$2M Professional Liability (E&O) Insurance for SaaS Companies

A $2M Professional Liability (E&O) requirement means a SaaS company needs a policy that pays up to $2M per claim, usually Technology E&O, to meet an enterprise customer's contract (master service agreement, or MSA).

What does a $2M requirement mean for SaaS companies?

Professional Liability (E&O, short for Errors and Omissions) covers claims that a mistake in your service cost a customer money. SaaS companies usually buy it as Technology E&O. An MSA clause often looks like this:

• Per claim vs. aggregate: the first number is the most paid for one claim. The second is the aggregate, the most paid for all claims in a policy year.
• Cyber at the same limit: "Network Security and Privacy" is Cyber coverage, which responds to data breaches, hacking and similar events. Some combined policies share one limit across both. If the clause lists each with its own limit, a shared limit may not satisfy it. See Professional Liability vs. Cyber.
• Claims-made and retroactive date: Professional Liability almost always covers claims first made and reported while the policy is active, for work on or after the retroactive date (the earliest date of work the policy covers).

Who asks SaaS companies for $2M?

The limit often tracks the customer's possible loss more than your size. SaaS companies often see $2M from:

• Enterprise customers whose standard MSA sets $2M as the vendor minimum. See MSA insurance requirements.
• Fintech customers when your software touches payments or account data.
• Healthcare organizations when your platform handles patient data.
• Resellers and integrators that pass their client's limits down to you.
• State and local agencies on larger rollouts.

Banks, large health systems and the biggest enterprises may ask for $3M or more.

How is $2M built?

At $2M, the limit is usually one primary policy (the policy that pays first) written at $2M/$2M. Some reach $2M with a $1M primary plus a $1M excess layer (a policy stacked above it) that follows form, meaning it uses the primary's terms. Confirm with the customer that this meets the clause. A commercial umbrella almost never covers Professional Liability, so it usually cannot fill the gap.

SaaS firms usually buy Technology E&O rather than Miscellaneous E&O (a general form for other professional services).

What will underwriters ask for?

An underwriter decides whether to offer coverage. At $2M, expect questions on:

• What your product does, including any payments, payroll or health records.
• Largest contracts, uptime promises, any service level credits (refunds when you miss them) and any cap on what you owe a customer.
• Revenue from implementation or custom work.
• Records you hold and where they are hosted.
• Controls such as multi-factor login and tested backups.
• Past outages, prior claims, and your current policy with its retroactive date.

What affects the cost?

• What the software controls. A tool that moves money or supports patient care usually costs more to insure than a marketing tool.
• Customers and contracts. Large accounts, tight service levels, uncapped liability or heavy implementation work can raise the price.
• Data and security. Sensitive records raise the price, especially with Cyber.
• Limit structure. $2M/$2M usually costs more than $1M/$2M. Separate Cyber limits, defense outside the limit and a lower retention (the amount you pay per claim) also add cost.

Frequently asked questions

Is $1M/$2M enough if my customer's MSA says $2M?

Usually not on its own, because a $1M/$2M policy pays only $1M per claim. To reach $2M, request new quotes through Morrow, either a new $2M primary or a primary with follow-form excess. See $1M for SaaS companies. Morrow can request quotes that keep your retroactive date and prior acts coverage where the market allows. Keep your current policy until the new one starts, and report possible claims to your current carrier first.

Do I need $2M Professional Liability as a SaaS company?

Only if a customer contract, law or your own risk calls for it, so read the insurance section of the MSA first. Hypothetical examples of claims: a pricing bug makes a retailer undercharge for weeks, a two-day outage stops a customer from routing shipments, or a sync error corrupts a lender's loan records. Even if you did nothing wrong, a policy may pay defense costs on a covered claim, subject to its terms and retention.

Can my customer be added as an additional insured on my Professional Liability?

Usually not, because Professional Liability policies generally cannot add a customer as an additional insured (a party the policy also protects). Some Technology E&O and Cyber policies may do so when a written contract requires it, with narrower coverage than general liability. Many customers accept a certificate of insurance, which is proof the policy exists and does not extend coverage to them. Check your contract.

What is prior acts coverage when I switch Professional Liability policies?

Prior acts coverage pays for claims about work you did before the new policy started, back to the retroactive date. Keeping that date when you switch helps avoid a gap.

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.