Insurance Curator Building a SaaS company in the United States means managing product risk as much as product-market fit. Professional Liability Insurance (Errors & Omissions, or E&O) is essential protection for SaaS startups that provide software, APIs, integrations, or data services — especially when contracts, SLAs, and third‑party integrations expose you to claims of negligence, failure to perform, or faulty advice.
This guide, aimed at SaaS founders and risk managers in the USA (with emphasis on hubs like San Francisco, New York City, Austin, and Seattle), explains what E&O covers, how pricing works, sample market prices and carriers, contract considerations, and practical next steps.
Why SaaS startups need E&O
SaaS businesses face specialized professional risk:
- Breach of contract or failure to meet an SLA (downtime, late delivery, missed throughput)
- Software defects causing financial loss to clients
- Faulty integrations, incorrect data processing, or advice embedded in your service
- Third‑party claims tied to your code, APIs, or professional services
Without E&O, legal defense costs and settlement demands can quickly wipe out early‑stage runway. E&O protects legal defense and damages for covered professional liability claims (subject to policy terms and limits).
What E&O covers for SaaS (and what it doesn't)
Typical E&O coverage for SaaS providers includes:
- Claims alleging negligence, errors, omissions, or failure to perform professional services
- Defense costs (often within or outside policy limits depending on the carrier)
- Claims from clients for economic loss, not bodily injury or property damage
Common exclusions:
- Cybersecurity incidents (data breach / privacy) — usually need a separate Cyber/Privacy policy
- Intentional illegal acts or fraud
- Known prior acts or claims-made retroactive date gaps
- Contractual liability in some circumstances (endorsements can change this)
Tip: Many tech startups buy a package that bundles E&O + Cyber/Privacy for comprehensive protection; some carriers offer bundled pricing and loss mitigation tools.
Typical limits and pricing drivers
Standard limit configurations for startups:
- $1M per claim / $1M aggregate
- $1M per claim / $2M aggregate
- $2M / $4M for higher‑risk or enterprise‑facing SaaS
Primary pricing drivers:
- Annual revenue and # of customers (higher revenue → higher premiums)
- Industry vertical (healthcare, fintech, legal = higher risk)
- Contract exposures and SLA language
- Claims history and development stage
- Whether you bundle cyber and E&O
Typical U.S. market cost ranges:
- Small early‑stage SaaS (under $1M revenue) with $1M/$1M limits: roughly $500–$3,000 per year
- Growing SaaS (>$1M revenue or enterprise clients): $3,000–$15,000+ per year depending on exposure and limits
Sources and market data:
- Insureon provides small‑business E&O pricing guides and brokered quotes showing similar ranges for tech firms: https://www.insureon.com/professional-liability-insurance
- Carrier product pages (Hiscox, Coalition) and market writeups reflect comparable starting points for startup-sized risks:
- Hiscox E&O: https://www.hiscox.com/small-business-insurance/professional-liability-insurance
- Coalition (tech-focused, bundles): https://www.coalitioninc.com/product/professional-liability
Note: Actual quotes vary greatly by company profile; use these ranges as planning estimates.
Market snapshot: carriers and indicative pricing
Below is a comparison of commonly used carriers and appetite for SaaS E&O in the USA. Pricing shown are indicative starting ranges for a small SaaS startup (annual revenue < $1M), seeking $1M/$1M limits — obtain tailored quotes for accuracy.
| Carrier | Typical starting annual premium (indicative) | Strengths for SaaS | Best for |
|---|---|---|---|
| Hiscox | $500–$1,500 | Fast online quotes, strong small-business focus | Early-stage SaaS, developer teams |
| Coalition | $1,000–$3,000 (bundled E&O+Cyber options) | Tech-focused underwriting, cyber integrations | Startups needing combined E&O + Cyber |
| The Hartford | $1,200–$4,000 | Broad agent network, customizable endorsements | Firms with formal contracts & enterprise clients |
| CNA / Chubb (market) | $3,000–$15,000+ | Higher limits, nuanced contract liability options | Enterprise SaaS, regulated verticals |
Sources: Carrier product pages and small‑business marketplaces (see links above). Use these as planning yardsticks — exact pricing requires underwriting review.
Contract and policy checklist for SaaS founders
When negotiating client contracts and buying E&O, watch for:
- Indemnity clauses and who bears defense costs
- Limits and whether they match contractually required minimums
- Whether defense costs erode the limits or are paid in addition
- Retroactive date (avoid gaps in “claims‑made” policies)
- Whether the policy covers subcontractors and consultants
- Terrorism, regulatory fines, and privacy exclusions — address with additional policies if needed
Contract clause tip: Push for mutual indemnity where possible and require clients to cap consequential damages — insurers may insist on limits compared to contract exposure.
Claims-made vs. occurrence: why it matters
E&O is almost always on a “claims‑made” basis:
- Coverage triggers only if policy is active when a claim is made (not when the alleged act occurred).
- Maintain continuous coverage or purchase a “prior acts” retroactive date and consider “tail” coverage on policy cancelation/retirement.
If you change carriers, ensure retroactive dates align or buy tail coverage to close exposure.
State considerations: California, New York, Texas, Washington
SaaS companies in major U.S. hubs should note local realities:
- California (San Francisco/Bay Area): High concentration of VC-backed startups and enterprise customers — underwriters scrutinize data handling and SLAs.
- New York (NYC): Financial services customers often require higher limits and strict contractual wording.
- Texas (Austin): Growing tech market with competitive pricing, but regulated verticals (health, finance) drive higher premiums.
- Washington (Seattle): Significant cloud and platform integrations; carriers assess code complexity and third‑party dependencies.
Regulatory differences affect privacy exposure (e.g., California Consumer Privacy Act enforcement), so pair E&O with cyber/privacy insurance in states with strong privacy statutes.
Practical steps to buy E&O for your SaaS startup
- Prepare underwriting materials:
- Revenue, customer concentration, number of endpoints/users, and top contracts (with indemnity/SLA language)
- Decide target limits (match largest contractual requirement)
- Request quotes from at least 3 carriers or a tech-specialized broker
- Compare not just premium but: retroactive date, defense within/outside limits, exclusions, and endorsements for contractual liability
- Consider bundling Cyber+E&O if you handle customer data or process payments
- Revisit annually as revenue, product complexity, or customer mix changes
Related resources (internal links)
- Professional Liability Insurance (Errors & Omissions) for Technology Companies: What Devs Need to Know
- E&O Insurance for Consultants: Coverage, Limits and Contract Tips
- Marketing & Advertising Firms: Professional Liability Insurance (Errors & Omissions) for Creative Errors
Final checklist (for founders in SF, NYC, Austin, Seattle and across the USA)
- Identify required policy limits in customer contracts
- Get E&O quotes (target 3+ carriers or a broker) and compare endorsements
- Decide on bundling with Cyber/Privacy insurance — usually recommended for SaaS
- Ensure retroactive date covers your product history; buy tail coverage if switching carriers
- Re-assess coverage annually as revenue, customers, and contracts evolve
External references
- Insureon — Professional Liability Insurance: https://www.insureon.com/professional-liability-insurance
- Hiscox — Professional Liability Insurance for small business: https://www.hiscox.com/small-business-insurance/professional-liability-insurance
- Coalition — Professional Liability product for tech: https://www.coalitioninc.com/product/professional-liability
If you’re ready to proceed, assemble your revenue and contract portfolio and get tailored quotes — E&O terms and pricing move quickly with underwriting data and contract language.