How much does business insurance cost for SaaS companies?

SaaS businesses spend an average of $91 per month, or $1,094 yearly, for technology errors and omissions insurance. This combined coverage bundles errors and omissions insurance and cyber insurance into one policy, often costing less than buying each coverage separately.

Also known as professional liability insurance, E&O insurance protects small businesses against claims of professional negligence. For example, suppose a service outage at your SaaS company results in downtime. This could cause a client financial loss and lead to a lawsuit.

Tech E&O includes third-party cyber insurance with this coverage, which adds extra protection in case your SaaS services unintentionally cause a data breach or cyberattack at a customer's company.

Below is the average E&O insurance policy for SaaS companies that purchase from TechInsurance:

Insurance premium: $91 per month
Policy limits: $1 million per occurrence; $1 million aggregate
Deductible: $2,500

The cost of errors and omissions insurance is based on many factors, including the coverage limits you choose, the types of SaaS products or services you provide, and your claims history.

SaaS companies spend an average of $153 per month, or $1,837 annually, for cyber insurance. Also known as cyber liability insurance or cybersecurity insurance, this policy helps pay for the cost of complying with your state's data breach laws.

Cyber insurance covers expenses related to a data breach or cyberattack, including legal fees and credit monitoring costs. It is especially crucial for companies that store personal customer data, such as credit card numbers or Social Security numbers.

The cost of cyber insurance primarily depends on your cyber risks. For example, SaaS businesses that have a large amount of sensitive information are considered high risk.

SaaS startups spend an average of $31 per month, or $371 per year, for general liability insurance. Though usually not required by law, a general liability policy may be needed in order to sign a lease or work with some clients.

General liability coverage protects your small business from common third-party risks, such as customer property damage or bodily injury. It also pays for lawsuits related to copyright infringement and advertising injury, including slander and libel.

For example, if a competitor claims that an employee at your SaaS company made a disparaging statement about them on social media and decides to sue, a general liability policy would pay for any legal costs.

Below is the average general liability insurance policy for SaaS businesses that buy from TechInsurance:

Premium: $31 per month
Policy limits: $1 million per occurrence; $2 million aggregate
Deductible: $500

If you have a small SaaS business and it's low-risk, TechInsurance's licensed agents usually recommend a business owner’s policy (BOP). A BOP bundles general liability insurance with commercial property insurance at a lower cost than buying these policies separately.

For SaaS business owners, the average cost for a business owner's policy is $47 per month or $569 per year. To protect against financial losses due to a forced closure, such as from a fire or flooding, you can also add business interruption insurance to a BOP.

The cost of general liability insurance is based on several factors, including the types of services offered, your annual revenue, size and location of your company's business property, and any subcontractors or additional insured endorsements you may have.

The average cost of a fidelity bond is $88 per month, or $1,054 annually, for SaaS companies. Some clients, especially those in the financial services industry, may mandate a bond in order to sign a contract with them.

Fidelity bonds, a type of surety bond, protect your clients by reimbursing them in the event your employee commits theft, fraud, or forgery. This includes illegal electronic funds transfers and unapproved credit card purchases.

The cost of a fidelity bond is a certain percentage of the total bond amount. Unlike most insurance policies, this amount must be paid back to the company that issued the bond.

SaaS business owners spend an average of $40 per month, or $485 annually, for workers' compensation insurance. To comply with state requirements and avoid penalties, SaaS companies with one or more employees typically must purchase this policy.

Workers' comp coverage pays for medical expenses and disability benefits when you or an employee suffers a work-related injury or illness. For example, if a programmer at your SaaS company develops carpal tunnel, a workers' comp policy would pay for their treatments and lost income while they recover.

Workers' compensation coverage also often includes employer's liability insurance, which pays for defense costs and other legal fees in the event of a lawsuit related to workplace injuries.

Even though workers' comp may not be required for sole proprietors or independent contractors, it is highly recommended since most health insurance plans can deny claims for injuries that occur at your jobsite.

Underwriters calculate workers' comp costs based on numerous factors, including the number of employees you have and their occupational risks.

Tech companies spend an average of $198 per month, or $2,375 yearly, for commercial auto insurance. Almost every state requires this type of insurance if your SaaS business owns any company vehicles.

If your business vehicle(s) are involved in an accident, a commercial auto policy would help cover property damage costs and any medical bills. This coverage also helps pay for costs related to vandalism, weather damage, and theft.

To protect personal, rented, and leased vehicles used for business purposes, you'd need hired and non-owned auto insurance (HNOA) instead.

The cost of commercial car insurance depends on many factors, including your employees' driving records, policy limits, the number of vehicles you own and their value, and your coverage options.