As cyberattacks become more frequent and costly, it’s crucial for organizations to maximize their financial protection against related losses by purchasing sufficient insurance coverage. Also known as cyber liability insurance, cyber coverage can help organizations pay for a range of expenses that may result from cyber incidents—including (but not limited to) data breaches, ransomware attacks and phishing scams.
Specific cyber insurance offerings differ between carriers. Furthermore, organizations’ coverage needs may vary based on their particular exposures. In any case, cyber insurance agreements typically fall into two categories: first-party coverage and third-party coverage. It’s best for policyholders to have a clear understanding of both categories of coverage in order to comprehend the key protections offered by their cyber insurance.
First-party Coverage
First-party cyber insurance can offer financial protection for losses that an organization directly sustains from a cyber incident. Losses covered by first-party coverage include:
- Incident response costs—This coverage can help pay the costs associated with responding to a cyber incident. These costs may include utilizing IT forensics to investigate the breach, restoring damaged systems, notifying affected customers and setting up call center services.
- Legal costs—Such coverage can help pay for legal counsel to assist with any notification or regulatory obligations resulting from a cyber incident.
- Data recovery costs—This coverage can help recover expenses related to reconstituting data that may have been deleted or corrupted during a cyber incident.
- Business interruption loss—Such coverage can help reimburse lost profits or additional costs incurred due to the unavailability of IT systems or critical data amid a cyber incident.
- Cyber extortion—This coverage can help 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—Such coverage can help pay for crisis management and public relations services related to a cyber incident.
Third-party Coverage
Third-party cyber insurance can provide financial protection for claims made, fines incurred or legal action taken against an organization due to a cyber incident. Types of third-party coverage include:
- Data privacy liability—This coverage can help recover 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—Such coverage can help pay fines, penalties and other defense costs related to regulatory action or privacy law violations stemming from a cyber incident.
- Multimedia liability—This coverage can help reimburse 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 also offer protection amid copyright, trademark or intellectual property infringement incidents.
Conclusion
Overall, it’s clear that cyberattacks are a significant concern among organizations of all sizes and sectors. With cyberthreats and attack vectors on the rise, it’s vital for organizations to take these incidents seriously and do what they can to bolster their digital defenses. Having a better understanding of cybersecurity and implementing effective incident prevention, response and recovery procedures allows organizations to not only limit their likelihood of experiencing cyberattacks but also mitigate possible losses when attacks arise.
Above all, it’s essential for organizations to understand that they aren’t alone in managing their digital exposures and safeguarding against cyberattacks. There is an abundance of resources and guidance available from trusted experts and professionals. For more information, contact Dealers Risk and Insurance Services today.