Have you ever heard a news anchor try to explain the latest mega breach, data breach or security breach? It’s hard to follow the story because it’s difficult to comprehend – for the reporter and the viewer. Cyber Liability Insurance (also known as Cyber Risk Insurance and Data Breach Insurance) may be the most misunderstood insurance policy out there because it’s one of the newest insurance offerings, which means many people are unfamiliar with it.
At Southern Colorado Insurance Center, we understand the importance of protecting your data and work to make sure you are covered in the event it is compromised.
Before we can really explain what Cyber Liability coverage is, we should note that there are actually two different Cyber Risk Insurance policies:
- First-party: The risk that your own computers and systems will be compromised (or that your data will be breached). Anyone who stores a lot of customer data (credit card numbers, emails, phone numbers) is a potential target for a breach incident, whether it’s a hack, misplaced thumb drive, or unsecured email with a sensitive attachment.
- Third-party: The risk that your clients’ systems will be compromised (or that their data will be breached). If your job description includes maintaining, hosting, or manipulating clients’ data, you have the potential to cause, enable, or fail to prevent a breach.
Most Professional Liability Insurance policies include coverage for third-party Cyber Liability. To make sure your exposures are covered, double-check with your agent whether your policy offers this protection. If not, our experienced agents at Southern Colorado Insurance Center can help!
What Does First-Party Cyber Insurance Cover?
Because first-party Cyber Liability Insurance covers the cost of breaches to your own network (and the cost to clean them up), it may help pay for:
- Customer notification.
- Anti-fraud protection for customers.
- Security incident investigations.
- Crisis management.
- Insider data breaches.
- Cyber extortion / ransomware costs.
Say you’re working on an in-house directory for a corporate client. You’ve got information for thousands of company employees and you’re excited about the wireframe you’ve developed. Unfortunately, biking home from the office, the flash drive you back everything up on falls out of a hole in your computer bag.
Even if nobody ever picks up the drive and plugs it in, this counts as a breach. You have to notify your client and they want you to pay for credit monitoring for every employee whose info was on the drive. A first-party Cyber policy could handle those costs.
In addition to unfortunate mishaps like this, hacks, insider data breaches, ransomware attacks, software malfunctions, and improper configurations can all leave your data exposed. They can also likely be covered under your first-party policy.
What Does Third-Party Cyber Insurance Cover?
Third-party cyber insurance is the coverage that protects you in the event your clients’ data is compromised, not your own. When that happens and a client sues you, third-party coverage pays for:
- Attorneys to defend your company.
- Settlement costs (to resolve the lawsuit amicably).
- Court-ordered damages (if you’re found liable).
- Miscellaneous court costs.
Third-party Cyber Liability is typically included in a professional liability insurance policy, which covers many other tech-related liabilities and lawsuits. If you have questions on how you can recover losses due to data breaches or identity theft, contact one of our experienced agents at Southern Colorado Insurance Center.
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