The technology industry evolves quickly, with new innovations, risks, and cyber threats continually developing. While tech companies are occupied with growth, scalability, and technology solutions, organizations often overlook a vital aspect of their business—specialized coverage. General liability insurance may not protect against the unique risks that technology companies face. Partnering with the right insurance company becomes essential.
From data breaches to intellectual property claims, technology companies need insurance policies that outline the unique vulnerabilities in their industry. In this article, we discuss why specialized coverage is an important aspect of risk management and how the right insurance company can minimize financial and operational disaster.
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The Specialized Risks of Tech Companies
While simpler firms have similar risk exposures for your potential cover, tech companies have entirely different risk exposures that most insurance companies’ standard and preferred policies will not cover. Some of the biggest risk exposures are as follows:
- Cyber breaches (ransomware, data breaches, phishing)
- Intellectual property (IP) litigations (patent infringement, copyright issues)
- Service outages & business downtime (mix up in the cloud, server outages)
- Errors & omissions (E&O) exposures (software malfunctions, service outages)
- Regulatory fines due to (GDPR, CCPA failure to comply)
While a general business insurance coverage could protect against exposures for property damage or employee injury, it won’t protect against tech specific exposures. So it is vital to seek coverage from an insurance company that specializes in technology coverage.
How a Specialty Insurance Company Can Help
Not all insurance companies understand the specifics around the tech space. A specialty insurance company will provide you with policies that are specific to tech-profiled website, such as:
1. Cyber Liability Insurance
Data breaches can be expensive; legal fees, damages, and lost reputation can leave a business crumbled, and one familiar with these challenges can adequately arrive at a decision reflecting the proper insurance. Cyber insurance covers:
- Data restoration and or recovery costs
- Legal fees for lawsuits
- Regulatory fines
- Customer notification and credit monitoring costs
2. Technology Errors & Omissions (E&O) Insurance
When a software malfunction hurts a client financially, they can sue you for negligence or state that you failed to deliver what you promised. You can obtain E&O insurance specifically for tech companies.
3. Intellectual Property (IP) Insurance
Most tech companies are unfortunately in situations where “patent trolls” are referring to your client’s work as potentially infringing on their patents. IP Insurance will provide you with coverage for legal defense expenses and settlements.
4. Business Income Insurance
Another important item in the tech space – specifically deployed for either SaaS or cloud-based business models – if your service goes down, you will lose income. Having a business income policy will cover the lost income due to technology breakdowns or cyber-attacks.
If you work with an experienced insurance company, they will help you to identify your particular risks and adjust coverage accordingly, so gaps in coverage do not leave you vulnerable.
ReEffects al-Life of Under-Insurance
Many tech companies discover that under-insuring themselves can be a disastrous choice. Here are a few situations:
- A start-up that neglected to purchase cyber insurance fell victim to a ransomware attack and paid $500,000 out of pocket to recover its data.
- A SaaS company faced an E&O lawsuit after a software bug produced financial losses for clients; and without coverage, the legal fees ultimately bankrupted the business.
- A fintech firm received a $200,000 fine for violating GDPR while also not having any regulatory risk insurance to cover the penalty.
In each of these cases, the right insurance company would have covered the costs, lessening the damages and allowing the company to operate.
Selecting the Right Insurance Partner
Not all insurers are created equal, so when selecting an insurance company, you should highlight:
✔ Industry Experience (experience with technology firms)
✔ Customized Policies (no one-solutions fits-all)
✔ Strong Financial Backing (ability to pay claims promptly)
✔ Proactive Risk Management Support (trying to prevent the incident from happening)
A specialized provider can offer risk assessments, cyber security training and support for claims aligned to technology businesses.
Conclusion: Do Not Wait to Act
While the leading technology companies tend to invest large amounts of revenue in innovating and developing their products and services, often the process falls short in terms of managing risks associated with the production of all things tech. The appropriate insurance is not a cost, it is a risk management strategy. By working with a specialty insurance company, you are protecting yourself from the significant loss in income associated with business interruption, costs associated with defending oneself in lawsuits or claims, and reputational damage.
Do not wait until there is an issue to identify. Review your current coverage today and ensure your technology company is fully protected from the unique risks associated with the digital age.
