How Does Cyber Liability Insurance Work?
For many small businesses, Cyber Liability Insurance is available both as a standalone policy and as an add-on to a Business Owner's Policy.
The two major types of Cyber Liability Insurance are first-party and third-party. First-party coverage can help cover expenses when your network is hacked or your data is stolen.
Third-party coverage offers protection when a customer or partner sues you for allowing a data breach to happen (either because of something you did or failed to do). Depending on your needs, you may choose either or both types of coverage.
First-Party vs. Third-Party Cyber Liability Insurance
The type of data breach insurance you need depends on the work your business does. Below are key things to keep in mind when considering which type of Cyber Liability Insurance to buy.
First-party response may cover…
- Legal and forensic services to determine whether a breach occurred and to assist with regulatory compliance.
- Notification of affected customers and employees, including costs such as letter preparation and mailing.
- Customer credit and fraud monitoring services.
- Crisis management and public relations to educate your customers about the breach and rebuild your company's reputation.
- Good faith advertising.
- Business interruption expenses, such as costs for additional staff, rented or leased equipment, or use of third-party services.
- Cyber extortion reimbursement for credible threats to introduce malicious code, to pharm and phish customer systems, or to corrupt your computer system.
Third-party defense and liability may cover…
- Judgments, civil awards, or settlements you're legally obligated to pay after a data breach.
- Electronic media liability, including infringement of copyright, domain name, trade name, service mark, or slogan on an intranet or Internet site.
- Potential coverage for employee privacy liability as well as network security and privacy liability.
Who Needs Data Breach Insurance?
Many small-business owners may not think they need Cyber Liability coverage, but small businesses are vulnerable to security threats. You may want to have this protection if your business handles…
- Customer payment, credit, or bank account information.
- Medical information.
- Social Security or driver's license numbers.
- Customer names, email addresses, phone numbers, and addresses.
Retailers, healthcare organizations, and financial service providers (like accountants) are especially hot targets for breaches and attacks. But all it takes is one employee mistake, unauthorized access by a former employee or vendor, an unshredded document, a skilled hacker, or a stolen laptop to trigger a breach. It can happen to any business, so cyber insurance is a smart safeguard.