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SaaS Insurance

If there’s one “new” industry that has entrenched itself with no signs of going away, it’s Software as a Service (SaaS). It evolved from the days of a few mail-order software companies into a vast landscape of cloud-based behemoths with steady subscription-based revenue, low overheads, and plenty of happy customers.

SaaS Industry Overview

Companies categorized under this new technology and industry include Microsoft, SalesForce, Cisco, Adobe, Amazon Web Services, Slack, and Zendesk. And those are just a few. These giants are setting the standard for how tech companies deliver their services, whether to other businesses or direct to consumers.

The value this business model adds for innovators and their clients is undeniable and reflected in the growth of the industry. Consider the following two key points:

  1. In 2023, the global public cloud services market is expected to grow by approximately 21.7%, which amounts to about $597 billion (Statista).
  2. Forrester predicts that more than 50% of global enterprises will rely on at least one public cloud platform to drive digital transformation and delight customers.

Risks for SaaS

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Business Interruptions

SaaS companies are susceptible to various disruptions, ranging from routine system maintenance to cyber-attacks. Service failures can lead to significant financial loss and potential lawsuits, making insurance critical for financial stability.

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Reputation and Value

After system failures or data breaches, a SaaS company’s reputation, value, and customer confidence can be significantly impacted. Insurance can provide crucial support during these crises, aiding in recovery and damage control.

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Technical and Operational Failures

Apart from cyber risks, SaaS companies can face traditional operational failures. A carefully tailored Errors and Omissions (E&O) policy can protect against unique exposures, such as software glitches that cause financial losses to clients.

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Specialized Coverages

For specific operations, like an accounting software provider, specialized policies such as Tech E&O or Accountant’s E&O may be required. These cover different aspects of potential errors and ensure comprehensive protection.

Why is Insurance for SaaS
Companies Important?

SaaS companies need their service to be as stable, fast, and effective as advertised, but service outages can come from anywhere. Anything from routine system maintenance to targeted DDoS or cyber extortion attacks can trigger a business interruption. If the service fails (whether it’s because of an attack on their system or the system of a critical vendor like AWS) and clients lose money, SaaS companies will have to pay the price in the form of lost income or, worse, lawsuits.

The damage to the company’s value, reputation, and customer confidence can be significant after system failures and data breaches. Microsoft experienced this early on, soon to be followed by the likes of Yahoo, LinkedIn, and Adobe.

Moving beyond the more technical, computer-based crises that can happen, there’s also the possibility of a more traditional failure in the software company itself. Sometimes a more carefully tailored Errors and Omissions (E&O) policy will also be required to cover unique exposures. An accounting software provider will want Tech E&O coverage in case a glitch causes a client some sort of financial loss, but what about run-of-the-mill accounting errors? Those would be excluded from a Tech E&O policy, so a separate Accountant’s E&O policy may be necessary.

Following are some of the core potential issues that a SaaS company would require protection from.

Insurance for SaaS Companies Against Data Breach

Data breaches are when sensitive information is copied, transmitted, viewed, stolen, or used by an individual unauthorized to do so. A recent IBM study estimated that the average cost for companies who are victims of cyber attacks is a whopping $141 per record.

Insurance for SaaS Companies Against Cyber Attacks

SaaS companies are often victims of cybercrime such as DDoS attacks and ransomware attacks. These attacks can lead to data being stolen or destroyed. According to IBM, the global average cost of a data breach in 2023 was $4.45 million, a 15% increase over three years.

Insurance for SaaS Companies Against System Failures

SaaS companies are by nature heavily reliant on back end & front end systems and third-party services providers for their applications, servers, cloud storage, and data services. Any outages, downtimes, or failures can result in lawsuits from customers who rely on their platforms to run their business.

Insurance for SaaS Companies Against Compliance Issues

SaaS companies must stay current on privacy and security measures to retain long-term customers. This approach means more than merely adhering to best cybersecurity practices, such as keeping software updated and servers maintained. SaaS companies must follow regulatory standards, as well.

