Building tech? One bug, one breach, one mistake, and you're facing a lawsuit
Software failures, data breaches, missed deadlines, IP disputes, and tech startups face unique risks that standard insurance doesn't cover. ICT Insurance protects you from the claims that could kill your startup before it scales.
What could go wrong
Tech startups move fast and break things but when you break the wrong thing, it can break your business. Software bugs that cost clients millions, data breaches that trigger regulatory fines, IP disputes that force you to rebuild your product, tech-specific risks aren't covered by standard business insurance. One critical bug or breach can destroy years of work and wipe out your funding runway.
The software bug that costs millions
You're a 5-person SaaS startup. Your payment processing integration has a bug that overcharges 2,000 customers. Some are charged multiple times. Complaints flood in.
Processing refunds costs $120,000*. Customers are threatening legal action due to financial distress. Your reputation is destroyed on social media. Lost ARR: $400,000*.
The water damage disaster
A pipe bursts in your office overnight. By morning, your carpet is ruined, your desks are warped, your stock is destroyed, and your server is fried.
Damage: $45,000*. You can't operate from the office for 3 weeks while it's repaired.
The data breach
Your cloud infrastructure is breached. Hackers accessed the customer database, which contained 15,000 user records, including emails, names, and encrypted passwords.
Under the Australian Privacy Act, you are required to notify every affected individual. OAIC investigates. Legal costs: $45,000*. Notification costs: $12,000*. Potential fines: $50,000*. Customer lawsuits: $200,000+*.
What this actually covers
ICT Insurance
ICT Insurance (Information and Communications Technology) is specialised cover for tech businesses:
Professional Indemnity for tech:
- Software bugs and errors
- Failed implementations
- Missed deadlines and deliverables
- Breach of contract claims
- System downtime or failures
- Data loss or corruption
- Poor advice or consulting
- Faulty workmanship in code
Cyber & Privacy Liability:
- Data breaches and hacking
- Privacy law violations (OAIC)
- Customer data theft
- Ransomware attacks
- Security failures
- GDPR breaches (if you have EU customers)
- Notification costs
- Regulatory fines
Intellectual Property cover:
- IP infringement claims (unintentional)
- Copyright disputes
- Patent infringement defence
- Trade secret breaches
- Domain name disputes
- Open source license violations
Media & Content Liability:
- Defamation in user-generated content
- Copyright infringement in content
- Privacy violations in published content
- Trademark issues
Contract & Financial Loss:
- Third-party financial loss due to your services
- Lost data recovery
- Business interruption of clients
- Consequential loss claims
When you need this
Pre-launch to first year
You need this from Day 1 if you're:
- Building software for paying customers
- Handling any customer data
- Providing SaaS, PaaS, or cloud services
- Developing mobile or web applications
- Offering IT consulting or services
- Taking online payments
- Storing user information
Growing and hiring
Your cover needs to increase when:
- Your revenue exceeds $1M
- You're storing thousands of customer records
- You're signing enterprise clients
- Contracts require $5M+ cover
- You're processing sensitive data (health, financial)
- You're expanding internationally (GDPR, other regulations)
- You're raising significant capital (investors often require it)
Established and optimising
Review your cover annually or when:
- You launch new products or services
- You change your tech stack significantly
- You have a near-miss (bug, breach, complaint)
- You're acquired or merging (representation & warranty claims)
- You enter new regulated markets
- You handle more sensitive data types
Common questions
Isn't this just Professional Indemnity?
ICT Insurance combines Professional Indemnity with Cyber, IP, and tech-specific extensions.
Standard PI often excludes cyber events, IP disputes, and tech-specific risks. You need ICT-specific cover.
Do I need this if I'm pre-revenue?
Yes, if you have users (even free users). If you're storing any user data, you're exposed to privacy law breaches and cyber liability. If you're building for clients under contract, you need PI cover from Day 1.
What if we use open source code?
You're still liable if you breach open source licenses (some require you to open-source your own code) or if the open source code contains bugs affecting your customers. IP cover helps with license disputes.
Does this cover us if AWS/Azure or our cloud provider goes down?
Depends. If you're contractually liable to customers for uptime, and you miss SLAs due to infrastructure failure, ICT insurance may cover customer claims against you. However, it won’t cover your own lost income—that’s business interruption insurance.
What about employee IP theft or taking code to competitors?
Most ICT policies include fidelity cover for employee theft of IP or trade secrets. However, prevention (through strong contracts and NDAs) is better than dealing with insurance claims.
Do VCs or investors require this insurance?
Many term sheets require tech startups to have a minimum $2-5M Professional Indemnity and Cyber cover before funding. It protects their investment if you're sued.