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Cyber Liability Insurance for Contractors- Do You Need It?

The construction industry is changing. From tablets to construction apps, the way you work has officially entered the digital age. While technology is making you more productive and efficient, there can also be a dark side to all of this data.

Ready for the good news?

Cyber liability insurance is there to protect business owners from unexpected data breaches and the loss of sensitive client information.

But do contractors really need it?

Is Cyber Liability Insurance a “Must-have” Policy for Contractors?

The short answer is the same as for many other insurance policies: it depends. If you’re operating a one-man business and keeping it old-school… paper invoices, mailed checks, paper files, a desktop computer that you seldom use… you may not need it.

On the other hand, if you’ve embraced construction technology you may want to learn a bit more about the benefits of cyber liability insurance.

Even better, take this short quiz.

Cyber Liability Quiz

  • Do you use a laptop or tablet to do your business?
  • Do you ever take your laptop or tablet out of the office?
  • Do you take credit card payments from clients?
  • Do you use a device to take credit card payments on your phone or tablet?
  • Do you store client information digitally, including names, addresses, or credit card information?
  • Do you perform contract work for large commercial clients?

If you answered yes to one or more of these questions, you may benefit from cyber liability protection. Let’s dive in a bit deeper to see if this coverage is right for you.

How Likely are You to Have a Data Breach?

Data breaches are in the news all of the time these days. Usually, it’s the bigger corporate victims who get all of the attention. (We’ll talk about one of these big guys in just a moment.)

But it’s not just the bigger businesses who are at risk from hackers and cyber criminals.

Small to medium sized businesses are actually at greater risk of a data breach-- specifically because they don’t often have the same resources available to protect themselves from malicious hackers and cyber thieves.

What’s easier? Hacking into a major corporation with dedicated IT security teams working around the clock to keep sensitive information protected, or hacking into your tablet while you use the free wifi at a local coffee shop or airport?

If you still don’t think it could happen to you, consider the following statistic from the National Small Business Association (NSBA) Technology Survey:

“Nearly half of all small businesses have been a victim of a cyber attack.”

The average cost associated with the cyber-attack for small businesses targeted was $8,699.48. And for small businesses whose banking accounts were hacked, the average losses were $6,927.50.

You Could be a Pawn in a Larger Hacking Scheme

It was a bad day for an HVAC contractor when news outlets learned that one of the largest data breaches of 2015 was all his fault.

Nearly 40 million debit and credit accounts were exposed when hackers were able to infiltrate point-of-sale systems at Target stores during the busiest shopping season of the year. The story was instantly picked up by the media and led to a frenzy of news coverage.

In the end, it was the HVAC guy who ended up getting the blame.

It turns out, the hackers didn’t get access to Target’s systems directly. Instead, they stole a username and password from an HVAC company that does work for Target and had access rights to monitor energy usage and temperatures at various stores. The savvy hackers, once gaining access to one of Target’s networks by stealing the login credentials from this contractor, were then able to get into the point-of-sale systems and start stealing credit and debit card information from millions of customers.

Luckily Target had a substantial amount of cyber security insurance in place to help mitigate the damage of the breach. Whether the HVAC company had coverage or was left holding a mighty big bill for their role in the breach is unknown.

What's the big take away for contractors from this story?

If you do work for commercial clients and have access to any of their internal systems, you could be an entry point for hackers looking to use you as a pawn in a very expensive hacking game.

In which case, a little extra protection in the form of a cyber liability policy may be a good safety net to have.

Bonus: If you want to perform contract work with larger commercial companies, having a cyber liability policy in place could give you a competitive advantage over a less-insured contractor bidding on the same job. As usual, don’t be afraid to advertise your coverage to potential clients. It may give you the edge you need to win the bid.

What Does Cyber Liability Cover?

Let’s imagine that you accidentally leave your tablet on the front seat of your unlocked truck one day, and it gets stolen while you grab a quick sandwich from your favorite local deli. You use that tablet for a number of purposes, it’s loaded up with construction apps that help you keep track of bids, manage vendor and supply orders and payments, for project management purposes, emails, and to keep track of client information.

If you have cyber liability coverage, it may cover first-party response, such as:

  • Services to determine if a breach has occurred
  • Notification of clients or other affected parties
  • Customer credit monitoring
  • Crisis management and PR
  • Business interruption costs

And if that’s not enough to help clean-up the mess after a hack or data breach, cyber liability may also cover your third-party defense and legal costs in the event you get sued over the incident, including:

  • Judgments, awards, or settlements
  • Lawyers’ fees
  • Miscellaneous court costs

Knowing which contractor insurance policies are a good investment and which you can afford to do without can help you protect your assets without stripping away too much of your cash flow. For some contractors, cyber liability may not offer enough potential benefits to justify adding this policy to their insurance coverage. For many contractors, however, a stolen laptop, lost tablet, or access to client’s systems provides enough risks to warrant the protection.

Smiling Female Contractor



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