As cyberattacks become more frequent and costly, it is important that organizations minimize the losses caused by cyberattacks by purchasing the right type and amount of insurance. Cyber liability insurance can reimburse organizations for a wide range of expenses that may result from cyber incidents—including (but not limited to) data breaches, ransomware attacks and phishing scams.
Cyber insurance coverage typically falls into two categories: first-party coverage and third- party coverage. A business needs to have a clear understanding of both types of coverage and the protections offered by each type to ensure that it has the cyber insurance that it needs. This article will discuss the differences between first-party and third-party coverage.
First-party cyber insurance guards against direct losses that an organization incurs from a cyber incident. Covered losses generally include the following:
Incident Response Costs—This coverage helps pay costs associated with responding to a cyber incident. These costs include IT forensics to investigate the breach, restoring damaged systems, notifying affected customers, and setting up call center services.
Legal Costs—This coverage helps pay for legal counsel to assist with any notification or regulatory obligations resulting from a cyber incident.
Data Recovery Costs—This coverage helps recover expenses related to recovering data that may have been deleted or corrupted during a cyber incident.
Business Interruption Losses—This coverage helps reimburse lost profits or additional costs incurred due to the unavailability of IT systems or critical data as a result of a cyber incident.
Cyber Extortion Losses—This coverage helps pay costs associated with hiring extortion response specialists to evaluate recovery options and negotiate ransom payment demands (if applicable) during a cyber incident.
Reputational Damage—This coverage helps pay for crisis management and public relations services related to a cyber incident.
Third-party cyber insurance protects against claims made, fines incurred, or legal action taken against an organization by a third-party. Third-party coverage usually includes the following:
Data Privacy Liability—This coverage covers the costs of dealing with third parties who had their information compromised during a cyber incident. These costs may include handling third-party lawsuits or legal disputes, offering credit-watch services and providing additional compensation.
Regulatory Defense—This coverage covers fines, penalties and other defense costs related to regulatory action or privacy law violations stemming from a cyber incident.
Media Liability—This coverage reimburses defense costs and civil damages resulting from defamation, libel, slander, and negligence allegations associated with the publication of content in electronic or print media. Multimedia liability coverage can offer protection for copyright, trademark, or intellectual property infringement incidents.
Cyber insurance makes all the difference in helping organizations avoid large-scale financial losses as a result of cyber incidents. However, cyber insurance coverage differs from carrier to carrier. In addition, every business or organization may have its own special exposures and needs. That is why businesses and organizations must consult trusted insurance professionals to ensure that they have the right type and amount of cyber insurance coverage. Contact RMC Group today for more risk management guidance and coverage solutions at 239-298-8210.
This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. © 2023 Zywave, Inc. All rights reserved.