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Lets say that Ram is a freelancer app developer and takes a contract for app development for $6K from an institution. With help of his friend Shyam he develops the app and delivers it to the client at their satisfactory level. However, Ram and Shyam want to ensure that the institution they build the app for cannot hold them liable for any fault in the app which got into action five years down the line only and has caused a damage of $100K to the institution.

So, they want to insure their liability by taking and insurance policy. Does something like this exists? If yes, what are such policies generally called.

Please feel free to ask for any further clarification.

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    To those voting to close this question, I would consider this question on-topic for a freelance developer wondering what type of insurance they might need.
    – TTT
    Apr 3 at 14:35
  • Just to provide some perspective here from a small business owner that has purchased the insurance before, I believe both of the answers by user71659 and DavidBrowne are correct. The insurance you are asking about is called E&O insurance, but very few freelance developers ever purchase it because it's pretty expensive. For example, in the US a $1M general liability policy (which does not cover what you're asking) might cost $400 per year, whereas a $1M E&O policy might cost $2000 per year.
    – TTT
    Apr 3 at 14:38
  • @TTT I can understand why... $2k per year to cover damage for a project that paid $6k, only 3 years worth of coverage would result in total loss but (at least) 5 years were needed.
    – user12515
    Apr 5 at 4:27
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Insurance for professional mistakes is called errors and omissions insurance, or E&O.

Searching reveals a number of firms offering technology errors and omissions insurance.

The International Risk Management Institute says

Tech E&O policies cover both liability and property loss exposures. Major liability insuring agreements include losses resulting from: (1) technology services, (2) technology products, (3) media content, and (4) network security breaches.

Additional information is detailed in another IRMI article, including why commercial general liability insurance may not be sufficient and why you may need both.

Of course, you need to speak to a licensed insurance agent to determine what is right for you.

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The more common course is not to insure against the liability but to have limits on liability, warranty disclaimers, and dispute resolution procedures specified in the contract.

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  • Good alternative, @David. I've done contract work where the client required me to prove I had liability coverage, and in other cases I've had to carry a bond. Much depends on the nature of the work and the client's requirements also.
    – RiverNet
    Apr 2 at 23:02

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