SaaS Insurance
Coverage & Policies

The following coverage form the foundation of any risk management program for SaaS companies:

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General Liability Insurance Learn More
General Liability Insurance

General Liability Insurance is one of the most necessary policies not just for a SaaS company to own, but for any business. It is a policy that protects businesses from various claims such as bodily injuries, property damage, and advertising injuries — and on top of that, it also covers legal defense costs if a business is sued over these issues. The cost of this insurance varies based on business specifics and risk level.

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Cyber Liability Insurance Learn More
Cyber Liability Insurance

Cyber liability offers protection against lawsuits related to cyber activities, such as data breaches and phishing scams. This insurance can help cover costs associated with data recovery, customer notification, and public relations following a cyber incident. It is particularly crucial for SaaS companies that handle sensitive customer data. Other types of insurance, like the Directors & Officers Insurance, make for good complementary insurance as well.

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Errors & Omissions Insurance Learn More
Errors & Omissions Insurance

E&O insurance, or Professional Liability Insurance, provides coverage to businesses against client lawsuits alleging subpar services or work. It is a financial safeguard against various operational mishaps, such as errors, oversights, missed timelines, and exceeding budgets, which could lead to expensive legal disputes. Essentially, this insurance type acts as a protective shield, responding to these potentially costly business mistakes.

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Tech Errors & Omissions Learn More
Tech Errors & Omissions

Technology drives most companies’ success in the modern world. If a tech issue arises, such as a newer software causing a third party’s older system to crash, liability becomes a massive problem. Tech E&O, usually teamed with cyber liability, covers legal fees, civil damages, and other related costs in the event of a lawsuit.

Employment Practices Liability Learn More
Employment Practices Liability

Any company with employees faces the risks of allegations, such as discrimination, wrongful termination, breach of contract, etc. Getting Employment Practices Liability insurance will protect companies and employees against lawsuits related to employment practices.

SaaS Specific

These policies are essential for or can be tailored to the needs of companies operating in the SaaS companies space:

Product Liability Insurance Learn More
Product Liability Insurance

Product Liability Insurance is a coverage that protects businesses against financial loss due to legal liability incurred from a product a company brings to the market. It covers legal fees and compensatory damages. However, it typically does not cover issues caused by software or apps, hence it is important to work with an insurance provider that specifically provides product liability insurance for the SaaS industry.

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Crime Insurance Learn More
Crime Insurance

Various forms of money theft can pose a significant risk to your business, be it through employee embezzlement, theft from your armored vehicle, or deceitful activities such as accepting counterfeit checks or becoming a victim of wire fraud. Crime insurance serves as a protective shield for your SaaS company’s success, offering coverage against financial losses arising from these specific types of criminal activities.

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Property Insurance Learn More
Property Insurance

For SaaS companies, unexpected events like severe fires, natural catastrophes, or break-ins can significantly impact business operations. Property insurance provides a safety net in these instances, compensating companies for direct losses to their property and helping maintain business continuity. The premium for this coverage is determined by several factors, including the location of the property, its value, and the scope of the coverage required.

SaaS Insurance Costs

The cost of insurance for Software as a Service (SaaS) companies can significantly vary based on several factors. The size of the company’s physical assets, its revenue, the level of risk involved in its operations, and its past claims history can all impact the insurance premium.

Larger companies with higher revenues often face more significant risks, potentially leading to higher insurance costs. Similarly, a company operating in a high-risk industry or with a history of numerous claims may also see increased premiums due to the perceived risk.

Despite these costs, it’s crucial to consider that the expense of insurance premiums is often far less than the potential out-of-pocket costs following a significant loss or liability claim. Without adequate insurance coverage, a single loss can seriously harm or even bankrupt a company. Thus, insurance provides not only financial protection but also peace of mind, allowing SaaS companies to focus on their core business and growth.

