Businesses today are increasingly dependent on technology for their company operations. Companies rely on technology for keeping track of sensitive data and information about clients, potential clients, and employees. However, using technology comes with a substantial amount of risk, like technology failure, data breaches, or invasion of privacy.
Are tech companies liable when a client using their technology or software suffers a breach?
The answer is often “yes.”
To protect against litigation, tech companies should purchase errors and omissions insurance and third-party cyber liability insurance. Plus, managing companies should also buy both as a precaution against breaches not related to the technology itself.
What is Tech E&O Insurance?
E&O stands for Errors & Omissions Insurance. Technology Errors & Omission insurance is primarily useful for companies that have a part in selling or installing software or technology equipment.
For example, Tech E&O insurance could help cover your business if the equipment you installed for a client failed and cost your client money. Another example would be if the software you sold a client glitched and caused your client to lose a significant amount of data. If you offer website development services, Tech E&O insurance would cover your potential financial losses if your client claimed the website you designed looked too similar to one of their competitors.
In other words, Tech E&O can help protect your business and employees by covering legal fees and additional related costs due to accidental errors and omissions made by your company.
What is Cyber Liability Insurance?
Third-party” and “first-party” are the two types of Cyber Liability Insurance you need to be aware of.
Third-party cyber liability insurance provides liability coverage for businesses specializing in online security. This type of coverage includes protecting clients from cyberattacks and data breaches. If your client experiences a cybersecurity breach created by an error or omission in the software you built for them, then sue your company for the losses they incur, third-party cyber liability insurance can pay for the legal expenses you incur to defend against their action.
First-party cyber liability insurance covers the financial liability associated with breaches on a company’s network. Incidents could include ransom attacks or hacked websites due to employee negligence rather than technical failure.
Who needs Cyber Insurance and Tech E&O Insurance?
Companies in the information technology field should have both types of liability insurance.
- Software Installers
- Computer Network and Security Consultants
- IT Consultants
- Software Developers and Engineers
- App Developers
- Website Designers and Hosting Companies
While the companies in the technology industry need to have liability insurance, front-line businesses working with sensitive information should carry it also.
- e-Commerce Businesses
- Medical Companies
- Banking and Finance
- Schools and Universities
What’s the difference between Tech E&O and Cyber Liability Insurance?
Technology Errors & Omissions Insurance and Cyber Insurance help commercial businesses manage the risks associated with technology. However, there are several key differences between the two.
Cyber Insurance helps protect your business from cyberattacks and accidental data breaches. It can help your business recover from a data breach or cyberattack. Cyber Liability Insurance can help mitigate the risk.
On the other hand, technology Errors & Omissions Insurance protects your company from legal fees and related costs associated with errors, omissions, negligence, and product failures. It is most beneficial to businesses that provide technology-related products and services, particularly businesses that produce electronic components or software and information technology specialists.
Which one do I need?
Nearly all businesses should consider investing in Cyber Liability Insurance, and any company in the tech industry should have both Cyber Liability Insurance and Technical E&O.
Suppose your business stores customer payment, credit, or bank information, stores Social Security or driver’s license numbers on file, or even has a database of client names and contact information. In that case, you are at risk of suffering from data breaches and cyber-attacks. Regardless of the size and scope of your business, Cyber Insurance can protect you from the financial risk of these incidents.
In addition, if your company provides products or services related to technology, you should consider investing in Technology Errors & Omissions Insurance to protect your company from financial risk in errors or negligence related to your services.
How can Post Insurance help?
Post Insurance is a third-generation insurance agency with expertise in personal and commercial insurance of all types. If you have questions about your insurance needs or would like to receive a quote, please fill out our contact form or call 800.262.9998.