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In the modern business world, data security is a crucial part of running a company. When you work as a cybersecurity consultant, your clients trust that your expertise and guidance will result in safer networks and systems for them. It’s important to keep this responsibility in mind when you select insurance coverage for your business. If your clients suffer a cyberattack or data breach after following your recommendations, they could sue you for damages. Even if your company is not to blame in the incident, defending a lawsuit can consume your company’s financial resources and even have a negative effect on your reputation.
Business insurance exists to help you manage your professional risks. In addition to the liabilities that could arise in the course of performing your services, there are common risks that are shared by most companies, such as fire, theft, or an injury that happens on your property. This is why it’s a good idea to consider purchasing business insurance that can financially protect your company from the hazards of doing business, whether it’s a lawsuit brought by an unhappy client or physical damage caused by an unexpected catastrophe.
What insurance coverage do I need for my cybersecurity consulting company?
While there are many types of coverage for companies to consider, these insurance policies are particularly important for cybersecurity consulting firms:
Errors and Omissions Insurance
When clients hire your cybersecurity services, they expect and trust that your work will help their businesses become more secure and protect their sensitive and confidential data. But no matter how diligently you work to create secure systems, there’s always a possibility that an error could be made, negatively impacting your clients. If a client believes that your firm’s negligence or mistake caused them to suffer financially in any way, they may hold you liable and file suit to recover losses. Errors and omissions insurance can protect your business against these risks by covering lawsuits and damages brought by dissatisfied clients.
- You are hired to evaluate the network security of a software development company. Your evaluation finds that the company has implemented sufficient protections and fail-safe systems. Soon after your evaluation, however, the client suffers a cyberattack and hackers are able to siphon off proprietary information. The client believes your firm should have prevented such an attack and sues you for damages. Your errors and omissions insurance would cover the lawsuit.
Commercial Property Insurance
As a cybersecurity consulting company, you may operate from owned or rented offices, and you may own valuable computers, tools, or electronic equipment. Commercial property insurance can help you protect the value of your business property if it is damaged or destroyed. Repairing or replacing damaged property can be a strain on your firm’s finances, and commercial property insurance can help your business recover more quickly by providing funds to help you rebuild. Commonly covered hazards include fire, lightning, explosion, vandalism, windstorm, and hail.
Commercial property insurance covers the following:
- Buildings belonging to or leased by your company
- Contents of the building, including furniture, computer equipment, and artwork
- Property of others while it is under your care, custody, or control
- A gas pipe underneath your office building suddenly ruptures and explodes, causing severe damage to your property. Your commercial property insurance would cover the damages, allowing you to rebuild your offices and replace the equipment and furniture you lost.
General Liability Insurance
General liability insurance is a commonly held business coverage that protects companies from accidental third-party injury and property damage risks. This is a key coverage because every business is susceptible to accidents, even companies that are not involved in physically dangerous work. If you consult with clients at their offices, host them at your location, or have outside workers such as repairmen on your property, general liability insurance can protect you if a non-employee is injured while on your property or if one of your employees accidentally damages a client’s property. General liability can also provide coverage for non-physical injuries, including personal injury and advertising injury.
- Bodily injury: A group of clients visits your company to discuss the security of their servers. One of the clients trips and falls on some uneven pavement at your office building entryway, fracturing her ankle. Your general liability insurance would pay for medical costs and legal fees if the client sues.
- Property damage: An overloaded circuit in your offices starts a fire that spreads to a neighboring business. Your general liability insurance would pay for the damages to the other business.
- Personal and advertising injury: Your company posts a regular blog about issues in the cybersecurity industry. One of the blog posts contains statements that a competitor believes are disparaging and untrue allegations about their business. The competitor sues your company for libel. Your general liability insurance would pay for the lawsuit and any settlements.
Cyber Liability Insurance
As a cybersecurity consultant, you are well aware of the threat of cyberattacks, and you no doubt have strong cybersecurity measures in place. However, you also know that no countermeasures can work perfectly to prevent every type of cyberattack. While threats can certainly come from outside the company, from cybercriminals who are constantly working on new ways to exploit vulnerabilities, many threats to small businesses actually come from inside the company, from employees or former employees who have access to sensitive information and systems. Cyber liability insurance can protect your business from the recovery costs and financial fallout of dealing with hacks or data breaches, and it can also provide coverage for third-party lawsuits that may result from any lapses in security.
- An employee that your firm recently fired stole the security keys to one of your company’s data servers before he left the company. In retaliation for his termination, the former employee hacks into the server and steals and exposes confidential information. Your consultancy is sued by clients whose data has been compromised. Thankfully, your cyber liability policy will cover the costs of defending your firm.
Business Owner’s Policy
For small and midsize companies, a business owner’s policy (BOP) can be a convenient way to simplify insurance coverage. These policies package general liability, property, business income, and extra expense coverage together in a single policy. Since it provides a wide range of coverage, a BOP can help smaller companies avoid coverage gaps while paying a lower cost in premiums than they would if they bought each policy individually. Requirements to qualify for a BOP can vary depending on the insurer. Typically, your company would be required to operate from a physical business location, employ fewer than 100 people, and make less than $5 million in sales per year.
- A severe hailstorm damages the roof of your office building. The commercial property portion of your business owner’s policy would cover the cost of repairs.
- Employment practices liability insurance protects your business if you are sued by prospective, current, or former employees with claims of wrongful treatment such as discrimination, harassment, or other employment-related issues.
- Business income insurance will reimburse you for lost income and operating expenses if your business is unable to operate due to a covered reason, such as fire, storm damage, or other property damage.
- Workers’ compensation insurance is legally required for companies with employees in most states. It covers employees’ medical expenses and lost income if they are injured while working. It can also provide benefits to an employee’s dependents in the case of a work-related employee death.
- A fidelity bond is a type of insurance that protects you from theft or fraud committed by your employees. This coverage would provide funds if an employee unlawfully accesses confidential customer data.
Your cybersecurity consulting firm could be held liable for a variety of major risks, and it’s critical to make sure that you’re prepared if an incident occurs. Business insurance can help your company cope with unexpected disasters, whether it’s a fire or serious storm that damages your offices or a lawsuit brought by a dissatisfied client. Ensuring that your company has a wide range of insurance coverage can give you, your employees, and your clients confidence that if a catastrophe occurs, your company will be financially protected.