Cyber risks are a growing source of liability claims for companies – especially for tech businesses. If you or your client insurance agency experiences a cyber incident like a data breach or a ransomware attack, chances are good that you’ll face a lawsuit.
The costs of a data breach incident can be steep, but cyber liability insurance helps cover your expenses. There are two types of cyber liability coverage: first-party and third-party cyber liability insurance.
First-party insurance covers the expenses associated with a cyber incident at your business. Third-party coverage protects you if a client sues you for not preventing a data breach or cyberattack on their company.
Most tech businesses opt to purchase a technology errors and omissions policy (tech E&O), which combines errors and omissions and cyber liability coverage. A tech E&O policy typically includes both first- and third-party coverage. Be sure to check with your insurance agent to confirm what your policy covers.
Here are some ways to avoid triggering a third-party liability claim:
Create a solid client contract. Make sure your contract clearly defines the services you’ll provide and specific liability limitations.
Encrypt sensitive data. If you handle cybersecurity or manage your clients’ IT systems or networks, it’s vital to encrypt sensitive data. This is an added layer of protection against cybercriminals.
Keep firewall and antivirus software updated. Ensure software is updated with the latest security patches to protect your clients from security vulnerabilities.
Train your client on cybersecurity best practices. Educate your client about the importance of strong passwords and how to spot suspicious downloads or phishing attempts.
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