If you are a solo developer building a Micro-SaaS or a small tool, insurance is usually the last thing on your mind. You aren’t a corporation. You don’t have an office. You’re just deploying code from your living room.
You might assume that because you don’t have a physical store, you don’t have “liability.”
This is a dangerous myth.
In the software world, you aren’t liable for slip-and-fall accidents; you are liable for data and uptime. If your code breaks and causes a client to lose revenue, or if you accidentally leak user emails, you can be sued for damages—even if you are a one-person company.
Here is the no-nonsense guide to the insurance policies that actually matter for software startups in 2025.
The Big Confusion: General Liability vs. Professional Liability
Most small business advice tells you to get General Liability (GL) insurance. For a SaaS founder, this is often the least useful policy.
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General Liability covers physical damage. If a client visits your office and trips over a cable, GL pays. If you are a remote dev with no office, GL covers almost nothing relevant to your actual work.
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Professional Liability (E&O) is what you actually need. “Errors and Omissions” covers you when your product fails to do what it promised.
The “Bad Deploy” Scenario
Imagine you run a small CRM tool for local florists. You push an update on Friday night that introduces a bug.
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The Result: The bug prevents your clients from accepting orders on Mother’s Day weekend.
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The Damage: Your clients collectively lose $50,000 in sales.
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The Lawsuit: They sue you for the lost revenue, claiming your software “failed to perform.”
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The Outcome: A standard General Liability policy pays $0. An E&O Policy would cover your legal defense and the settlement costs.
Cyber Liability: The New Essential
Ten years ago, only banks needed Cyber Insurance. Today, if you store any user data (emails, passwords, credit card tokens), you are a target.
Cyber Liability Insurance steps in when you are hacked. It covers:
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Notification Costs: The legal cost of telling every customer “we leaked your email” (which is required by law in most states).
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Ransomware: If a hacker locks your database and demands Bitcoin.
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Fines: Penalties from regulators for poor data privacy.
Tip: Many “Business Owners Policies” (BOP) bundle E&O and Cyber together for tech companies.
Do You Need It Right Now?
If you are still in “beta” with zero paying customers, you can likely wait. But you absolutely need insurance if:
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You Sign B2B Contracts: If you sell to other businesses, their procurement department will usually require you to carry $1M in E&O coverage before they sign the deal.
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You Handle PII (Personally Identifiable Information): If you store medical data (HIPAA) or financial records, the risk is too high to go uninsured.
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You Are Bootstrapped: If you don’t have investors, a $20,000 lawsuit comes out of your pocket. Insurance protects your personal runway.
How Much Does It Cost?
The good news is that for Micro-SaaS, insurance is surprisingly cheap.
| Policy Type | Avg. Annual Cost (Micro-SaaS) | What It Covers |
| General Liability | $300 – $500 | Physical accidents (Required for office leases). |
| Tech E&O | $500 – $1,200 | Bugs, downtime, breach of contract lawsuits. |
| Cyber Liability | $500 – $1,500 | Data breaches and hacking response. |
Estimates based on a <$100k revenue US-based software company.
Summary: Your Protection Stack
Don’t let legal fear stop you from shipping code, but be smart about it.
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Step 1: If you work from home, skip the expensive General Liability unless a client contract demands it.
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Step 2: Get a quote for Tech E&O. Providers like Vouch, Embroker, or Hartford specialize in startups and allow you to apply online in minutes.
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Step 3: Read your Terms of Service. Ensure your “Limitation of Liability” clause is solid (ask a lawyer, not ChatGPT), but remember: a clause won’t stop someone from suing you; insurance pays for the lawyer to defend it.