Cyber Insurance (sometimes called Cyber & Data Breach Insurance) is designed to cover businesses or organizations for information breach, privacy liability, and/or data breach-based exposures. This type of insurance has two major elements, which can be purchased separately or together, and can be found either within a commercial package (Business Owners Policy) or a stand-alone policy.
The first element of Cyber Insurance is typically called First-Party data breach coverage. It provides protection for cyber-related incidents that directly impact the firm. This will give the firm a “response fund” after a cyber or data breach, to cover the costs of client notifications, forensics, credit monitoring, public relations, and other response costs. It can also provide the firm with “business interruption”. That covers any lost revenue for the firm if their system must be shut down due to a cyber incident. It also pays the extra expense needed to get the firm back running. If a cyber incident results in damaged or lost data, first-party coverage will cover the costs to replace or restore that data. The last major part of first-party data breach is “network extortion.” Many cyber criminals will get into a firm’s database system and threaten to leak/release the personal information if they are not payed a ransom. Network extortion will pay for that ransom.
The other element of Cyber Insurance is known as Third-Party Liability coverage. While many carriers may have slightly different names for this type of coverage, it all boils down to coverage for your clients, or any other third-party whose information you store. It will provide financial indemnification (damages, settlement costs, and costs of legal defense) if a claim is made saying that the business or organization failed to protect the personal information of others from a cyber incident. Common names for this include cyber liability, privacy liability, and information security liability coverage. Third-party liability coverage may also pay credit card companies if the card information stored was leaked as a result of an incident. Some carriers will also add media liability, which will cover copyright and trademark infringement claims against your firm.