Data loss is estimated to cost businesses $265 Billion by 2031. It’s no surprise that more distributors offer customers an entirely new type of warranty called the cybersecurity warranty. These warranties are designed to reduce the financial risks that are associated with cyberattacks, and they’re often a complement to insurance. They cover the gaps left by insurance.

These warranties are not all the same. Some have strict stipulations that could result in companies paying the highest price for data retrieval in the case of a cyber attack. These may include:

Incorporating such a warranty into an M&A deal can be an excellent way to ensure that the buyer is adequately protected against security risks that could arise, and that the vendor takes steps to prevent attacks like this from occurring in the future. In addition to the usual warranties and representations that are included in an asset or stock purchase agreement, these warranties can be negotiated to address privacy, data security, and other pertinent issues that relate to the transaction being considered.

A typical warranty can cover the cost of repairing and replacing equipment, the cost of forensics or IT labor to retrieve data, and the costs of compensating those impacted by a breach. Certain warranties also cover legal costs due to lawsuits. A more comprehensive plan could also cover lost business revenue and the cost of reprogramming software and the cost to repair reputational damage caused by a security event.

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