Data loss is expected to cost businesses $265 Billion by 2031. It’s no surprise that more distributors offer customers the latest type of warranty, the cybersecurity warranty. These warranties are designed to reduce the financial risks that are associated with cyberattacks, and often serve as a complement to insurance. They fill in the gaps that insurance doesn’t cover.

However they’re not all created equal. Certain warranties come with strict terms that can cost companies amount of money to retrieve information in the event a cyber attack occurs. These may include:

This type of warranty could be included in the technology M&A agreement to ensure that the buyer is adequately protected against potential security threats and that the vendor takes measures to protect against future attacks. In addition to the usual representations and warranties in an asset purchase or stock purchase agreement, these warranties can be negotiated to address privacy concerns, data security, as well as other relevant issues specific to the deal being discussed.

A typical warranty may include the cost of fixing and replacing hardware and software, as well as the cost of forensics and IT work to retrieve data, and the costs of compensating those affected by a breach. They also cover the costs of legal fees resulting from potential lawsuits. A more comprehensive plan could also cover lost business revenues as well as the cost of reprogramming software and cost of repairing reputational damage resulting from an incident of security.

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