Cyber Liability Insurance
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What does cyber liability insurance cover?

Cyber liability insurance covers the costs associated with data breaches and cyberattacks, including the cost of recovering important data and hiring legal representation.

Cyber liability insurance provides coverage for:

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Data breaches and cyberattacks at your business
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Lawsuits when your business is blamed for a data breach or cyberattack

Data breaches and cyberattacks at your business

First-party cyber liability insurance, sometimes called data breach insurance, covers costs related to a data breach or cyberattack at your business. That could include:

Example: An employee at your retail store accidentally opens an email containing a malicious computer virus. The virus encrypts data crucial to your business’s operations and demands a ransom for its retrieval. Your cyber liability insurance reimburses you for the ransom and for the cost of hiring someone to look into the source of the attack.

Lawsuits when your business is blamed for a data breach or cyberattack

IT consultants and cybersecurity businesses can benefit from third-party cyber liability insurance. This policy provides coverage when a client sues you for failing to prevent a data breach or cyberattack at their business. It's sometimes included in technology E&O insurance. This policy can help pay for:

  • Attorney's fees
  • Court-ordered judgments
  • Settlements

Example: An IT consultant leaves data for a small healthcare company unsecured on Amazon Web Services, and a cyberattack exposes hundreds of Social Security numbers and email addresses belonging to the company's customers. The healthcare company blames the consultant and files a lawsuit. The consultant's third-party cyber liability policy pays for legal defense costs and the eventual settlement.

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Cyber liability insurance does not cover:

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Mistakes and oversights
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Professional negligence

Mistakes and oversights

Professional liability insurance, also called errors and omissions insurance (E&O), covers the costs of lawsuits over mistakes or oversights.

Example: A web hosting company accidentally takes down a client's website and is sued for damages. The company's errors and omissions policy pays for legal defense costs and a court-ordered judgment.

Professional negligence

Professional liability insurance also covers the costs of lawsuits over professional negligence.

Example: A management consultant recommends software that should improve an e-commerce company's bottom line. When the software fails to produce the desired results, the e-commerce company sues the consultant. Professional liability insurance covers the consultant's settlement with the company.

Updated: April 29, 2022
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