How Much Cyber Liability Insurance Do You Need

Assess your business risk to decide the appropriate amount of cyber liability insurance, as the scale and severity of a cyberattack, along with data recovery costs, can result in settlements or judgments exceeding six figures.

What does cyber insurance actually pay for?

Cyber liability insurance aids in recovering from cyberattacks and data breaches, whether at your business or a client’s.

It covers costs like breach investigations, customer notifications, crisis management, and business interruption expenses.

Cyber liability insurance
How much cyber liability insurance do you need: Photo source (Sapling)

Without this coverage, you’d be responsible for these post-breach expenses, which can accumulate quickly.

The average data breach costs around $3.86 million, and businesses with thousands of customers could face substantial costs.

If a client sues your tech company over a breach, third-party cyber liability policy handles legal expenses, including attorney fees, defense costs, judgments, or settlements.

How much cyber liability insurance does a small tech business need?

Many small tech firms opt for cyber liability policy with a $1 million per occurrence limit, $1 million aggregate limit, and a $2,500 deductible, sufficient for businesses handling a few thousand records.

High-risk tech firms may consider policies with higher limits, up to $5 million.

Most small tech companies prefer tech errors and omissions policies (tech E&O), which include cyber liability coverage, due to the high cyber risk.

Insurance providers often bundle these policies.

How much cyber liability insurance does an independent contractor need?

Independent contractors typically skip first-party cyber liability insurance, which covers breaches on their network.

Instead, they may need third-party cyber liability insurance to safeguard against lawsuits.

Certain clients may demand contractors to have third-party cyber liability policy before starting a project.

This assures clients that you can cover cyber liability lawsuit costs stemming from your work, with a common requirement of a $1 million per occurrence limit.

How much cyber liability insurance do your clients need?

Although your errors and omissions insurance covers data breach lawsuits, it’s best to prevent such lawsuits.

Ensure your clients have a risk management plan for data breaches.

Clients with cyber liability policy are less likely to sue your tech business for breach-related losses.

To safeguard against client lawsuits, encourage them to buy cyber liability insurance or make it a requirement for risky projects.

In your contract, specify the desired cyber liability policy coverage limit, which can range from $1 million to $5 million or more.

How much does cyber liability insurance cost?

The average cost for a cyber liability policy with a $1 million limit is around $145 per month or $1,740 per year, as reported by TechInsurance.

Many small businesses pay less, with 38% spending under $100 per month and 33% between $100 and $200 monthly.

Costs rise with the volume of sensitive data your company manages.

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