$1M Professional Liability (E&O) Insurance for SaaS Companies

When a SaaS customer contract asks for $1M, Professional Liability (E&O) at that limit is common, but check for a $2M aggregate and Cyber wording.

What does a $1M Professional Liability requirement mean for SaaS companies?

Professional Liability (E&O, short for Errors and Omissions) covers claims that a mistake in your service caused a customer a financial loss, such as a bug or an outage. A typical clause reads:

• Per claim: the most the policy pays for any one claim. Here, $1M.
• Aggregate: the most the policy pays for all claims in one policy year. Here, $2M. A $1M/$1M policy would not meet this aggregate. Many carriers write one limit that is both the per-claim and aggregate limit, so meeting a $2M aggregate may mean a $2M limit instead of a split $1M/$2M. Clauses can also add Cyber coverage and a tail period.
• Claims-made: Professional Liability almost always covers claims made and reported while the policy is active, for work on or after the retroactive date (the earliest date of work the policy covers). The three-year term means you would keep coverage, or buy extra time to report claims, after the contract ends.
• "Network security and privacy": this is Cyber coverage. A plain E&O policy may not meet a clause that names it.

Who asks SaaS companies for $1M?

$1M may come up with:

• Small and mid-sized customers with a short insurance section.
• Mid-market procurement teams sending a vendor insurance questionnaire.
• Channel partners and resellers that bundle your product.
• Healthcare and public sector buyers on smaller pilots.

Enterprise MSAs (master service agreements) often ask for higher Technology E&O and Cyber limits, such as $2M or $5M. See MSA insurance requirements.

How is $1M Professional Liability built?

At $1M, the limit is usually one primary policy (the policy that pays first), with no excess layers (extra policies above it). SaaS companies usually buy Technology E&O, a form built for software and IT services, rather than a general Miscellaneous E&O form. It is often packaged with Cyber, which covers data breaches, network attacks and privacy claims. See Technology E&O vs. Miscellaneous E&O.

A commercial umbrella (a policy that adds limits above others) almost never covers Professional Liability. Additional insured status (a named party who gets coverage under your policy) is usually not available on Professional Liability. Some Technology E&O and Cyber carriers may add a customer in limited cases, often only for liability arising from your services, and others will not. If your contract requires it, ask before you buy. A certificate of insurance (a one-page proof of coverage) only shows that coverage exists.

Also check whether the policy limits claims tied to uptime promises.

What will underwriters ask SaaS companies for?

At $1M, underwriters usually ask for:

• What your product does, who uses it, and whether it handles payments, payroll or health records.
• How many customers and records you hold, and whether the data is personal, health or financial.
• Your uptime history, service level credits (refunds you owe customers when service falls short), how you test releases, and custom work.
• Security controls such as multi-factor login and encryption, plus the cloud hosts you rely on.
• Your standard terms, revenue, prior claims, and current retroactive date.

What affects the cost?

• What the software controls. Tools that move money, run payroll or support medical work usually cost more than scheduling or marketing tools.
• Data volume and type. More or more sensitive records usually raise the price, especially with Cyber.
• Revenue, controls and claims history. Larger customers, weak security or prior claims can raise it.
• Aggregate and retention. A higher aggregate usually raises the price. A higher retention (the amount you pay on each claim before the policy pays, like a deductible) usually lowers it.

Frequently asked questions

Do I need $1M Professional Liability as a SaaS company?

Often yes, if a customer contract asks for it or your software could cause a customer a financial loss. Hypothetical examples: a release breaks a billing feature, or an outage stops a retailer from taking orders during a big sale. Many policies may help pay defense costs for a covered claim, subject to the retention, the limit and the policy terms.

Do I need Cyber as well as Technology E&O?

Often, yes, if you store customer data. Technology E&O covers mistakes in your service. Cyber covers breaches and privacy claims. See Professional Liability vs. Cyber.

Is $1M/$1M enough if my contract asks for $1M/$2M?

Usually not, because a $1M/$1M policy has a lower aggregate than the clause asks for. Morrow can request quotes for a $1M/$2M structure where a carrier offers it, or for a higher single limit, and ask carriers to keep your retroactive date, so earlier work may stay covered (prior acts coverage), where the market allows. Report anything that could become a claim to your current carrier before that policy ends.

What if a customer later asks for more than $1M?

Request new quotes through Morrow for a new primary policy at the higher limit, or for excess layers that follow form (match the policy below). Confirm with the customer that primary plus follow-form excess meets the clause.

This article is general information, not legal advice or a coverage determination. Coverage depends on the actual policy wording, carrier underwriting and your contract terms.