Technology errors and omissions (E&O) vs. cyber insurance
Technology errors and omissions insurance and cyber insurance both cover data breaches. The type of coverage your business needs depends on whether a cyberattack could damage your company, your clients, or both.
What does cyber insurance cover?
Data breaches have affected hundreds of millions of customers across numerous industries. Breaches and cyberattacks are a major risk for most small business owners, but especially for those who handle sensitive customer data, such as accountants, healthcare providers, and retailers.
When a data breach happens, the companies pay for finding the cause of the breach, notifying customers and regulators, and providing credit monitoring for their customers.
Cyber insurance is the policy that helps cover costs related to data breaches and cyberattacks.
There are a few ways to purchase this policy:
- You can purchase cyber insurance by itself as a standalone policy.
- You can add a data breach insurance rider to your general liability insurance or business owner's policy (BOP).
- You can bundle it with your errors and omissions insurance in a package called technology errors and omissions insurance (E&O).
The type of coverage that is the best fit for your company depends on whether you're concerned about a data breach on your own system, or a client suing you for failing to prevent a breach at their business.
What does tech E&O insurance cover?
If you are an IT consultant or own a technology firm and you recommend or install hardware or software that enables a breach, you might face expensive litigation.
Technology companies that face this risk should consider technology errors and omissions insurance. This policy includes a specific type of cyber liability insurance that covers your legal costs when a client sues over a breach.
The difference between technology E&O and cyber 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, specifically first-party cyber liability insurance, helps companies address the financial aftermath of a cyberattack or another type of data breach that occurs on your own system. 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 costs are known as first-party costs since they affect the policyholder. Cyber liability insurance also pays for customer claims resulting from the theft or breach of customer data on your network.
First-party cyber liability insurance, known here as data breach insurance, can often be added to your general liability insurance or business owner's policy.
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
This policy bundles errors and omissions insurance with third-party cyber liability insurance, which covers accusations that your negligence led to a breach on a client's system.
Does your small business need cyber or tech E&O insurance?
To determine if you need cyber insurance, consider how much customer data you store on your network. If that’s a significant part of your business, you’ll want this policy to help cover costs if credit card numbers or other client data is exposed.
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.
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MALE VOICEOVER: If you're an IT consultant, software developer, web designer, or cybersecurity professional, you've probably heard about Tech E&O insurance and cyber insurance.
But, what’s the difference? And more importantly, do you need one or both?
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The biggest difference between Tech E&O and regular cyber insurance is third-party cyber claim coverage.
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To start, let's talk about cyber insurance.
Cyber insurance is designed to protect your own business when a cyberattack or data breach impacts your systems.
If hackers gain access to customer information, cyber insurance can help cover costs such as forensic investigations, customer notifications, credit monitoring services, crisis management, and other breach-response expenses. It can also help with lawsuits related to a breach.
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You should also consider commercial auto insurance. If your company owns trucks, vans, or other vehicles used for solar panel installation, commercial auto coverage can help pay for accident-related expenses, vehicle damage, and liability claims.
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Now let's look at Tech E&O.
Technology errors and omissions insurance, often called Tech E&O, protects technology businesses when a client claims your services, software, advice, or technology recommendations caused them financial harm.
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For example, imagine an IT consultant recommends software with a security vulnerability. A hacker exploits that weakness, and the client suffers a costly data breach.
The client may sue the consultant for negligence. But that's where Tech E&O can help.
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So, what does Tech E&O insurance cover? It typically covers professional mistakes and oversights, failure to deliver promised services, missed deadlines and project failures, breach of contract allegations, legal defense costs, settlements and judgments, and third-party cyber liability claims.
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Cyber insurance primarily focuses on protecting your business when your systems are compromised.
Tech E&O focuses on protecting your business when a client claims your technology services caused their losses, including losses tied to a cyber incident.
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Here's an easy way to remember it:
If your company gets breached, think cyber insurance.
If your client sues you because they believe your work contributed to a breach or financial loss, think Tech E&O.
Many technology businesses face both risks.
That's why SaaS providers, web hosting companies, cybersecurity firms, and other technology professionals often carry Tech E&O coverage along with cyber insurance to help close coverage gaps.
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Understanding the difference can help you choose the right protection before a claim happens.
At Insureon, you can complete one simple application, compare Tech E&O and cyber insurance quotes from top-rated insurance companies, and find coverage tailored to your business.
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Tap the link to get small business insurance that you can count on.
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