As cyber threats and professional liability claims continue to rise, understanding the differences between Cyber and Errors & Omissions insurance is essential for protecting your business from distinct but significant financial risks.

Coverage and common claims:

Cyber insurance protects against data breaches, ransomware attacks, and system compromises, covering costs like forensic investigations, regulatory fines, and business interruption expenses. Errors & Omissions (E&O) insurance covers professional mistakes and service failures that cause financial harm to clients, such as software bugs preventing transactions or service outages that lead to customer losses.

When you need each:

You need Cyber insurance as soon as you collect, store, or process any digital data, regardless of your business size or industry. E&O insurance becomes critical when you begin delivering products or services to customers, as this is when the risk of professional liability claims significantly increases.

Typical limits:

Cyber insurance policies typically range from $1 million to $10 million in coverage, depending on your company's size, data exposure, and risk profile. E&O insurance limits generally start at $1 million and can extend to $10 million or more, with coverage amounts based on your revenue, client contracts, and potential exposure to financial losses.

Understanding cyber insurance coverage

Cyber insurance addresses the growing threat landscape that affects virtually every business with a digital presence. Beyond basic data breach response, modern cyber policies cover sophisticated threats like cyber extortion, where hackers demand ransom payments to restore access to critical systems. The coverage extends to business interruption costs when cyber incidents disrupt normal operations, ensuring companies can maintain cash flow during recovery periods.

Errors & Omissions insurance essentials

E&O insurance specifically protects against claims arising from your professional work and service delivery. This coverage is particularly vital for technology companies, as even minor software bugs can cascade into significant financial losses for clients. The insurance responds to allegations of negligence, failure to deliver promised services, or professional mistakes that result in client harm, regardless of whether your company is ultimately found liable.

Risk mitigation and prevention

While both insurance types provide crucial financial protection, implementing strong preventive measures can reduce your exposure and potentially lower premiums. For cyber risks, this includes multi-factor authentication, regular penetration testing, and comprehensive employee training programs. For E&O risks, focus on robust quality assurance processes, clear client communication, and well-defined service agreements that set appropriate expectations and scope limitations.

The scenarios described are offered only as examples. Coverage depends on the actual facts of each case and the terms, conditions and exclusions of each individual policy. Anyone interested in the above product(s) should request a copy of the standard form of policy for a description of the scope and limitations of coverage.

How much does cyber insurance cost?

Cyber insurance costs vary significantly based on your company's size, industry, revenue, and risk profile. Small businesses might pay $1,000-$3,000 annually for basic coverage, while larger enterprises can pay $10,000-$50,000 or more. Factors that influence pricing include the amount of sensitive data you handle, your cybersecurity measures, claims history, and coverage limits. Companies in high-risk industries like healthcare or finance typically face higher premiums due to increased exposure to cyber threats.

What does cyber insurance not cover?

Cyber insurance typically excludes coverage for acts of war, insider threats from employees acting with malicious intent, prior known security vulnerabilities that weren't addressed, and losses from outdated or unpatched systems. Most policies also don't cover reputational damage beyond specific crisis management costs, intellectual property theft for competitive advantage, and costs related to system improvements or upgrades. Physical damage to hardware and losses from business decisions made during a cyber incident may also be excluded.

Who needs cyber insurance?

Any business that collects, stores, or processes digital data needs cyber insurance, regardless of size or industry. This includes companies that handle customer information, payment data, employee records, or proprietary business information. Small businesses are particularly vulnerable because they often lack robust cybersecurity measures but still face significant costs from data breaches. Even businesses that primarily operate offline but use computers for basic operations like email or accounting should consider cyber coverage.

What does errors and omissions insurance not cover?

Errors and omissions insurance doesn't cover intentional wrongdoing, criminal acts, or fraudulent behavior by your company or employees. It also typically excludes bodily injury or property damage (which would be covered by general liability insurance), employment practices claims, intellectual property infringement, and breach of contract disputes that don't involve professional negligence. Additionally, E&O policies usually don't cover punitive damages, fines and penalties, or claims related to services performed before the policy's retroactive date.