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Like many businesses, your firm probably uses computers to send, receive, or store electronic data. Such data might include sales projections, tax records, and other information owned by your business. If the data is lost, stolen or damaged due to a security breach, it could be very costly to replace or restore.
Your computer system might also contain sensitive data that belongs to other parties such as customers, employees, or vendors. If the data is lost or compromised by a hacker, the owners might sue your company for damages. Your firm could also incur substantial notification expenses. Virtually states have laws requiring businesses to inform individuals whose personal information has been compromised in a data breach.1 You can protect your business against the costs associated with data breaches by purchasing a cyber liability policy.
Cyber liability insurance covers financial losses that result from data breaches and other cyber events. Most cyber policies include both first-party and third-party coverages. Some coverages may be included automatically while others are available "a la carte."
First-party coverages pay expenses your firm directly incurs as result of the breach, such as the cost of informing your customers about a hacker attack. Third-party coverages apply to claims against your firm by people or companies that have been injured as a result of your actions or failure to act. For instance, a client sues you for negligence after a hacker steals his personal data from your computer system and releases it online.
Examples of cyber policies are The Hartford's CyberChoice, Travelers' CyberRisk. and Philadelphia's Cyber Security products. All three provide a range of coverages and allow buyers to choose the ones they need.
Here are the types of first-party coverages you are likely to find in a cyber liability policy. These coverages may be subject to a deductible.
Each cyber liability policy contains unique terms that are explained in the Definitions section. To understand the policy, you need to know what the terms mean.
The liability coverages afforded by a cyber policy are usually claims-made. Coverage typically applies to damages or settlements that result from covered claims as well as the cost of your defense. Note that defense costs may reduce the limit of insurance.
A cyber liability policy may include a retention, an amount you must pay before the insurer will make a payment.
Cyber liability policies protect your business from claims and expenses resulting from a data breach.
Policies aren't standardized and contain unique terminology.
Most policies are flexible so you can choose the coverages you want.
Written by Marianne Bonner