guidelines for social media posts, and documenting all communications with clients.
