Home Improvement Contractor - Licensed Contractors

Contractor Insurance clause?

I've been offered a sales contractor agreement to sell software. One of the contract's clauses concerns me: Insurance -- I'm required to maintain $1,000,000 worth of liability insurance. Is this really necessary (I'm just selling software, not providing structural engineering consulting), and how much would this insurance cost? Thanks very much.

Public Comments

1. it seems like alot but shouldnt cost that much since there is little or no chance of someone suing you for liability. it usually goes off of gross income or estimated gross income mine was 1200 a year.
2. The premium on general liability is based on your projected annual gross sales. First they look at what kind of industry you are doing business in. For every industry there is a code assigned, and each code has a set of rating guidelines. The best thing to do is to call an insurance agency and get a quote. If you don't know who to call, contact the Department Of insurance of the state you operate in and they should be able to point you in the right direction. As far as the necessity of insurance coverage, every body needs insurance because there is always some sort of risk involved with anything we do. Without knowing what type of software you are selling, here's a few things to consider: - If something goes wrong with your software, will the user suffer any kind of financial loss? - If the software is intended for commercial applications, if something goes wrong with the software, what kind of monetary damages are you looking at? The main reason they want you to have insurance is to guarantee them that just in case something goes wrong they can can be compensated for damages.
3. As you are just selling software and not designing it, I suspect your contract requires commercial general liability insurance only and not professional liability insurance. Your question is not clear on this issue and there is a big difference between the two. If you only need commercial general liability insurance, you should be able to buy a business owners policy (BOP) for about $500 or so. You could look on the Travelers, CNA, or Hartford websites and look for a broker in your area who can help you.
4. Is it necessary? Well, your contract says it is so yes it is necessary unless you don't want the contract. As for the cost, what type of software who are you selling it to? This is important because, even though your contract does not state what type of liability insurance to maintain (CGL vs. professional) no insurer is going to insure you for CGL coverage without professional liability in place depending on the type of software being sold (i.e. games vs. financial software).