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General Liability, Tech E&O, or Cyber - What Do You Need?
There are thousands of insurance products available to companies today. Navigating all of those products can get tricky, especially if you are a younger company in a rapidly developing tech industry.
So what do you do? You start with fundamentals and focus on what matters to your customers!
If your company is bringing a new product or service to the market, you need to make sure you are shielded from third-party liability in case something goes wrong with your new offering. Customers will definitely require you to carry insurance because they want to protect themselves in case your tech doesn't live up to their expectations or if it causes harm.
It is always a good idea to go with the most foundational coverages such as General Liability, Professional Liability (or Tech E&O), and Cyber Liability. Those three coverages can get the job done for you.
Let's break it down to give you a clear picture of what those coverages are and how they can protect you and your customers.
Understanding General Liability Insurance
General Liability insurance is the bedrock of any business insurance program, including those in the technology sector. It covers bodily injury and property damage claims that your business could be legally obligated to pay. This coverage is not just for physical products; it also extends to personal injuries like slander or libel. However, it's important to note that General Liability does not cover professional mistakes or cyber incidents, which are common risks in the tech industry.
For example, if a visitor to your office trips over a cable and is injured, General Liability would cover the legal and medical costs associated with this incident. However, it wouldn't cover a situation where your software product fails to perform as promised.
Understanding Technology Errors and Omissions (Tech E&O)
Tech E&O insurance is Professional Liability tailored specifically for technology companies. It provides protection against claims arising from your products or services, particularly in situations where they fail to perform as intended or expected. This coverage includes financial losses that your customers or third parties may suffer due to your product's failure or a service error.
Imagine your company develops a fleet management software that malfunctions, causing your customer to lose significant revenue. In this scenario, Tech E&O would step in to cover the legal costs and any awarded damages, something General Liability would not.
Understanding Cyber Liability Insurance
In an era where data breaches and cyber-attacks are rampant and seemingly always on the rise, Cyber insurance is a critical component of a technology company's risk management strategy. This coverage protects against a variety of cyber risks, including data breaches, cyber extortion, and system damage. It covers the costs associated with responding to and recovering from cyber incidents, including legal fees, notification costs, and even public relations efforts to manage reputation damage.
For example, if your company experiences a data breach that exposes sensitive customer information, Cyber insurance would cover the costs related to managing the breach, including potential regulatory fines and customer notification expenses.
Comparing the Coverages
While there's some overlap, each of these insurance coverages serves a distinct purpose. General Liability is your baseline, covering physical and reputational damages. Tech E&O adds a layer of protection for the services and products you provide, covering the financial damages your work might cause to others. Cyber insurance, meanwhile, is specifically designed to address the digital risks inherent in today's technology landscape.
Recommendations for Tech Companies
Most technology companies will find that a combination of all three types of insurance is necessary to fully protect their business. Furthermore, tech companies often need to meet contractual insurance requirements that may mandate specific types or amounts of coverage. Clients, especially in industries such as finance or healthcare, may require you to carry Tech E&O and Cyber insurance to protect against potential losses stemming from your products or services.
Remember, it's not just about meeting contractual requirements; it's about ensuring the longevity and resilience of your company in a world where risks are ever-changing!
