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>>>I recently came across a prospecting customer who asked for liability insurance of up to $1,000,000. So this is where I started looking into this issue. I contacted one insurance agency and they, after interviewing me about my application, suggested that I do need Professional Liability Insurance.
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>>Suggesting that you need to buy their stuff without an interview would be unprofessional. And these guys ARE pros... not amateurs.
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>>> And those policies are pretty expensive. Actually the prospective customer already issued a purchase order but included a clause indicating that my company should get liability insurance. I talked to another insurance agency and they said they can get me what is called "General Liability Insurance" which is less expensive. So I am working on getting the General Liability Insurance now. But still wonder if I will or not in the end get the Professional Liability. I may have to raise the price for my application to cover for the added cost which will make me less competitive. And I will talk to my lawyer this weekend (my brother-in-law <g>) see what he suggests.
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>>It's all a racket, IMO, but if the end customer is willing to pay a more expensive app because of that, then they should get what they pay for.
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>The point is that the customer is not willing to pay more; they want me to pay more :). But I will still be investigating on what is the fair price for me to buy Professional Liability Insurance for my type of business application.

Many carriers offer a special type of liability insurance that is not exactly general and not exactly professional. Chubb, does for example.I think it's important to understand the difference between the two types (below is Chubb's definitions):

General Liability Insurance
Is there a chance that your customers could ever suffer personal injury or experience property damage from any products or services that your company has provided? If so, our General Liability Insurance will protect you and your technology business from expensive legal costs and damages that could arise.

Information and Network Technology (INT) Liability Insurance
If you would like more extensive cover than what our General Liability Insurance provides, our INT Liability Insurance is worth considering. It will cover your company for costs and damages arising from failure of your products and/or services to deliver as intended. It also protects you against unintentional infringement of intellectual property rights.

In other words, it protects you from being sued by your client for failure to deliver.

Many carriers have liability insurance specifically for software developers. do some searching and cost comparison on it.