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What is Cyber Liability Insurance?

You know you need car insurance to protect your car if you’re in an accident. And health insurance to cover costs if you’re sick or injured. Home insurance in case of fire or wind damage.

But while it’s easy to visualize things that could happen in the physical world – and thus, the need to insure against them – how often do you think about what could go wrong in the digital world?

That’s the purpose of Cyber Liability Insurance.

Cyber Liability Insurance is insurance made to protect businesses or individuals from Internet-based risks. This often includes the information, images, or intellectual property transacted or stored online.

Cyber Liability Insurance: An Overview

The reality is that cybercrime is on the rise. In 2017, the US spent $1 trillion on cybercrime and is expected to hit $6 trillion by 2021. Five billion dollars alone was spent on ransomware damage in 2017…which was 15 times the cost just two years prior.

Cybercrime is growing faster than the insurance industry can keep up. As of yet, there is no standard definition as to what should be covered and what shouldn’t, but it is clear that cyber insurance should no longer be looked at as an “extra” or a “nice to have.” Too much of life happens online.  

What Does It Cover?

Because there is no standardization yet for Cyber Liability Insurance it can be hard to know what to cover or even what can be covered. So, let’s start with who it’s generally designed to cover:

  • You & Your Business. This is known as first-party coverage.
  • The People You Do Business With. This is known as third-party coverage.

Cyber Liability Insurance Coverage Limits

Before we get into what Cyber Liability Insurance covers, let’s talk about what it typically does not cover.

  • Intentional acts
  • Internally generated viruses
  • Loss of trade secrets
  • Negligence induced incidents
  • Post-breach remediation
  • Physical damage

It’s important to realize that this type of liability insurance is focused on protecting your company from a loss of data and the fallout that comes from that.

Electronic data, like information that belongs to your business like sales projections and tax records, are covered.

Data that belongs to your customers, employees or vendors are also covered.

If this data is stolen, the cost to recover it, notify customers, and pay for any damages covered by this theft, can be significant. It’s these costs that are covered by a cyber liability policy.

Other coverages include:

  • Loss of income related to a breach
  • Cyber Extortion Losses
  • Damage to your reputation
  • Lawsuits brought against you due to a breach

While each of these items may be covered by Cyber Liability Insurance, your coverage will depend on your policy and what you’ve added and what you haven’t. What’s covered and not covered will be determined by your limit and sublimit caps so it’s a good idea to keep an eye on the details of your policy.

How to Choose Cyber Liability Insurance

Because Cyber Liability Insurance isn’t standardized and highly specific to a given business, what can be underwritten, and more, you should seek trustworthy advice. Naturally, we’d love to learn more about your use case and see how we might be able to help. But, if it’s not us, please make sure you don’t neglect this coverage. You could regret it when you least expect it.