It’s hard to imagine a business today that is not dependent on some form of internet-related technology to operate. Unfortunately, it exposes most companies to cyber security risks, resulting in costly losses and expensive lawsuits.

Consequently, it’s no wonder cyber insurance policies, like technology errors and omissions (E&O) insurance, are on the rise. This form of coverage is becoming more and more necessary for businesses of all kinds, not just Silicon Valley startups.

So, does your business need technology E&O coverage? Our guide to technology E&O can help you figure that out. Let’s jump in.

What is technology E&O insurance?

Technology E&O insurance is a form of small business insurance that protects policyholders from losses caused by the failure of technology products or services they sell to their customers. It helps shield your company financially if a client sues, claiming that your mistakes or negligence caused them financial harm.

Technology E&O insurance covers typical technology failures, including data breaches, network failures, malfunctions, and even e-commerce malfunctions. Or, if one of your employees provides bad technical advice to a client or fails to perform a task that protects a client’s data, thus harming your client’s business, technology E&O insurance can cover you if you get sued.

Technology E&O insurance can provide the investigation and defense of claims and may help pay damages (whether a result of a direct settlement or by a court of law). Let’s look at the most pressing reasons why you may need to purchase a technology E&O insurance policy for your business:

1. Cyber security breaches are expensive and high-impact

As companies become more and more dependent on technology, cyber security breaches are on the rise. The process of figuring out how a cyber attack happened and restoring normal business afterward can cost hundreds of thousands of dollars. Most tech service businesses cannot afford such an unplanned expense and, without sufficient coverage, could end up going out of business if sued by a client.

Technology E&O insurance can help protect your financials if your client is the victim of a cyber attack as a result of services your company rendered or the products it sold to the client.

2. Technology failures are on the rise

Every business assumes a technology failure won’t happen to them — until it does. You and your clients are always at risk of a cyber-attack.

According to a small business survey, 12% of participants had experienced a cyber attack in 2019 — up from 10% in 2018 — and 75% of survey participants said they believe the risk of cyber attacks is growing at an alarming rate.1

Cyber security insurance often covers small businesses in the wake of a cybercrime if your technology failure is found to be responsible for that breach. Technology E&O can safeguard your business if you get sued.

3. Most of your clients aren’t equipped to handle a breach

Even if your technology business has the cash to recover from an internal cyber security breach, your small business clients are probably not prepared for such expenses.

According to the small business survey, 44% of respondents said they do not currently have a form of cyber insurance, while 21% said they do not know if they do.2

Even those customers who do have cyber insurance might hold you responsible if your company’s failure led to the breach. Odds are, your customers will rely on you to address any losses they experienced due to your technology offerings.

4. Even unfounded claims against your business will cost you

Perhaps you feel 100% confident that your technology products and service are impervious to cybercrime or technology failures. Even if you’re right, every business is susceptible to unfounded claims. In the wake of a technology failure, some clients and customers might still blame you even if your technology wasn’t at fault. Nothing can prevent that.

Suppose a customer claims your business’s technology caused them to incur financial losses without technology E&O insurance. In that case, you’ll have to pay for your legal defense — even if that claim is unjustified. Legal costs can cost thousands of dollars per hour. Fortunately, technology E&O insurance can provide your legal defense and settlement of claims.

5. Customers might require it

As a result of the mounting risks that come with technology-based services and products, many customers may require you to have technology E&O insurance. Even if a client has their own cyber coverage, their policy may not be sufficiently broad to protect their business in all instances.

If a client or customer requires you to have technology E&O insurance to be eligible to work with them, they’ll likely ask for a Certificate of Insurance (COI) as proof of your coverage. A COI can help you prove your coverage details and ultimately help you win business with clients who perform even the most thorough due diligence when picking their technology providers.

Who needs technology E&O insurance?

Technology E&O insurance is designed for companies that offer tech-based products and services, such as software, hardware, IT consulting, or data storage. Technology E&O insurance protects your business from the financial ramifications of mistakes or negligence that economically harm your clients.

Imagine running a website hosting service that allows small business owners to create websites and purchase branded domains. But something goes wrong and your entire network goes down for several hours. Within that time span, one of your customers loses out on a huge contract opportunity because their website went dark. They file a claim against you for those financial losses.

Your technology E&O insurance can provide for your legal defense and the settlement of claims should there be a judgment against you.

Cyber insurance vs. technology E&O insurance

The difference between cyber insurance and tech E&O insurance is that cyber insurance covers liability for a data breach resulting in the loss of customers’ sensitive information. Cyber insurance often covers the costs associated with investigating and repairing the breach and the liability involved with leaked third-party information. For example, it can include providing free credit reports or enhanced identity theft protection for a specified period of time.

Technology E&O insurance, on the other hand, covers the technology company responsible for the mistake that led to the breach.

In other words, if you purchase a database program to store your client records and experience a cyber data breach that compromises your customers’ sensitive information, cyber insurance may help you cover the resulting damages.

But, if your company sold the database program that was compromised because of a programming design flaw that resulted in losses to your customers, then you would need technology E&O insurance to help cover expenses related to customer claims for damages.

You probably do not need tech E&O insurance if your business’s core offerings are not technology-based. It’s not a necessary expense if you simply rely on technology provided by other businesses to make your business run, like a point of sale system, an online bank account, or a website hosting service. In those examples, cyber liability insurance may be more appropriate.

TLDR: Tech E&O insurance

If your business provides tech products or services and one of your clients blames you for a mistake that leads to their financial loss, you could face a crippling lawsuit that may threaten to put you out of business. Technology E&O insurance can help protect your business from this scenario.

Supplement your technology E&O insurance with Thimble’s professional liability insurance, which can cover your business if a customer claims your mistakes or negligence caused monetary or reputational damage. It’s easy — click “Get a Quote” or download the Thimble mobile app, answer a quick set of questions, receive your quote, and click to purchase, all within minutes.

Disclaimer: Thimble does not currently offer technology errors and omissions insurance.


  1. Insurance Information Institute and J.D. Power. Small Business Cyber Insurance and Security Spotlight Survey.
  2. Insurance Information Institute and J.D. Power. Small Business Cyber Insurance and Security Spotlight Survey.