Handling sensitive data becomes riskier every year. At times, it seems like big tech companies are experiencing major security breaches every day. If your company handles sensitive information or personal data, you live with the risk that you, too, may experience a security breach. If your company uses email or other electronic forms of communication to share tax information, sales projections, or, really, any other information that your business uses, you could find a data security breach very costly.
If a security breach causes you to lose sensitive data belonging to your customers, you could be facing one or more very expensive lawsuits. Even if you are not sued, you will have to pay costs associated with notification, as the law requires that you notify all customers whose data may have been compromised. The best way to protect yourself and your company against those expenses is with a Cyber Liability Insurance policy.
What Is Cyber Liability Insurance?
Cyber liability is an insurance policy that specifically covers financial losses resulting from data security breaches and other cyber security events. Many policies will bundle first- and third-party coverage together, while others sell them separately.
First-party coverage pays the expenses that you have incurred as a direct result of a breach, like the cost of notifying your customers about the security breach. Third-party coverage pays for the expenses you incur from claims made against you by people or companies who have been harmed by the cyber attack. For example, if you are sued for negligence by a customer whose sensitive data was stolen and spread online, third-party coverage handles the legal expenses.
Will My General Liability Insurance Cover Cyber Liability?
If you hold a general liability policy, you may wonder if it will cover losses sustained from cyber security breaches. Possibly, but it is rare. While some General Liability policies will provide cyber coverage, the vast majority of them do not. General Liability protects you in cases of bodily harm, property damage, and personal or advertising injury.
That coverage is quite different from cyber coverage, and it will usually not protect you in the event of a data security breach. A Cyber Liability policy ensures that you are covered in the event that such a breach does occur.
What Does Cyber Liability Insurance Cover?
Cyber Liability coverage is broken down into first-party and third-party coverages.
These are the most common first-party coverages:
- Loss or damage to electronic data. This type of coverage covers the cost to replace data or programs that are lost, damaged, or stolen in a cyber attack, whether they belong to you or someone else.
- Loss of income and extra expenses. This covers any income you lose and extra expenses you incur when your computer system shuts down in the wake of an attack. Sometimes these policies will cover dependent expenses as well.
- Cyber extortion. Cyber extortion coverage covers you in the event that a hacker breaks into your system and threatens to steal or destroy data unless you pay them. Coverage extends to any payments you make to keep the data secure and any expenses you incur in responding to the attack.
- Notification costs. This covers the cost of notifying the parties affected by the breach. It may also cover the cost of providing credit monitoring and establishing a call center.
- Damage to your Reputation. This will cover the cost of any marketing or PR you need to protect or restore your company’s reputation after a cyber attack.
These are the most common third-party coverages:
- Network Security and Privacy Liability. This covers claims against you for negligence, errors, or omissions that may have led to the security breach.
- Electronic media liability. This type of coverage will cover lawsuits against you for libel, slander, defamation, copyright infringement, or invasion of privacy. These acts are only covered if they result from the publication of electronic data online.
- Regulatory proceedings. This includes coverage of fines imposed on you by the regulatory agencies that deal with data breach laws.
Who Should Acquire A Cyber Liability Insurance Policy?
Any company or firm that stores and shares data electronically needs cyber liability coverage. You may not think that your company or firm is big enough to be a target, but you simply cannot take that risk. If you do experience a data security breach and you have no coverage, you could find yourself in deep financial trouble.
Cyber liability insurance is the only way to make sure you are covered in the event of a data security breach. Even if you do not handle sensitive information for your customers, you certainly handle some for your employees. Your records will have their bank account information, tax information, and their social security numbers.
You also have your own company information to worry about. Your company’s bank and tax information is at risk, and you could find yourself in real trouble if that information is stolen and you have no insurance coverage.
Speak To Experienced Technology Insurance Brokers
If you would like to know more about Cyber Liability Insurance or would like to speak to a broker about getting Cyber Liability Insurance, contact MFE Insurance today.