Technology errors and omissions (E&O) vs. cyber insurance

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.

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.

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

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 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.

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.

Insureon partners with top-rated insurance companies to help small business owners compare quotes for technology E&O and cyber insurance policies. Start an online application to compare quotes and protect your business and clients. Our licensed agents can provide more information and guidance at any point in the process.