I am starting a small contracting business and was wondering: how much professional liability insurance I should get? I would appreciate advice on this, especially if from someone with personal experience.
Note: to those who may wish to close this as not-programming related, please bear in mind that issues of personal startup are of interest to programmers, just as the kind of mouse or chair a programmer uses are of interest. So I believe this is a valid question.
This totally depends on where you're starting your business and where you plan to practice. It's also the kind of question you should ask your attorney.
This should be directly proportional to the amount of damage you might be capable of producing if something goes horribly awry.
If you're working with small businesses on the order of hundreds of dollars, $1,000,000 might be excessive. OTOH, if you're working with mission-critical devices in a Fortune 100 company, $1,000,000 could easily be too small by far.
@Rober S is right. Two types of insurance you'll be looking at, General Liability and Errors and Omissions. The former is at a reasonable cost, the latter is mucho $$$. I'm not aware of many small shops that haver Errors and Omissions. Good luck.
In addition to insurance, I would recommend you create an LLC or similar legal entity to protect you. In Texas it costs about $500 to set one up. I would imagine the cost is similar in other states, not sure about outside the US.
Disclaimer: I Am Not A Lawyer.
General Liability insurance will cover you if, for example, you knock over a server rack at a client's office and break the machines in it.
Errors and Omissions covers you in case you miss details in programming, specs, etc.
I was advised to get $1 million in coverage. It ran between $1500-$2000 for the year in the past.
Sometimes, the minimum is whatever the client asks for in their contract.
But, I'm in California and my agent (not your agent, blah, blah) says that generally the min in CA is $1 mil per occurrence, $2 mil aggregate for each type. There are two main types: "general liability" (dropping servers) and "errors and omissions" (forgetting to validate backups for production applications).
What if you are just selling software? Assuming the EULA has the usual "not my fault if the software formats your harddrive and kills your cat", disclaimer.
I can see liability if I am on a customer site but has anyone ever been (sucessfully) sued for a failure in shrink wrap software? If so there's a compnay in Redmond I'd like to go after!
Sorry for the late response but I just joined:)
The professional insurance limits requirements usually go in tandem with the customers requirements. For larger companies, this can range from $1M - $5M (I had a request one time for $25M in coverage for work with a Government entity).
Generally speaking, as an independent contractor you can carry $1M in limits and feel pretty secure that that E&O program will take care of most of the situations that you run into.
We have a program available that provides for the E&O and small business owners policy (property, computer equipment and general liability) starting at $995.