Cyber Liability

cyber liability text overlaying image of people working on computers with internet lock graphics If you’re running a business, you know you have to have insurance to protect against a variety of physical threats, like injury and property damage. But if you use any type of technology in your business, you should be aware that you’ll also need to protect against threats related to that tech. These risks range from hacking to data leaks, and they can be devastating for your business. To guard against these threats, many businesses choose to supplement their business insurance coverage with cyber liability insurance. Broad coverage provided by cyber liability insurance can help protect your business from a variety of dangers associated with the use of technology. 

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Types of Cyber Liability Insurance

Cyber liability insurance typically comes in the form of first-party or third-party coverage; each of these policies offers protection to businesses under various conditions. But it’s important to note that if you need a lot of cyber coverage, you should think about including technology errors and omissions coverage, especially if your company is in the technology industry.

First-party coverage 

This type of cyber liability insurance covers any immediate costs resulting from a cyber attack, including:

  • Cost of informing workers and clients
  • Fixing any damaged hardware or software
  • Preserving your brand’s reputation through marketing and PR measures
  • Costs of business interruption and lost revenue while operations are disrupted
  • Extortion funds or ransom money
  • Other expenses, such as paying for your customer’s credit monitoring

Third-party coverage

This type of cyber liability insurance covers costs associated with lawsuits brought on as a result of a cybersecurity attack. In general this includes:

  • Lawsuits alleging that you violated the privacy of clients or workers
  • Media responsibility lawsuits, such as libel or slander or copyright infringement
  • Contract-breach or negligence claims
  • Court costs and attorney fees related to legal actions
  • Court rulings and settlements

If your company retains client data, you should think about purchasing a cyber liability insurance policy, because general liability insurance does not provide coverage for liability claims resulting from data breaches.

Technology errors and omissions

A technology errors and omissions (E&O) policy will cover your business if an error on your part leads to a cybersecurity issue in a customer’s business. If your company develops technology products or offers technology-based services, you should think about purchasing this coverage. Tech E&O typically covers legal fees, court costs, and judgments or settlements, much like cybersecurity liability insurance, but only in specific situations involving goods or services.

First-party or liability insurance, for instance, would offer protection if a customer’s financial information was stolen from your server. But, if you create an accounting software application with a bug in the coding, and your customer’s data is stolen from their server as a result, that would be covered by tech E&O.


What Cyber Liability Insurance Doesn’t Cover

It’s important to read your cyber liability insurance coverage completely and understand any exclusions to your policy.

All of the following are frequently excluded from cyber liability insurance:

  • Bodily injury or property damage claims – Claims for bodily injury or property damage are not covered by cyber liability insurance. A general liability policy can help in these situations.
  • Property loss – A cyber policy will not usually provide coverage for the loss of a piece of property, such as a phone or computer.
  • Criminal activity – Typically, fraud, robbery, employee theft, and other crimes are not covered by a cyber liability policy. 
  • Social Engineering – Cybercriminals can use social engineering to lure their victims into sending company money. Social engineering is not always covered by cyber liability insurance. This might have a lower coverage cap or be an add-on that is optional.

When you buy a cyber liability policy, you consent to keep up the necessary security precautions to avoid a cyber incident in the first place. Coverage could be declined if you don’t observe these security precautions. For instance, if your employee unintentionally clicks on a link in an email, causing malware to damage your business’s computer systems, an insurance provider may refuse coverage if they find that you didn’t install any anti-malware software.

This example demonstrates the significance of understanding what you’re committing to when purchasing cyber liability insurance, and of having appropriate security measures in place. You can implement these security measures yourself, or you can get up to speed with the aid of outside security companies.

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The Cost of Cyber Liability Insurance

A year’s worth of cyber liability insurance can cost as little as $500 or as much as $50,000. You should be able to find a cyber liability policy that fits your budget by customizing coverage to your company’s needs.

The following factors affect how much cyber liability insurance will cost:

  • Coverage limits – Your insurance policy will cost more the more extensive and complex your coverage requirements are. For instance, your insurance will cost more if your business employs several servers or keeps a lot of client data.
  • Data access – You can cut costs by restricting access to sensitive information. For instance, it might be beneficial if you limit data access to senior staff only. You can also reduce costs by hiring an on-site security specialist.
  • Security measures – Your rates can be reduced by taking effective security precautions, including setting up network firewalls, antivirus software, and password-updating programs.
  • Your industry – In comparison to a brick and mortar company with a low-traffic website, an online-only business will face greater cyber dangers and pay more as a result. In addition, companies in specific sectors—such as healthcare and accounting—that hold the most sensitive sorts of data will likewise bear a higher cost.
  • Claims history – Your insurance carrier may raise your rate if you have a history of filing numerous claims.

