Cybersecurity is extremely important for businesses big and small. As breaches at Fortune 500 companies have shown, no matter how air tight you think your cyber defenses are, there are always vulnerabilities and loopholes that a sophisticated hacker can exploit. In fact, did you know that cyber criminals favor small businesses?1
That’s why it’s critical for companies to not just secure their digital assets but also insure them in case of an attack. Modern problems require modern solutions, so there are two main kinds of digital security coverage: technology errors and omissions (tech E&O) and cyber insurance. And while they’re similar, there are key differences between them.
Both of these forms of cyber-related insurance products protect information technology (IT) companies in the event of a data breach. Both are designed to help recoup losses as a result of a malicious hacker’s attack and seizure of your or your clients’ information.
However, the specific circumstances protected under each form of cyber insurance are different. The main distinction between the two has to do with a focus on your own data or your clients’ data:
- Tech errors and omissions insurance policy – This primarily third-party coverage usually protects you in the event that one or more of your clients falls victim to cyber crime as a result of a professional mistake made by your company.
- Cyber insurance – This usually provides first-party and third-party coverages to protect you in the event that your company or your clients are the victim of a cyber attack.
In the sections that follow, we’ll fully break down each type of these insurance coverages down to the basics (or 1s and 0s for you techies).
What is tech e&o insurance?
Tech E&O is insurance coverage for mistakes made by a technology company that impacts its clients or customers.
In general, errors and omissions insurance is also commonly known as professional liability insurance. It exists to shield your company in the event that a client sues, claiming that your mistakes or negligence caused them financial loss.
In the case of tech E&O, the insurance coverage relates specifically to disputes over your technological service provided to a customer. If a representative from your company neglects to perform a certain security protocol that safeguards a client’s data, or provides technical advice that harms a client’s business, you may be sued.
In the event of such a lawsuit, tech E&O insurance can provide the investigation and defense of a claim as well as the payment for damages, whether as a result of a settlement or as ordered by a court of law.
Negligence and accidents are not the only reasons that data breaches happen. Sometimes, even the most secure systems fall victim to an attack.
That’s why you need a cyber insurance policy.
What is cyber insurance?
Cyber insurance protects your company from situations in which your business has been a victim of cyber crime. Importantly, these protections are in place regardless of your own level of fault (for instance, if your security infrastructure was lacking), unless you intentionally caused the breach.
If a hacker has penetrated your systems and seized control of your company’s or your customers’ data, the financial consequences can be very costly. But cyber liability can help recoup some of your losses.
The kinds of items cyber insurance usually covers include:
- Investigation and treatment of attack(s)
- Ongoing monitoring during and after breach
- Notification and management of impacted clients
- Loss of business income
- Extortion and ransom costs
- Rehabilitation of reputation, such as public relations services
- Damages to third parties who have been injured due to the breach of their protected information
- Investigation and defense of claims by third parties
In the event of a cyber attack, businesses can be crippled by not just the initial blow, but the aftermath that follows. Hackers directly stealing resources is a major issue, but unfortunately, it is far from the worst damage that an attack can do.
Cyber criminals may leverage seized resources as ransom, demanding additional funds from the company. Additionally, they may create additional vulnerabilities in your systems, opening the company up to further cyber threats.
In the face of these incredibly complex attack scenarios, the best defense comes down to a one-two punch of cyber security and a cyber insurance policy.
Tech E&O vs. cyber insurance: Recap
Let’s do a quick reboot of what we’ve learned. The first steps to ensuring your company’s data safety is to maximize your cyber defenses (minimizing the chance you’ll be attacked) and to follow best practices with respect to client-facing technological responsibility. Create a strong cyber security shield, and you’ll deflect as many attacks as possible.
But in the event that something does slip through the cracks, insurance will keep you afloat. Keep in mind these similarities and differences between tech E&O and cyber insurance:
- Both forms of insurance protect against cyber threats
- Tech errors and omissions coverage focuses on lawsuits involving errors that hurt clients
- Cyber insurance focuses on security breaches that harm your company or your clients’ private information
Now that you understand more about each form of insurance, you’re better equipped to seek out the coverage that’s right for you. Get your digital assets insured so you can rest easy and focus on taking a “byte” out of your competition!