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Cyber Liability Insurance
Gain protection against cyberattacks and data breaches.
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Cyber liability insurance

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Cyber liability insurance

Cyber liability insurance pays for legal expenses, credit monitoring services, and other recovery costs if a data breach or cyberattack affects your company or your clients.

Does your company need cyber liability insurance?

Any business can be the victim of a cyber incident. But tech companies that handle sensitive data are especially at risk. 

To protect your business’s reputation and bottom line, you should consider cyber liability coverage. That goes doubly if you deal with personally identifiable information (PII) like:

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  • Credit card or bank account information
  • Medical information
  • Social Security or driver's license numbers
  • Customer names, email addresses, phone numbers, and addresses

But cyber risks go beyond sensitive data. Any tech company that provides a product or service could be blamed for a client’s data breach. And a lawsuit could leave you on the hook for serious damages.

Expenses like ransom payments, regulatory fines, and legal action add up quickly. Small business data breach costs now average between $36,000 and $50,000 according to

Avoiding those high, unpredictable costs with cyber liability insurance comes in at about $145 per month.

Cyber liability insurance provides crucial protection for tech companies

Data breaches and other cyber incidents affect businesses of all sizes. While cyberattacks on large companies get the most press, small businesses are targeted 43% of the time.

And small tech businesses face even greater risks. If your client is the victim of a cyber crime, your company could be on the hook for the damage done.

For example, clients can hold software developers liable for software bugs that allow hackers to break into their systems – even if the developer never touched the stolen data. Clients can also sue IT consultants who recommend faulty security solutions, along with the cybersecurity companies that build them.

Tech businesses that work with personal information can play it safe with cyber liability insurance coverage. So can companies that provide cybersecurity or cloud services.

Cyber liability insurance covers the costs related to cyber threats like:

Any tech company that provides a product or service could be blamed for a client’s data breach. And a lawsuit could leave you on the hook for serious damages.

What does cyber liability insurance cover?

Cyber liability business insurance typically pays for:

  • Extortion demands
  • Security incident investigations
  • Data breach response and notification costs
  • Fines from state regulatory agencies
  • Legal services to assist with compliance
  • Legal defense costs for cyber liability lawsuits

There’s no standard cyber liability policy – many policies contain different terms and conditions. Make sure you clarify the specifics of any potential policies with your insurance agent.

If a data breach forces your business to temporarily close, a cyber liability insurance policy can also cover business interruption expenses. These could include the cost of hiring additional staff, renting equipment, or purchasing third-party services.

Beyond the financial losses, a cyber incident can leave your reputation in ruins. Cyber liability insurance will also pay the cost of hiring public relations experts to handle damage control.

Cyber liability insurance comes in two forms, each protecting a crucial area of cybersecurity:

  • First-party coverage covers expenses when your data is stolen or your computer systems are hacked.
  • Third-party cyber coverage pays for your legal costs if a client sues you for failing to prevent a data breach or cyberattack at their business.

What does first-party cyber liability insurance cover?

First-party coverage helps your business recover from a data breach or ransomware attack at your tech company. A first-party cyber insurance policy typically covers:

  • Cyberextortion payments
  • Hiring experts to investigate security incidents
  • Notifying clients or customers of a data breach
  • Credit monitoring services
  • Public relations and crisis management

For example, a data analyst might use first-party cyber liability insurance to cover the costs of restoring client data that’s corrupted, deleted, or stolen in an SQL injection attack. First-party cyber insurance can even cover the cost of hiring a data recovery expert.

What does third-party cyber liability insurance cover?

Third-party cyber liability coverage offers protection if a client sues you for a data breach or cyberattack on their business. Third-party insurance typically covers the cost of:

  • Hiring attorneys to defend your company
  • Paying settlement costs to resolve a lawsuit amicably
  • Paying court-ordered damages
  • Covering miscellaneous court costs

For example, a project manager might use third-party cyber liability coverage when a client lawsuit claims the recommended SaaS solution failed to protect sensitive client data.

Third-party cyber liability coverage is often bundled with errors and omissions insurance in a package called technology E&O insurance, which includes coverage for lawsuits over professional mistakes or oversights.

Is cyber liability insurance required by law?

Cyber liability insurance isn’t required by law, but it can pay regulatory fines that result from a data breach. It can also cover the cost of hiring an attorney to represent your company during regulatory proceedings.

For example, let’s say your web design business in California suffers a data breach, and all of your client data is stolen. If you aren’t able to fix your security issues within the 30 days required by law, you could be subject to fines. Cyber liability insurance can cover any financial penalties.

How much does cyber liability insurance cost?

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Cyber liability insurance costs small companies an average of $145 per month or $1,675 per year. Your insurance premiums are based on many factors, including your:

  • Number of employees
  • Volume and type of data handled
  • Industry risks
  • Policy coverage limits
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What determines the cost of cyber liability coverage?

Claims history. Your insurance company will charge you more if you have a history of making cyber liability claims. If you haven’t made many claims in the past, you’ll pay less.

Data access. The more people with access to your sensitive information, the more a small business owner will pay for cyber liability insurance. Limiting access to sensitive data or hiring a cybersecurity expert may lower your insurance rates.

Coverage limit. If you need a higher coverage limit because your business is higher risk, your policy will cost more. For example, if you’re responsible for multiple servers or a large volume of customer records, you’ll need more coverage.

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How much cyber liability insurance do you need?
Evaluate your business risk to determine how much cyber liability insurance you need.


Security measures. You can save on cyber liability insurance by establishing security measures like:

  • Securing your data behind strong network firewalls to prevent a security breach
  • Using antivirus software
  • Using a VPN
  • Changing company passwords often
Updated: June 29, 2022