For SaaS companies with a $5M contract requirement: $5M Professional Liability (E&O) is often one primary policy, or a primary plus follow-form excess layers.
The short answer
- $5M Professional Liability (E&O) means your contract asks you to show coverage that pays up to $5M if a customer says a mistake in your software cost it money.
- It may be one $5M primary policy, or a lower primary policy plus one or two follow-form excess layers (extra layers that use the primary's terms) with matching retroactive dates and policy periods.
- $5M is very rare online and almost always takes a broker and a full application, especially for SaaS that handles payments or health data. Morrow can help you find it.
What does a $5M 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, often combined with Cyber (coverage for data breaches and network security events). See Technology E&O vs Miscellaneous E&O. A $5M clause in an enterprise MSA (master service agreement) may read like this:
Illustrative contract wording
Supplier shall maintain (a) Technology Errors and Omissions insurance with limits of not less than $5,000,000 per claim and in the aggregate, and (b) Network Security and Privacy Liability insurance with limits of not less than $5,000,000 per claim and in the aggregate. Claims-made coverage shall be maintained for three (3) years after termination. Limits may be satisfied by primary and excess policies.
Illustrative example only. Actual contract wording varies.
Per claim is the most the policy pays for one claim. Aggregate is the most it pays for all claims in the policy period.
- Two coverages, two limits: this clause asks for $5M of each. One shared $5M limit may not meet it.
- Claims-made: Professional Liability almost always covers claims made while the policy is active, for work after the retroactive date (the earliest date of work it covers).
- Three years after termination: you would usually renew every layer for that period. Or buy tail coverage (an extended reporting period for claims after the policy ends) if you stop buying coverage, switch to a later retroactive date, or sell the company.
- Stacking allowed: the last sentence allows primary plus excess. If yours is silent, confirm with the customer that primary plus follow-form excess meets the clause.
Who asks SaaS companies for $5M?
Many SaaS contracts ask for $1M or $2M. A $3M request is often the next step up. A $5M request is usually a step above that and often comes from customers that see one outage or data error as a serious risk to their business. These include:
- Global enterprises with one MSA for every critical supplier. See MSA insurance requirements.
- Banks, payment processors, lenders and insurers that move money through your platform.
- Hospital systems and health plans where your product touches patient records.
- Large retailers and logistics networks that run orders on your software.
- Some state and federal agencies, mainly on large IT contracts, set the limit in the request for proposal (RFP).
How is $5M built?
A primary policy pays first. An excess policy pays only after the layer below it is used up. "$3M xs $2M" means a $3M layer that sits above the first $2M.
Example A: single policy
Example B: two layers
Example C: three layers
Each excess layer should follow form, meaning it uses the primary policy's terms. If your primary combines Technology E&O and Cyber, check that every excess layer sits over both parts. A commercial umbrella almost never adds Professional Liability limits.
Good to know
One outage can hit many customers. If one failure affects many accounts, the policy may treat the resulting claims as one related claim, so one per-claim limit can be the cap for all of them. Many Professional Liability policies also pay defense costs inside the limit, so legal bills shrink what is left.
What will underwriters ask for?
An underwriter decides whether to offer coverage and on what terms.
- What your platform runs for customers: payments, payroll, billing or clinical work.
- Uptime history, SLA (service level agreement) credits, release testing, and backups.
- Security audits such as SOC 2 (an independent report on your security controls), and controls like multi-factor login.
- The MSA asking for $5M and any limitation of liability clause (a cap on what you owe a customer).
- Annual recurring revenue, loss runs (a report of past claims), and your current policy.
What affects the cost?
- What your software runs. Platforms that move money or touch patient care often cost more than marketing tools.
- How the $5M is built. Primary layers often cost more per $1M than higher excess layers, but this varies.
- Security and claims history. Weak controls or past claims can raise the price or cut the limit.
- Retention and defense terms. A retention works like a deductible. A higher one often lowers premium. Defense outside the limit often costs more.
Frequently asked questions
I already have $2M Professional Liability as a SaaS company. How do I get to $5M?
Request new quotes: a new $5M primary, or follow-form excess layers above a primary. Morrow can ask carriers to keep your retroactive date and prior acts coverage where the market allows. Report any known incidents to your current carrier before you switch.
Can my SaaS customer be added as an additional insured on Professional Liability?
Usually not. An insurer may add one in some cases when a written contract requires it. Many customers accept a certificate of insurance (a one-page proof of coverage) listing every layer, with limits and dates. It gives the customer no rights under the policy.
Is $5M enough if my SaaS customer's contract asks for $10M?
No, a $5M limit would not meet a $10M clause. See $10M Professional Liability for SaaS companies for how higher limits are built. Morrow can help you find them.
Looking for $5M in Professional Liability? Morrow can help.
Send us the insurance requirement from your MSA and your current policy. Morrow can review both and request quotes for a $5M primary policy or a primary policy plus excess layers, keeping your retroactive date where the market allows.
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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.