Last Updated on January 14, 2023 by techtudum
With technology, social media and online transactions influencing how organisations conduct business, there need to be risk management plans (data recovery, hardware and software repairs, preventing new threats, etc) to manage the threat of cyber attacks on these businesses that’s why it’s important to find the best insurance company for a tech startup.
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Cyber attacks have caused moderate to severe damages in small scale and large scale businesses. Cyber insurance, or cyber risk insurance, is required in these cases to protect individuals and businesses from internet based risks and help them recover from their losses after cyber security breach. Cyber insurance usually covers data destruction, theft, hacking, extortion, DDoS attacks (denial of service attacks), and other cyber attacks.
The best insurance company for a “tech startup” cyber insurance needs will depend on the classification and scope of work the new business performs.
Standard Class of Business:
If the class or type of business in question can be written on a standard Business owners policy, most insurance companies will offer a Data-Breach Endorsement to protect against that kind of loss. A standard ISO Endorsement for this type of coverage is the “Electronic Data Liability Coverage Form, CG 00 65”.
Larger or More Involved?:
If the new startup business is larger and more involved there are some companies that specialise in this type of insurance product on a stand alone basis. Those companies include:
Chubb: CyberSecurity by Chubb
Travelers: Cyber Insurance
Philadelphia: Cyber Security – Philadelphia Insurance Companies
AIG: Cyber Insurance from AIG in the US
There are nuances to placing the right Cyber coverage. Every business has unique exposures and concerns. Many of the above companies will write a Cyber Liability policy on their approved forms, so coverage differs company to company. In most cases, coverages can be tailored to your specific needs and exposures.
Employ the Help of a Knowledgeable Agent:
All of those considerations suggests employing the help of a knowledgeable insurance agent would be helpful for this line of insurance. Find a local, reputable and specifically knowledgeable Independent Insurance Agent, who is not bound by any one company. They will help you sort out your options both from a coverage and pricing standpoint.
There Are Few Reasons Why You Need Cyber Liability Insurance;
Here are the major reasons why you need cyber liability insurance for your business.
- To ensure monetary safety against different types of cyber frauds
- To cover against malware or phishing attacks
- To cover the loss of income due to business interruption
- To cover damages caused due to data breach
- To pay for investigation costs, regulatory fines, and other penalties
- To avoid digital asset destruction
- To deal with reputation damage control costs
- To avoid cyber extortion and pay recovery costs
Importance of insurance in an early startup:
Any insurance that is “mandatory” by state law should obviously be considered first. In most cases, this is Worker’s Compensation insurance. If you have ANY non-owner employees, chances are you are required to offer some form of coverage for both their protection and yours.
Second are any insurances which may be required by your building lessor or lien-holder, such as general liability / commercial property coverage. It is also worth noting that even in cases where you are not specifically required to carry this coverage, operating your business without general liability in place can make it very difficult and expensive to obtain this coverage at a later date.
Finally, coverage to protect the owners/principals/directors should be put in place. This brings two other coverages into play:
1) Professional liability insurance (also known as errors and omissions or malpractice). Mostly this is only needed if you are providing some sort of service for a fee. Product-based startups are less (or not at all) likely to need this.
2) Directors & officers insurance. This specifically compensates the company principals and board of directors (if present) from liability claims arising out of the operations of the company. This is sometimes required by VC as part of the funding agreement.
These are what I would consider the “must-have” insurances for any new business. Of secondary importance are things like employee benefits and the like, which serve to assist in company growth, acquisition and retention but are not required to run a business.
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