What does cyber liability insurance cover?
The most common cyber liability coverages pay for certain financial losses due to a cyberattack, ransomware, data breach, and other digital-related risks. A cyber insurance policy can provide coverage for costs associated with federal or state regulations, notices to affected parties, security flaw investigation, hiring of expert consultants, credit monitoring, loss of business, lawsuits, regulatory fines, and sometimes extorsion payments.
Every state has unique legal requirements regarding the steps a business needs to take after a cybersecurity attack. Cyber liability insurance helps cover the cost of legal guidance to follow these guidelines. For example, Vermont has instituted the “Security Breach Notice Act,” which requires all data-gathering businesses to notify the state’s Attorney General within 14-days and affected customers within 45-days when a security breach has happened.
Vermont Security Breach Notice Act Guidance
For businesses gathering data on clients in multiple states, this becomes a tricky legal path to navigate as each state has different regulations in place. A cyber liability insurance policy may help cover compliance costs.
If state or federal regulations were not met in some capacity, a business may be able to recoup some of those fines through their cyber liability insurance policy.
Notices to affected parties
Depending on the affected party’s location, many businesses will be required to send out direct notices to all those directly affected by a cyberattack. Directly notifying all your customers can become costly, but failure to do so can produce large fines from government regulators. Cyber liability insurance can help cover the cost of sending these notifications or fines associated with lack of notification.
In some scenarios when social security numbers, credit cards, or banking information is stolen, a company can be required to set up multi-year-long credit monitoring for affected customers. A cyber liability insurance policy covers the cost of setting this up and other ongoing maintenance of the initiative.
Security flaw investigation
Cyber liability insurance covers the cost of identifying how a security breach happened in the first place. It can cover the need to hire a team of experts to investigate and the required security changes to prevent the issue from happening again.
Loss of income
If your business is shut down due to a cybersecurity issue, cyber liability insurance will pay for lost income while you were unable to operate. This can occur due to incidents involving ransomware that steal important data and holds it for ransom or malware that causes network outages over long periods of time.
Lawsuits from people affected by stolen data can quickly become expensive. A cyber liability insurance policy will pay for attorney fees, court costs, and potential settlements or judgments.
Depending on the cyber liability insurance policy details, it may cover extorsion payments when critical data is being withheld by the attackers for a ransom payout.
What does cyber liability insurance NOT cover?
Cyber liability insurance only covers costs associated with data breaches, cyberattacks, and hacks. It will not cover business oversights, professional liability, or general liability insurance claims.
Cyber liability insurance will not cover any expenses related to claims of inadequate work delivered or performed for a client. These claims fall under professional liability insurance. However, we have access to carriers who provide insurance coverage that bundles this coverage with cyber liability.
Third-party property damage or injury
A business will require a general liability insurance policy to cover property damage or injuries to customers.
Business owned property damage
Commercial property insurance will help your company cover damage to owned assets.