SaaS Frequently Asked
Questions (FAQ)

The cost of insurance for SaaS companies will depend on several things, including the company’s size and development stage. Other factors include:

  • Exposures: risks being insured
  • Company practices: views on safety, compliance, and risk management
  • Program structure: the amount of deductible and willingness for a company to assume more risk
  • Claims history: the type and amount of past claims against the company


While SaaS insurance isn’t typically mandated by law, it is strongly recommended given the unique risks that SaaS companies face, such as cyber threats and business interruptions. In certain cases, clients or business partners may require you to have specific insurance coverage as part of their contractual agreements.

The amount of SaaS insurance you need will depend on several factors, including the size of your company, the nature of the data you handle, and your risk profile. It’s recommended to work with an experienced insurance advisor to determine the right amount of coverage.

You can obtain SaaS insurance by reaching out to an insurance provider or broker who understands the unique needs and risks of SaaS companies. They can guide you through the process, from assessing your needs to comparing quotes and finally purchasing a policy.

Business Liability insurance protects your company if it’s held legally responsible for damages caused to a third party. This could include bodily injury, property damage, or data loss. For SaaS companies, this is usually in the form of Professional Liability or General Liability insurance.

SaaS insurance often includes cyber liability coverage, which can protect your company in the event of a data breach. It can cover the costs related to notification and credit monitoring for affected customers, PR efforts, and any resulting lawsuits or regulatory fines.

Absolutely, insurance policies can often be tailored to the specific needs of your SaaS company. Your provider can help you select the right types of coverage, limits, and deductibles based on your company’s risk profile and budget.

SaaS Insurance Quotes

Finding SaaS insurance coverage doesn’t have to be painful. We aim to make the purchasing experience as streamlined and intuitive as possible.

Get a quote

Use our custom-built digital platform to get quotes fast. We automate clerical tasks that plague traditional insurance brokerages, giving us more time to be responsive and alert to your company’s needs.

Pair with a specialist

No two organizations are the same. Our team of coverage experts partners with your team to engineer your risk management strategy, together. We take the time to understand the intricacies of your company to get you the best possible coverage.

Stay one step ahead

To do better, you need to know better. With changing political, technological, legal, and economic landscapes, staying ahead of the curve is critical.

Our in-house team is tapped into the latest developments in your industry, proactively ensuring you’re covered.

Jonathan Selby General Manager
Jonathan Selby, General Manager

your specialist

Jonathan spent the first five years of his professional insurance career working as a generalist broker at a traditional firm on Long Island. Intrigued by how to leverage technology in the industry, he joined the Founder Shield team in 2016 and quickly grew into his current leadership role of General Manager. Jonathan works to oversee client strategy and communication, and has fostered a culture of providing unparalleled service and risk consulting for some of the fastest growing companies in the world.

Why Choose Founder Shield?

Founder Shield is a leading insurance provider that specializes in offering comprehensive coverage for SaaS companies, offering numerous benefits and advantages over traditional insurance providers. Here’s a breakdown of some of the key features and benefits that you’ll enjoy with us:

Benefits of Choosing Founder Shield:
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Industry Expertise

Founder Shield is focused on protecting rapidly evolving SaaS startups. We ensure that our products are tailored to meet the unique needs of SaaS businesses.

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Customized Solutions

Founder Shield offers bespoke insurance policies that are designed specifically for each client’s needs, ensuring co

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Fast Quotes

With Founder Shield’s streamlined quoting process, you can receive a personalized quote for your SaaS insurance quickly, allowing you to make informed decisions fast.

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Ease of Use

Founder Shield’s user-friendly digital platform makes it easy to manage your insurance policies, submit claims, and access important documents whenever you need them.

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Dedicated Support

Founder Shield provides exceptional customer service, with dedicated account managers who are always available to assist you with any questions or concerns you may have about your insurance coverage.

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Scalable Coverage

As your manufacturing business grows, Founder Shield’s insurance policies can grow with you, ensuring you always have the right level of coverage for your changing needs.

Founder Shield is a preferred choice for SaaS businesses because of our specialization in the industry. We offer flexible and customized insurance policies, a speedy quoting process, and exceptional customer service with dedicated account managers.