Technology E&O vs Cyber Insurance: Tech Companies Need Both
💻TECH COVERAGE GUIDE
Technology companies face unique risks that standard business insurance doesn't cover. You need both Technology E&O and Cyber Insurance—but for different reasons. Here's exactly what each covers and why the combination is critical.
🏗️ Technology E&O: Your Software Liability Shield
⚙️ What Technology E&O Covers
🐛 Software Errors & Bugs
• Algorithm errors causing financial losses
• Database corruption leading to data loss
• Integration failures breaking client systems
• Performance issues causing business disruption
• Security vulnerabilities in your code (not exploited)
• Calculation errors in financial software
• Database corruption leading to data loss
• Integration failures breaking client systems
• Performance issues causing business disruption
• Security vulnerabilities in your code (not exploited)
• Calculation errors in financial software
⏰ Failure to Deliver
• Missing project deadlines costing client revenue
• Software not meeting specified requirements
• Incomplete functionality at launch
• Poor performance not meeting SLA requirements
• Failed system migrations
• Inadequate testing leading to client problems
• Software not meeting specified requirements
• Incomplete functionality at launch
• Poor performance not meeting SLA requirements
• Failed system migrations
• Inadequate testing leading to client problems
💡 Intellectual Property Issues
• Accidental use of copyrighted code
• Patent infringement claims
• Trade secret violations
• Licensing agreement breaches
• Open source license violations
• Confidentiality agreement violations
• Patent infringement claims
• Trade secret violations
• Licensing agreement breaches
• Open source license violations
• Confidentiality agreement violations
🛡️ Cyber Insurance: Your Attack Response Team
🔥 What Cyber Insurance Covers
👹 Active Cyber Attacks
• Ransomware encrypting your systems
• Hackers stealing source code or client data
• DDoS attacks taking down your services
• Business email compromise and fraud
• Social engineering attacks on employees
• Supply chain attacks through vendors
• Hackers stealing source code or client data
• DDoS attacks taking down your services
• Business email compromise and fraud
• Social engineering attacks on employees
• Supply chain attacks through vendors
💸 Business Interruption
• Lost revenue from system downtime
• Extra expenses to restore operations
• Customer notification and credit monitoring
• Crisis management and public relations
• Forensic investigation costs
• System restoration and data recovery
• Extra expenses to restore operations
• Customer notification and credit monitoring
• Crisis management and public relations
• Forensic investigation costs
• System restoration and data recovery
⚖️ Regulatory Response
• GDPR, CCPA, and other privacy law fines
• SEC cybersecurity disclosure requirements
• State data breach notification compliance
• Industry-specific regulatory penalties
• Legal defense against regulatory actions
• Compliance consulting and remediation
• SEC cybersecurity disclosure requirements
• State data breach notification compliance
• Industry-specific regulatory penalties
• Legal defense against regulatory actions
• Compliance consulting and remediation
📊 Real Tech Company Scenarios
💼 Case Studies: When Each Policy Responds
SaaS Platform: $2.3M Tech E&O Claim
Scenario: Authentication bug in software update allows some users to access other customers' data
Not a cyber attack: Internal software error, not criminal activity
Tech E&O covers: $850K in client revenue losses, $680K legal defense, $475K business interruption costs to affected customers, $295K regulatory fines
Cyber insurance: Wouldn't cover—no external attack or criminal activity
Not a cyber attack: Internal software error, not criminal activity
Tech E&O covers: $850K in client revenue losses, $680K legal defense, $475K business interruption costs to affected customers, $295K regulatory fines
Cyber insurance: Wouldn't cover—no external attack or criminal activity
Mobile App Developer: $1.8M Cyber Claim
Scenario: Hackers exploit API vulnerability to steal 50,000 user profiles including payment data
Criminal cyberattack: External threat actors exploiting security weakness
Cyber insurance covers: $425K forensic investigation, $380K customer notification, $520K credit monitoring, $295K legal defense, $180K regulatory fines
Tech E&O: Might contribute if API was negligently designed, but cyber is primary
Criminal cyberattack: External threat actors exploiting security weakness
Cyber insurance covers: $425K forensic investigation, $380K customer notification, $520K credit monitoring, $295K legal defense, $180K regulatory fines
Tech E&O: Might contribute if API was negligently designed, but cyber is primary
Cloud Services Provider: $950K Tech E&O Claim
Scenario: Database migration script error permanently deletes customer data, no backups recoverable
Internal operational error: Poor change management and backup procedures
Tech E&O covers: $425K to recreate lost client data, $285K business interruption for affected clients, $140K reputation management, $100K legal defense
Cyber insurance: Wouldn't cover—internal mistake, not criminal attack
Internal operational error: Poor change management and backup procedures
Tech E&O covers: $425K to recreate lost client data, $285K business interruption for affected clients, $140K reputation management, $100K legal defense
Cyber insurance: Wouldn't cover—internal mistake, not criminal attack
Fintech Startup: $3.1M Combined Claim
Scenario: Poorly secured admin panel discovered by hackers who access customer financial data
Overlapping coverage: Both negligent security design AND criminal exploitation
Tech E&O contributes: $675K for negligent security design and inadequate testing
Cyber insurance covers: $1.2M incident response, $485K regulatory fines, $395K customer damages, $345K business interruption
Coordination required: Carriers work together on defense strategy
Overlapping coverage: Both negligent security design AND criminal exploitation
Tech E&O contributes: $675K for negligent security design and inadequate testing
Cyber insurance covers: $1.2M incident response, $485K regulatory fines, $395K customer damages, $345K business interruption
Coordination required: Carriers work together on defense strategy
💰 Cost Analysis for Tech Companies