Cyber liability insurance is more expensive than other types of business insurance, since the risks it covers often results in higher claims. 


How Much Cyber Liability Insurance Is Enough?

A cyber event can cost a lot of money when you add together all the expenses: you would need to manage the crisis, address customer concerns, handle customer service issues, repair harmed hardware or software, recover lost revenue, and pay the expense of any legal claims. Settlements or judgments could easily surpass six figures based on the extent and severity of a cyberattack, as well as the cost of data recovery. 

To calculate how much cyber liability insurance you require, evaluate your company’s risk. Different industries need different amounts of coverage. For example, a small IT enterprise would typically purchase a cyber liability insurance policy with a $1 million per event limit, a $1 million aggregate maximum, and a $1,000 deductible. Any company that manages a few thousand records would have full protection with this level of coverage, if a data breach costs roughly $250 per client or customer record.

A greater coverage limit might be a wise choice for high-risk companies like those that specialize in data storage. Most policies have a $5 million maximum coverage limit, but you can talk to your insurance company if you think you need more protection.

You also have to keep in mind how much cyber coverage your clients may need. Even if you have coverage for lawsuits resulting from data breaches under your errors and omissions insurance, the goal is to stay out of court. Make sure your customers have a risk management strategy that accounts for the expense of a data breach.

Your clients will be less likely to sue your tech company in an effort to recover their damages following a data breach if they carry cyber liability insurance. Encourage your clients to buy cyber liability insurance. Or require it before you start on a risky project to safeguard your company against client litigation.

You can change the recommended coverage limit in a work contract if you require clients buy cyber liability insurance.


Why You Need Cyber Liability Insurance

Hackers target personal identifiable information (PII) or protected health information (PHI) that you store on your business’s computers or servers. To react quickly to a data breach or cyberattack, it’s essential to protect your company with cyber liability insurance. So, if your business uses the internet to function or store data in any way, cyber liability is a necessary protection. 

The most common cyber liability claims are:

  • Data breaches – A data breach occurs when a hacker obtains PII from customers. This is the most common type of corporate cyber insurance claim, and also has the highest overall losses.
  • Cloud hacks – Phishing scams are used by hackers to access cloud-based accounts. Once inside, they switch between different customer accounts using the cloud infrastructure.
  • E-commerce shutdowns – It’s not just about money for hackers. The goal for certain hackers is to shut down your company. They can entirely shut you down if they can hack into your business.
  • Account takeovers – Account takeovers are one of the most common cyber insurance claims. These hacks involve criminals attempting to access your bank or credit card accounts in order to carry out fraudulent activities.
  • Malware – Malware attacks are common cyberattacks in which the victim’s system is compromised by malware, or malicious software. Malicious software, also known as a virus, includes several sorts of attacks, including ransomware, spyware, and command and control.

The market for cyber insurance is expanding, and for good reason. Cyberthreats have increased in number over the years. For instance, the FBI reported that cybercrime increased by 300% in 2020.

So, if you’re running a small business that uses technology in any way, we advise that you purchase cyber insurance. Before you purchase a policy, take into account the expenses and the ways you can save money on your coverage.



  • Will other types of insurance cover cyber liability?

Common business insurance policies like general liability, errors and omissions, property, or crime insurance may offer some coverage but it’s limited. As the internet grows, cyber risks are more detrimental to your business. So to make sure you’re getting properly covered it’s best to get cyber liability instead of hoping your limited coverage on other policies will be enough.

  • Will my premium go up after a cyber attack?

Typically yes, insurers will raise your premiums after a claim.

  • What isn’t covered by cyber liability insurance?

There are several things cyber liability won’t cover. It doesn’t cover bodily injury or property damage claims since these things aren’t cyber related. It also doesn’t cover property loss even if the item lost is a phone or a computer with sensitive information on it. Additionally if one of your employees uses protected information to commit fraud or theft then you will also not be covered. 

  • What counts as a cyber attack?

A cyber attack is when someone outside of your business breaks into your private network to shut it down and steal sensitive information about your company, employees, and clients. They usually hold this information hostage for a ransom in exchange for not releasing the information to the public.


Purchasing your cyber liability policy through an EZ agent is the best option. Our service is focused on each individual customer and creates a welcoming environment throughout the shopping experience. We provide immediate results in addition to personalized service. We want to help you make the best decision and save the most money. There is no hassle, no purchase obligation, and no more headaches, and all of our services are completely free. To star call one of our agents today at 877-670-3538.

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About The Author:
Cassandra Love

With over a decade of helpful content experience Cassandra has dedicated her career to making sure people have access to relevant, easy to understand, and valuable information. After realizing a huge knowledge gap Cassandra spent years researching and working with health insurance companies to create accessible guides and articles to walk anyone through every aspect of the insurance process.

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