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Industry Insights

Words of wisdom from our business insurance experts.

SaaS Insurance: Know Your Risks, Coverage, and Costs

8 min read
June 4, 2024
SaaS Insurance: Know Your Risks, Coverage, and Costs

The software as a service (SaaS) industry has grown significantly over the past decade, but businesses in this field still face serious risks. Injuries, service downtime, data breaches, and many other threats can cause major problems for SaaS providers.

If you want to control the financial consequences related to these dangers, you’ll need to have the right insurance policies in place. Here, you’ll find an in-depth explanation of your SaaS company’s coverage needs.

What is Software as a Service (SaaS)?

In the 21st century, software isn’t always something companies purchase outright and install on their computers. Instead, many software providers now distribute their programs using the SaaS model. Unlike traditional software distribution models, SaaS focuses on offering paid subscriptions to cloud-based programs.

Since businesses do not have to install or maintain their SaaS solutions manually, these programs are typically more convenient and accessible than their predecessors. With that in mind, it’s not hard to understand how and why this market grew from a net worth of $31.4 billion in 2015 to an estimated $232.3 billion in 2024.

What risks do SaaS companies have?

Like any other technology business, SaaS companies face their fair share of risk on a daily basis. When you’re in charge of one of these businesses, you should be aware of dangers such as:

Accidental injuries

If someone is injured at your SaaS company’s office, you could find yourself dealing with a lawsuit before you know it. Because of that, you’ll need coverage that can help you deal with the monetary consequences of visitor and employee injuries.

Service interruptions

Clients count on the SaaS businesses they work with to deliver the software they need when they need it. However, downtime is always a possibility in this industry—and dissatisfied customers could end up suing your company in response to this situation.

Employee misconduct

SaaS companies have a responsibility to protect their clients. Even so, unscrupulous employees of these businesses could abuse their position to commit theft, fraud, or other illegal activities.

Data breaches

Cybercrime can be devastating to companies in the SaaS industry. Due to the role they play in the business world, these businesses are attractive targets for cyberattacks, which could easily lead to data breaches.

Auto accidents

Auto accidents may not be the first SaaS security risk most people think of. But if these businesses use a company vehicle, they could still end up facing the consequences of a car crash.

What insurance do they need?

Due to these risks and other threats, SaaS companies can’t afford to neglect their insurance needs. Instead, they need to explore insurance coverage options such as:

General liability insurance

The vast majority of businesses should have a general liability insurance policy in place. In fact, this is the first form of insurance most businesses purchase—general liability insurance is a standard requirement for companies looking to sign a commercial lease.

General liability insurance policies cover all kinds of everyday risks, including:

  • Injuries to people visiting your office
  • Property damage affecting customers and other people
  • Advertising injuries (such as slander and libel)

Workers’ compensation insurance

Workers’ compensation insurance is an extremely common form of insurance coverage—in fact, most states require businesses with employees to have one of these policies in place. And while the office settings SaaS employees work in may not seem like high-risk environments, people working in these settings can and do get injured on the job.

When an employee at your SaaS business gets hurt in a work-related accident, workers’ compensation insurance can help. This insurance coverage will help you handle costs related to:

  • Upfront medical costs (including things like ambulance rides)
  • Ongoing medical expenses (such as medication)
  • Partial lost wages while your employee recovers
  • Disability benefits (if they sustain a long-lasting injury)

In addition to the coverage described above, workers’ compensation insurance can provide financial assistance related to court costs, attorney’s fees, and settlements if an injured employee decides to sue.

Technology errors and omissions insurance

By their very nature, SaaS companies focus on giving customers access to cloud-based software. Thus, your clients won’t have access to your services if something goes wrong—which means extended downtime could lead to lawsuits and other consequences.

Technology errors and omissions (E&O) insurance is meant to help SaaS providers and other technology businesses deal with lawsuits tied to customer dissatisfaction. These policies are unlike other E&O policies because they include third-party cyber liability insurance, which can help businesses deal with legal fees resulting from cyberattacks and data breaches.

Cyber liability insurance

Though technology E&O coverage can definitely assist your business in the wake of a cyberattack, that isn’t the only form of insurance you’ll need in this scenario. While these policies include third-party cyber liability insurance, you’ll also want a first-party cyber liability insurance policy. This type of coverage is meant to help companies in this situation afford their own expenses.

First-party cyber liability insurance can assist your business as it deals with:

  • Ransom demands
  • Customer/vendor/stakeholder notifications
  • Revenue losses
  • Forensic investigation
  • PR management
  • Data and asset recovery
  • Stakeholder protection services

Fidelity bonds

Even if almost all of your employees are trustworthy, one bad apple could be enough to cause serious problems—especially in an industry like SaaS. Fortunately, fidelity bonds can keep you and the people/businesses you work with safe from this threat (which is why they’re a common requirement in client contracts).

Fidelity bonds fall into two different categories: namely, first-party and third-party fidelity bonds. The former type of fidelity bond is intended to keep your business’ property safe from rogue workers by covering expenses resulting from forgery, theft, fraud, and embezzlement. Meanwhile, the latter bond type provides the same coverage to your affected clients.

Commercial auto insurance

Does your SaaS business use one or more company vehicles? If it does, you’ll always have to be ready for the risk of auto accidents. These incidents could cost your company thousands of dollars, especially if another person gets injured.

While you can’t eliminate this possibility, you can minimize your financial consequences by investing in commercial auto insurance. With one of these policies, your company can get help paying for accident-related expenses such as medical bills, property damage, and lawsuits. Along with that, commercial auto insurance can provide support if your company vehicle sustains weather-related damage or gets stolen.

How much does it cost?

To get the coverage benefits described in this article, you’ll need to be ready to pay for multiple insurance policies. Here’s how much the average SaaS business looking to invest in these insurance policies can expect to spend:

  • General liability insurance: $31/month
  • Workers’ compensation: $40/month
  • Technology errors and omissions insurance: $91/month
  • Cyber liability insurance: $153/month
  • Fidelity bonds: $88/month
  • Commercial auto insurance: $198/month


The SaaS industry is unlikely to slow down any time soon, but that doesn’t mean individual companies in this field can afford to take it easy. After all, these businesses still face a wide variety of threats, from injuries and auto accidents to the potential misconduct of their own employees.

While every business faces some level of risk, there are ways to keep your risk to a minimum. The best way to pursue this goal is by investing in commercial auto insurance, technology errors and omissions insurance, cyber liability insurance, and other insurance policies. Once you’ve done that, you can shift your focus toward building and maintaining high-quality SaaS solutions for your customers.

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