Technology errors and omissions insurance coverage
Technology errors and omissions insurance (technology E&O) provides coverage when you’re accused of negligence, mistakes, or oversights. It also covers data breaches that affect your business or a client’s operations.
Technology errors and omissions insurance includes two policies
Technology E&O is an insurance bundle designed specifically for tech companies. It includes errors and omissions insurance and cyber liability insurance policies, and costs companies about $60 per month.
What is errors and omissions insurance?
Client contracts often require errors and omissions insurance, also known as professional liability insurance. This policy protects you when a client sues over professional negligence, such as an error or oversight.
For example, a project manager could have hired a key contractor who had to leave a project due to illness. When the project sails past its deadline, the client sues the project manager. The client lost profits when the work ran late, and they’re trying to get that money back.
Your E&O policy will pay for your legal defense and whatever it takes to resolve the case, be it a settlement, judgment, or fines.
E&O insurance protects your company when a client sues over:
- Errors or oversights
- Undelivered services
- Missed deadlines
- Budget overruns
- Incomplete work
- Breach of contract
- Poor advice
You don’t need to do anything wrong to face an E&O suit. A client might view it as a way to try and recover a financial loss. That’s why E&O coverage is so important for tech professionals, even those who think they don’t need insurance.
What is cyber liability insurance?
First-party cyber liability insurance
Technology companies that handle sensitive client or customer information should consider first-party cyber liability insurance, which covers data breaches on your own systems. Data breaches happen frequently and cost a lot of money to resolve.
Causes of data breaches include:
- Malware and viruses
- Phishing scams
- Application vulnerabilities
- Weak passwords and other employee errors
- Insider attacks
First-party cyber liability coverage helps pay for:
- Notifying affected customers
- Data recovery
- Damage control, like a PR campaign
- Credit and fraud monitoring services for affected customers
- Data breach source investigations
- Ransom demands from cyber extortion
Companies that only need first-party cyber coverage can often add it to their general liability insurance policy.
Third-party cyber liability insurance
Third-party cyber liability insurance covers data breaches on clients’ systems that you worked on or for which you are responsible. IT consulting businesses, cybersecurity businesses, and other companies that recommend software or manage network security should buy this policy.
For example, say an IT consultant advises a client to move their customer information to a new database. A hacker breaks into the database and exposes customer data, including credit card numbers. The client might sue the consultant to recover costs of dealing with the breach.
In a situation like this, a third-party cyber liability policy would cover your legal defense up to the policy limits. That includes:
- Attorney’s fees
- Court-ordered judgments
Third-party cyber coverage is also crucial for providers of technology services or software. For example, say a retailer depends on your software for customer transactions. If it goes offline, so does their business. The retailer might sue to try and recover from the business interruption.
How much does technology errors and omissions coverage cost?
What other business insurance does your tech company need?
A tech E&O policy covers the two biggest risks of information technology, client lawsuits and computer system security. But business owners face many other risks. You should also consider:
- Commercial general liability insurance for third-party claims of bodily injury or property damage.
- Business owner’s policy for business property protection combined with general liability.
- Commercial umbrella insurance for businesses that need extra protection.
- Workers’ compensation insurance for any business that has employees.
- Fidelity bonds to compensate clients for employee theft or fraud.