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With data loss affecting businesses every two seconds and expected to cost businesses $265 billion by 2031 so it’s no wonder distributors are offering buyers a new kind of warranty that’s called the cybersecurity guarantee. These warranties are designed to help reduce the financial risks that are associated with cyberattacks, and they’re often a complement to insurance. They cover the gaps left by insurance.

However these warranties aren’t made equal. Some warranties have rigid conditions that could cost companies a lot of money to retrieve information in the event of a cyber attack occurs. These may include:

This kind of warranty can be included in an IT M&A agreement to ensure that the buyer is secured from security threats and that the vendor takes measures to safeguard against future attacks. In addition to the normal warranties and representations contained in an asset purchase or stock purchase agreement, these new warranties can be made to address privacy concerns, data security, as well as other relevant issues that are specific to the transaction at hand.

A typical warranty could cover the cost of repairing and replacing hardware and software, as well as the cost of forensics and IT work to retrieve data, as well as the cost of compensating people who are affected by a breach. Some also cover the costs of legal expenses resulting from lawsuits. A more comprehensive policy could also cover lost business revenues as well as the cost of reprogramming software and cost to repair reputational damage from an incident of security.