📈 Premium Expectations by Company Size
🚀 Startup ($1-5M Revenue)
Tech E&O: $3,000-8,000
Cyber: $2,500-6,000
Combined: $4,500-11,000
Typical limits:
• Tech E&O: $1M-2M
• Cyber: $1M-3M
Key factors:
• Development practices
• Client contract values
• Data handling scope
• Tech E&O: $1M-2M
• Cyber: $1M-3M
Key factors:
• Development practices
• Client contract values
• Data handling scope
🏢 Growing Company ($5-25M Revenue)
Tech E&O: $8,000-18,000
Cyber: $6,000-15,000
Combined: $12,000-26,000
Typical limits:
• Tech E&O: $2M-5M
• Cyber: $3M-5M
Key factors:
• Security program maturity
• Client diversity
• International operations
• Tech E&O: $2M-5M
• Cyber: $3M-5M
Key factors:
• Security program maturity
• Client diversity
• International operations
🏭 Enterprise ($25M+ Revenue)
Tech E&O: $15,000-75,000
Cyber: $25,000-150,000
Combined: $35,000-180,000
Typical limits:
• Tech E&O: $5M-25M
• Cyber: $10M-100M
Key factors:
• Global operations
• Regulated industries served
• Claims history
• Tech E&O: $5M-25M
• Cyber: $10M-100M
Key factors:
• Global operations
• Regulated industries served
• Claims history
🎯 Coverage Requirements by Tech Sector
🏭 Industry-Specific Recommendations
💳 Fintech & Payment Processing
Higher cyber limits essential: $10M+ due to regulatory scrutiny
Tech E&O critical: Financial algorithm errors extremely costly
Key considerations: PCI DSS compliance, banking regulations, real-time processing risks
Package benefit: Coordinated coverage for security failures vs. design flaws
Tech E&O critical: Financial algorithm errors extremely costly
Key considerations: PCI DSS compliance, banking regulations, real-time processing risks
Package benefit: Coordinated coverage for security failures vs. design flaws
🏥 HealthTech & Medical Software
Both policies essential: HIPAA requires both security and reliability
High liability exposure: Patient safety implications of software errors
Key considerations: FDA software regulations, medical device connectivity
Package benefit: Coordinated response for breaches involving medical data
High liability exposure: Patient safety implications of software errors
Key considerations: FDA software regulations, medical device connectivity
Package benefit: Coordinated response for breaches involving medical data
🚗 Automotive & IoT Technology
Physical safety implications: Software errors can cause accidents
Connected device risks: IoT devices vulnerable to attacks
Key considerations: Product liability overlap, real-world consequences
Package benefit: Coverage for both security vulnerabilities and design flaws
Connected device risks: IoT devices vulnerable to attacks
Key considerations: Product liability overlap, real-world consequences
Package benefit: Coverage for both security vulnerabilities and design flaws
☁️ Cloud & Infrastructure Services
Business interruption focus: Client dependencies create massive exposure
Data custody responsibility: Storing client data increases cyber risk
Key considerations: Service level agreements, data sovereignty
Package benefit: Coordinated coverage for outages (internal) vs. attacks (external)
Data custody responsibility: Storing client data increases cyber risk
Key considerations: Service level agreements, data sovereignty
Package benefit: Coordinated coverage for outages (internal) vs. attacks (external)
📝 Application Strategy for Tech Companies
📋 Maximize Your Application Success
🎯 Highlight Your Strengths
Development practices: Agile methodologies, code reviews, testing protocols
Security program: DevSecOps integration, vulnerability scanning, penetration testing
Quality assurance: Automated testing, staging environments, gradual rollouts
Documentation: Comprehensive requirements gathering, change management
Team experience: Senior developer tenure, relevant certifications
Security program: DevSecOps integration, vulnerability scanning, penetration testing
Quality assurance: Automated testing, staging environments, gradual rollouts
Documentation: Comprehensive requirements gathering, change management
Team experience: Senior developer tenure, relevant certifications
⚠️ Address Risk Factors Honestly
Rapid development cycles: Explain quality controls for fast deployment
Open source dependencies: Describe vulnerability monitoring and updates
Remote development teams: Detail security controls and access management
Client data access: Explain data handling and access control procedures
Third-party integrations: Describe security evaluation and monitoring
Open source dependencies: Describe vulnerability monitoring and updates
Remote development teams: Detail security controls and access management
Client data access: Explain data handling and access control procedures
Third-party integrations: Describe security evaluation and monitoring
📊 Present Coordinated Risk Profile
Consistent technology descriptions: Same architecture details on both applications
Unified security posture: Present comprehensive security program view
Coordinated limits: Proportional coverage amounts based on actual exposure
Package approach: Request coordinated coverage from same carrier group
Unified security posture: Present comprehensive security program view
Coordinated limits: Proportional coverage amounts based on actual exposure
Package approach: Request coordinated coverage from same carrier group
🚨 Critical Coverage Gaps to Avoid
⚠️ Don't Let These Gaps Sink Your Company
💸 Business Email Compromise
Wire transfer fraud targeting tech companies—make sure cyber policy includes social engineering coverage
🔗 Supply Chain Attacks
Attacks through third-party vendors—ensure cyber policy covers dependent business interruption
📱 Mobile and IoT Devices
Connected devices create new attack vectors—verify coverage extends beyond traditional IT systems
☁️ Cloud Service Failures
When AWS/Azure goes down—make sure dependent business interruption covers third-party service failures
🌍 International Operations
GDPR fines can exceed $20M—ensure adequate limits for international regulatory exposure
🎯 The Tech Company Bottom Line
Technology companies need both Technology E&O and Cyber Insurance because you face risks from both internal errors and external attacks. Your code might have bugs (Tech E&O), and criminals might attack your systems (Cyber). The combination provides comprehensive protection for the unique risks of building and operating technology businesses.