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Abstrakt Marketing Administrator2023-10-31 09:00:002023-11-29 14:29:23The Role of E&O Insurance in Managing Supply Chain RisksWhat Are the Different Types of Cyber Insurance?
In the past few years, it has become clear that all types of businesses—from small, locally owned shops to Fortune 500 companies—need cyber insurance. But not every business has the same digital risks, which means you may need different coverage from the company next door.
Are you unsure what types of cyber insurance are available to protect your business? Keep reading to learn about the two insurance types you’ll find and the various scenarios they might cover.
First-Party Cyber Insurance
The first type of insurance you’ll find in most policies is first-party coverage. This cyber insurance coverage provides financial support for business owners in the aftermath of a cyberattack. Depending on the type of policy you choose, you may receive some or all of the following coverages in your first-party insurance:
Data Compromise Coverage
Data compromise or breach coverage pays for various expenses following a data loss event. Causes of a covered event can include:
- Malware attacks
- Phishing
- Hardware malfunction
- Software vulnerabilities
Some small businesses may choose to add data compromise coverage to their business owner’s policy (BOP), but companies with significant risk typically purchase a standalone cyber policy.
Here are a few of the expenses your data compromise insurance may cover:
IT Forensics
Before your business can move forward with a recovery plan, it’s critical to uncover the root cause of a data breach and identify the data lost. In some cases, you may have to hire a team of experts to comb through your network, determine where the threat originated, and assess the extent of the damage. Depending on the scope of the attack, this investigation can cost your business tens of thousands of dollars. However, with the right first-party data compromise coverage, you can avoid a hefty bill and get reimbursed for some or all of this expense.
Customer Notification and Credit Monitoring
If your customers’ personal information was compromised in a data breach, it can take extensive time and resources to notify them. Your policy may cover the costs of reaching out to affected parties and providing credit monitoring to detect suspicious activity following the loss event.
Crisis Management
Even if you do everything in your power to prevent a data breach, no business is immune—and you can suffer severe reputational harm in the aftermath. Your policy can help if you need to hire a public relations firm to assist with damage control.
Ransomware Coverage
While data compromise coverage may pay for some expenses related to ransomware attacks, many businesses need additional coverage to adequately protect their risks. That’s because ransomware attacks have become increasingly common and expensive, and you can end up with a substantial out-of-pocket responsibility after exhausting your data compromise limits.
Ransomware coverage typically pays for many of the same expenses as data compromise coverage, plus the ransom payment itself.
Looking for more information about ransomware insurance and why you need it?
Business Interruption
Every second of downtime can cost your business money, and a data breach can lead to several hours, days, or even weeks of lost productivity for you and your employees. If you’re concerned about losing profits while you recover, look for a policy with business interruption coverage. This first-party coverage pays for lost income following a covered loss, typically after a designated waiting period.
Third-Party Internet Liability Insurance
In the aftermath of a cyberattack, your main concern will probably be the immediate effect on your business—but your losses can also affect clients. And even if you pay for credit monitoring, these clients may choose to sue you for damages. Third-party cyber liability coverage helps pay for lawsuit fees and regulatory expenses if you’re found responsible for failing to secure others’ data.
Legal Expenses
If an attack on your network led to sensitive data getting leaked, which caused a customer to get their identity stolen, they could sue your business for damages. With third-party coverage, you wouldn’t have to pay lawyer fees, settlement costs, and other expenses out of pocket—your policy would pay up to its coverage limit.
Regulatory Fines
Some cyber liability insurance will also help pay for fines and penalties from regulatory agencies following a data breach. For example, your policy may cover the costs if your healthcare organization receives a fine for violating the Health Insurance Portability and Accountability Act (HIPAA) after a cyberattack.
What Does Cyber Insurance Not Cover?
Regardless of the types of cyber insurance you buy for your business, there are certain things your policy won’t cover, including:
- Professional liability: If a client sues you for negligence that resulted in them experiencing data loss or a breach, you would need a separate information technology errors and omissions (E&O) policy to cover lawsuit fees.
- Criminal acts: Many policies won’t cover a loss if it originated inside your company, such as an employee stealing a customer’s credit card information and making fraudulent purchases.
- Future lost profits: While your policy may pay for short-term business interruption losses, it won’t pay if you permanently lose earnings due to reputation loss after a cyber event.
- Cybersecurity improvements: Your policy may help pay for network recovery after an attack, but it typically won’t pay for cybersecurity improvements to help prevent a future recurrence.
Get Expert Recommendations to Protect Your Business
Cyber insurance isn’t always easy to understand—and as the digital landscape becomes even more complicated, so will risk management. If you’re unsure which types of cyber insurance you need or how to secure the right policy for your business, turn to Southpoint. We help businesses nationwide navigate cyber risks and understand cyber insurance requirements.
Whether you’re looking to add first-party cyber coverage to your BOP policy or find standalone cyber insurance that protects against data breaches, ransomware, and third-party lawsuits, our team can help. We partner with the most trusted carriers to provide comprehensive coverage at competitive rates. Contact us today to learn more about the different types of cyber insurance and request a quote.
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