Cyber insurance vs. commercial crime insurance

Crime insurance and cyber insurance both protect your business from the heavy costs resulting from a crime that has been committed, but each policy handles different types of crime. Specifically:

• Cyber insurance protects your business and your clients from costs related to cyberattacks and data breaches that are caused by non-employees, such as hackers and cybercriminals outside your business.
• Commercial crime insurance safeguards your business and your clients from employee theft, fraud, and embezzlement.

You may need one or both types of insurance depending on the type of work you do and your business's specific risks.

Here's a closer look at each form of coverage:

Cyber insurance, also known as cyber liability insurance, helps your business recover from ransomware attacks, cyber extortion, data breaches, and other cyberattacks. There are two types of cyber insurance: first-party coverage and third-party coverage.

• First-party cyber insurance covers expenses related to a direct cyberattack on your business, including notifying affected customers, business interruption expenses, and ransomware payments.
• Third-party cyber insurance covers your business if a client claims you caused or failed to protect them against a cyber threat. For example, if a cybersecurity firm provides poor advice that leads to a data breach, their third-party cyber coverage would help cover legal expenses should their client decide to sue.

Both types of cyber insurance are often included as part of a comprehensive risk management strategy, especially for small businesses that function largely online and store customer data.

Commercial crime insurance, also called fidelity insurance, covers financial losses caused by theft, fraud, forgery, and other dishonest acts.

Depending on the type of coverage purchased, it can protect your business from losses caused by employee dishonesty, such as if an employee steals money or inventory, or if a hacker tricks an employee into transferring funds through a social engineering scam.

This policy is beneficial for any company that has employees with access to important and sensitive information, client data, and physical property. For example, cleaning businesses regularly have employees on client property, and consulting businesses handle a large amount of client information.

There are two types of commercial crime coverage:

• First-party crime insurance coverage protects your company against losses from employee theft. This coverage is often purchased as a fidelity bond or as an endorsement to a business owner's policy (BOP) or a commercial package policy (CPP).
• Third-party crime insurance protects your client against losses that result from theft related to one of your employees. This is typically purchased as a fidelity bond.