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What's the difference between technology E&O and cyber liability insurance?

Cyber liability insurance and technology errors and omissions insurance both cover data breaches at IT businesses. The type of coverage your business needs depends on whether a cyberattack could damage your company, your clients, or both.

Both policies protect against data breaches

Data breaches are a major risk for small business owners, especially for technology professionals and industries that handle sensitive digital customer data, such as finance and accounting.

There are two types of small business insurance policies that provide data breach protection: technology errors and omissions (E&O) and cyber liability insurance. The type of insurance that is the best fit for your company depends on who is likely to be impacted the most by a cyberattack – you or a customer.

Tech companies face unique cyber risks

Data breaches have affected hundreds of millions of customers across numerous industries. When this happens, the companies pay for finding the cause of the breach, notifying customers and regulators, and providing credit monitoring for their customers. The average cost of a data breach is several million dollars or more, according to the Ponemon Institute.

If you own a technology firm and you recommend or install hardware or software that enables a breach, you might face expensive litigation. Technology companies with a large client risk may have a greater need for technology E&O insurance. A business that faces more internal risks might consider cyber liability (or data breach) insurance, which mitigates a company’s own breach-related costs.

Compare quotes for technology E&O and cyber liability insurance

The difference between technology E&O vs. cyber liability insurance

Technology errors and omissions and cyber liability insurance both address cyber risks, but from a different perspective.

Cyber liability insurance protects against data breaches at your company

Cyber liability insurance helps companies address the financial aftermath of a cyberattack or another type of data breach that occurs with data on the company's systems. It pays for the costs of:

  • Investigating the breach
  • Notifying customers and regulators
  • Managing the ensuing crisis
  • Providing credit monitoring to affected individuals
  • Public relations and reputational costs

These and related costs are known as first-party costs, since they affect the policyholder, unlike costs your customers must pay after you cause a breach (third-party costs). Cyber liability insurance also pays for customer claims resulting from the theft or breach of customer data from your network.

Technology E&O protects your company when a client is harmed

Technology E&O insurance protects a company that makes a mistake or forgets to do a critical task that hurts a client financially. These mistakes can range from recommending inappropriate technology to failing to meet project deadlines. When a client sues to recover losses, technology E&O insurance will pay for a firm’s legal expenses, including:

  • Attorney's fees
  • Court costs
  • Money paid to settle a lawsuit
  • Legal judgments (what a judge or jury orders you to pay)
  • Related costs, such as court and expert witness fees

Do technology companies always need cyber liability insurance?

Cyber liability insurance covers the first-party costs of a data breach. However, the value of such a policy depends on how much customer data you store on your network. If that’s a significant part of your business, you’ll want to protect yourself against hackers or other incidents exposing your data. 

If you don’t store much customer data, your first-party risk may be small. However, if the technology services you provide have a strong bearing on your clients’ network security, your third-party liability may be significant. In that case, you may have a strong need for technology E&O insurance.

Finally, it’s possible to have significant first-party and third-party risks. If that's the case, you may want to add both coverage types to your small business insurance portfolio.

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