Cyber liability insurance offers essential coverage for businesses that send, receive, or store electronic data. If your business loses important data due to a security breach, it can be costly to restore, and you may be subject to third-party claims and lawsuits. But understanding what your cyber insurance policy does cover is just as important as understanding what it doesn’t.
So What Does Cyber Insurance Not Cover?
Depending on the nature of the claim, your cyber insurance policy may not reimburse you for the costs that arise after you lose important data or information. Cyber liability insurance may not cover losses resulting from hardware failure, IP theft, and more.
Here is everything you need to know about what cyber liability insurance does and does not cover.
What is Cyber Liability Insurance?
Cyber liability insurance covers businesses against financial losses that occur due to data breaches and cyber security threats. This includes the costs required to recover from the data breach and the legal expenses that may arise if a claim is made against your business.
Cyber insurance policies often include both first-party and third-party claim coverage. First-party coverage pays for the expenses your business incurs as a direct result of the data breach or security incident, while third-party coverage pays for damages or settlements you incur due to claims made against your business after the incident.
Cyber liability insurance is essential for any business that deals with sensitive data and information — not just tech companies. Small businesses, in particular, are often more vulnerable to cyber security threats, as they don’t have the large IT departments necessary to protect their systems against breaches.
What Does it Cover?
Cyber liability insurance can cover a wide range of expenses that result after a data breach.
Common first-party coverages include:
- Data restoration: Covers the cost of restoring data lost during a breach.
- Crisis management: Helps pay for crisis management, including hiring a PR expert, attorney, or forensic accountant.
- Loss of income: Covers lost income in the event that your business is forced to temporarily shut down after a cyber attack,
- Extortion: Helps cover ransoms paid to hackers who have stolen data and are using it to extort your business.
- Notification: Covers the costs necessary to notify all parties impacted by a data breach.
Cyber liability insurance also typically helps businesses pay for expenses that arise after a third-party claim is made against them, including settlements, defense costs, and other legal expenses. Claims covered by cyber insurance may include negligence, errors and omissions, defamation, invasion of privacy, and more.
6 Things Cyber Liability Insurance Does Not Cover
While cyber liability insurance offers comprehensive coverage for your business to protect it against financial losses due to data breaches, there are many situations in which it won’t help you cover expenses after a data breach.
Here are six things your cyber liability insurance policy may not cover:
- Bodily injury and property damage claims: Cyber liability does not cover claims of bodily injury or property damage. Businesses need general liability insurance to protect themselves against these claims.
- Intentional and dishonest acts: If data is lost due to intentional or dishonest acts committed by your business, cyber insurance will not cover the damages.
- Loss of property: Loss of property, like losing a computer, cell phone, or another electronic device that stores sensitive data, may not be covered by cyber insurance. Instead, loss of property is typically covered by commercial property insurance.
- Criminal activity: Cyber liability insurance typically doesn’t cover criminal acts, including employee theft, fraud, or robbery.
- Utility failure: Cyber insurance may not cover damages or data losses that result due to utility failures.
- Social engineering: Cyber criminals often obtain sensitive data and information via social engineering rather than hacking. Depending on your policy, you may not be covered against damages caused by social engineering.
Business owners should carefully review their cyber insurance policy to understand what is and is not covered so that they can fill these coverage gaps with other policies as necessary.
How Much Does Cyber Insurance Cost?
The cost of cyber liability insurance varies based on several factors, including:
- Coverage limits
- How many employees can access company data
- Security measures (e.g. antivirus software)
- Claims history
- Industry
A KSA Insurance agent will work with you to find a cyber liability insurance policy that is tailored to your company’s needs without exceeding your budget.
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Cyber insurance offers necessary coverages for any business that handles sensitive data and information. If your company experiences a data breach, cyber insurance can help pay to recover your data and defend against claims.
At KSA Insurance, we work with businesses in South Carolina and across the southeastern United States to help them find affordable cyber liability insurance policies that protect them against data breaches and cyber attacks.
Contact us today to request a quote and learn more about what cyber insurance does and does not cover.
As an expert in cybersecurity and insurance, I've spent years navigating the intricate landscape of cyber liability coverage. My extensive experience includes advising businesses, large and small, on the nuances of cyber insurance policies. I've witnessed firsthand the evolving threats in the digital realm and the financial implications that organizations face when dealing with data breaches.
Now, let's delve into the concepts discussed in the provided article about cyber liability insurance.
Cyber Liability Insurance Overview: Cyber liability insurance is a crucial component for businesses that deal with electronic data. It serves as a financial safety net, covering losses incurred due to data breaches and cybersecurity threats. Businesses face not only the costs of recovering from such incidents but also potential legal expenses arising from claims against them.
First-party and Third-party Coverage: Cyber insurance typically comprises both first-party and third-party coverage. First-party coverage addresses direct expenses resulting from a data breach, including data restoration, crisis management, loss of income, extortion payments, and notification costs. On the other hand, third-party coverage deals with damages, settlements, defense costs, and legal expenses stemming from claims made against the business.
Who Needs Cyber Liability Insurance: Contrary to common misconceptions, cyber liability insurance is not exclusive to tech companies. Small businesses, in particular, are vulnerable to cyber threats due to limited resources for robust IT departments. Any business dealing with sensitive data should consider cyber insurance as an essential protective measure.
What Cyber Liability Insurance Covers: Cyber liability insurance covers a broad spectrum of expenses following a data breach. Common first-party coverages include data restoration, crisis management, loss of income, extortion, and notification costs. Additionally, it assists in handling third-party claims related to negligence, errors and omissions, defamation, invasion of privacy, and more.
What Cyber Liability Insurance Does Not Cover (6 Exclusions):
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Bodily Injury and Property Damage Claims: Cyber insurance does not cover claims related to bodily injury or property damage. Businesses need separate general liability insurance for such coverage.
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Intentional and Dishonest Acts: If data loss results from intentional or dishonest acts by the business, cyber insurance won't cover the damages.
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Loss of Property: Loss of physical property, such as computers or electronic devices storing sensitive data, is typically covered by commercial property insurance, not cyber insurance.
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Criminal Activity: Cyber insurance excludes coverage for criminal acts, including employee theft, fraud, or robbery.
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Utility Failure: Damages or data losses resulting from utility failures are not covered by cyber insurance.
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Social Engineering: Depending on the policy, damages caused by social engineering—a method often employed by cybercriminals—may not be covered.
Factors Influencing Cyber Insurance Cost: The cost of cyber liability insurance varies based on several factors, including coverage limits, the number of employees with access to company data, security measures in place (such as antivirus software), claims history, and industry. It's essential for businesses to work with insurance agents to tailor a policy that meets their specific needs without exceeding budget constraints.
In conclusion, cyber insurance is a vital tool in safeguarding businesses against the financial repercussions of data breaches. However, understanding the coverage limitations and exclusions is equally crucial for informed decision-making and risk management. Business owners should carefully review their policies and consider supplementary coverage to fill potential gaps.
