Cyber liability insurance covers financial losses that result from data breaches and other cyber events. Policies vary widely because most insurers that offer cyber coverage use forms they’ve developed themselves. In addition, many policies include both first-party and third-party coverage.
First-party coverages pay out-of-pocket expenses that a firm directly incurs as a result of a breach. Third-party coverages apply to damages or settlements a business is obligated to pay due to claims or suits for injuries resulting from the company’s actions or failure to act. For instance, a client sues his therapist for negligence after a hacker breaches the therapist’s computer system, steals the client’s treatment records, and releases them online.
Many cyber policies provide a range of coverages, some of which are automatically included and others optional. In addition, a separate limit may apply to each coverage. For example, some coverages may apply only after the insured business has paid a deductible or retention.
Why is Cyber Liability Insurance important?
Any business with an online component or one that sends or stores electronic data might benefit from cyber insurance, as may any organization that relies on technology to conduct its operations, which is pretty much every business.
Private personal data such as contact details of customers or staff, intellectual property, or sensitive financial data are all potentially very lucrative to cyber criminals who could attempt to break into the network and steal it.
There’s also the potential for hackers to cripple a network with ransomware. A cyber insurance policy that covers ransomware could go a long way to helping organizations that fall victim to attacks like this find a way out of the predicament.
As cyber risks evolve, so must your coverage. Understanding where traditional policies and other property and casualty insurance policies complement, overlap, or exclude cyber exposure is critical. Contact us today to know more!