What Insurance Covers Software Downtime?

The right coverage depends on whose loss the outage creates and what caused it. Cyber insurance may cover the insured company’s lost income when a covered cyber event interrupts operations; FTC guidance lists lost income from business interruption among possible first-party cyber costs. A technology provider facing a customer claim over unavailable software may instead look to technology E&O for covered liability arising from its professional services. Those are distinct protections, and a policy may offer one without the other.

A routine bug, maintenance window, utility interruption, cloud-host failure, cyberattack, or customer-side configuration problem may trigger different provisions or no coverage. The FTC recommends considering vendor-held data and cyber coverage scope; its guide does not say every vendor outage is insured. Policy waiting periods, required interruption duration, restoration period, service-level credits, and direct physical damage requirements can also affect business-interruption coverage.

Read the cyber policy’s definition of a security event and business interruption, any contingent business interruption extension for third-party providers, and the waiting period and sublimit. For customer claims, check the technology services schedule, failure-to-perform grant, contractual liability exclusion, and defense-cost limit. Ask the insurer to address both your own lost revenue and liability to customers.