Cyber insurance for technology companies and IT consultants

Cyber liability insurance safeguards your business when sensitive data is stolen or compromised. If a hacker exploits a system vulnerability and steals Social Security numbers, credit card numbers, or other personal information, you could be held liable. A cyber insurance policy can cover expenses from a client lawsuit and other costs related to the security breach.

After a data breach or cyber incident, this policy can help pay for:

• Customer notification expenses
• Fraud monitoring services for affected clients
• Legal costs from a client’s lawsuit

There are two kinds of cyber liability insurance: first party and third party.

First-party cyber liability insurance covers cybercrimes at your own business. For example, a hacker could use a ransomware attack to steal clients’ credit card numbers from a managed service provider (MSP) or SaaS company's database.

First-party cyber liability can cover expenses related to incident response, including:

• Notifying clients or customers about the breach
• Credit monitoring services for affected clients
• Cyber extortion demands

You may also see this coverage referred to as data breach insurance. Data breach coverage refers to several different policies that all safeguard the same part of your business: information.

A study from the IBM | Ponemon Institute found that data breaches cost businesses $242 per stolen record on average. So for a small business storing data for 1,000 customers, they could expect to pay nearly a quarter million dollars to recover from a breach – including the cost of notifying customers, which is often mandated by state law.

When a client suffers a data breach or social engineering attack, like phishing or malware, you could face a lawsuit if they believe you were negligent in preventing it. For example, your network security company or cybersecurity business could set up a data protection system for a client who suffers a breach and sues your business.

Third-party cyber liability insurance protects your business from expenses related to the client’s lawsuit, such as:

• Attorney’s fees
• Court costs
• Settlements or judgments

Technology, web, and IT businesses that need third-party cyber coverage usually bundle it with errors and omissions insurance. Both policies protect against accusations of negligence. The package is called technology errors and omissions insurance, or tech E&O.

While cyber liability insurance covers some of the biggest cyber threats in the IT industry, it does not complete your business's risk management plan. Technology professionals should also consider the following insurance solutions:

General liability insurance: This policy covers expenses related to client injuries and property damage, such as a slip-and-fall injury at a data analyst's office. Technology businesses can often bundle it with commercial property insurance for savings in a business owner’s policy (BOP).

Errors and omissions insurance: This policy is critical for IT consultants, IT trainers, and other professionals who provide expert advice. Also called professional liability insurance, it covers lawsuits related to work performance, such as a mistake that crashes a client’s computer system, causes a business interruption, and costs them hours or days of money.

Fidelity bonds: Data breaches can happen internally, too. An employee could jeopardize your business by engaging in unlawful access of sensitive information, theft, or fraud. Fidelity bonds safeguard your business when an employee engages in certain criminal acts.

Workers’ compensation insurance: This policy covers medical bills and disability benefits from work-related injuries and illnesses. Most states require technology businesses with employees to purchase workers’ comp. It's also beneficial for sole proprietors for workplace injuries and illnesses that private healthcare insurance won't cover, like carpal tunnel syndrome, repetitive motion injuries, and neck or back pain.

Commercial auto insurance: This insurance coverage is required in most states for business-owned vehicles. It can cover property damage and medical bills in an accident involving your IT company vehicle, along with theft, vandalism, and weather damage.

Are you ready to protect your technology business with cyber liability insurance? Complete Insureon’s easy online application today to compare quotes from top U.S. insurance companies. Once you find a policy that fits your needs, coverage can start in less than 24 hours.