Does Your Business Need Cyber Insurance?
October 4, 2022
In our increasingly interconnected world, businesses are relying more and more on technology. From online ordering systems to cloud-based storage, technology is an essential part of doing business. However, with this reliance comes risk. That’s why many companies are considering insurance to protect against technological risks.
This article will provide an overview of two types of insurance that address technological risks: cyber insurance and technology errors and omissions insurance. We’ll also discuss what each policy typically covers and who might benefit from each type of insurance.
What is Cyber Insurance?
Cyber insurance is specifically designed to cover businesses against the financial losses caused by cyber-attacks. This can include anything from data breaches to system downtime and reputation damage.
It can help cover a wide range of expenses, including the cost of repairing damaged computer systems, reimbursing customers for stolen data, and providing legal support in the event of a data breach.
While the specifics of each policy will vary, most cyber insurance policies will provide coverage for:
- Data breaches
- Cyber attacks and malicious online activity that harms your business or customers
- Ransom attacks, malware infections, phishing scams
- Reputation management services after an attack on your business’s online presence or brand image
- Investigations into the source of a cyber attack or breach
- Crisis management and PR expenses
Like tech E&O insurance, cyber insurance does not cover intentional acts like fraud or criminal activity.
What is Tech E&O Insurance?
Technology errors and omissions (E&O) insurance is a type of professional liability insurance that helps protect technology companies from claims arising from errors or omissions in their products or services.
If you’re a technology company, it can protect your company from costly lawsuits that could arise if a customer suffers losses due to an error made by your company.
Tech E&O insurance can cover a wide range of risks, including:
- Data breaches and system failures
- Tech bugs and glitches that impact customer usability
- Errors in software or hardware development
- Incorrect specifications or user instructions
- Tech issues that result in a product recall or financial penalties
- Mistakes or oversights in the development of your tech product
However, tech E&O insurance does not cover intentional acts like fraud or criminal activity. It also does not cover product liability claims if your product causes injury or property damage. While it is not designed to cover all potential risks associated with technology, it can provide valuable protection for businesses that rely on technology to operate.
How Do I Know Which One I Need?
Cyber insurance is likely beneficial to a wider range of businesses. While any business that stores customer data electronically is vulnerable to risks, certain types of companies are more likely to be targeted by cybercriminals. For example, healthcare, financial services, and retail businesses are often targeted due to the valuable customer data they possess. In addition, small businesses are also at risk due to their limited resources for cybersecurity. As the number of cyber attacks continues to grow, companies should consider purchasing cyber insurance to protect themselves from the financial losses that can result from an attack.
Technology E&O insurance is typically purchased by businesses that provide technology-related services, such as software development, IT consulting, and web design. However, any company that provides professional services and relies on technology could benefit from this coverage.
While we are not insurance brokers or agents, we like to inform our clients of tools to help protect their assets. Insurance can help a business recover from a cyber breech but it can’t prevent them. We strongly recommend that companies mitigate risks by installing and enhancing their controls to help prevent a cyber event. Cyber attacks are difficult to prevent with IT controls alone. Cyber attacks represent an enterprise risk that should be addressed by at an enterprise level. Contact our office to speak to an advisor about mitigating risks within your business and we recommend reaching out to your insurance consultants to discuss your technology risks and coverages.