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Making Sense of Cyber Liability Insurance

Cyber liability insurance is a critical policy that all companies need to strongly consider. In this post, we'll explain what it does and doesn't cover.

If you own or operate a business, you are likely aware of the laundry list of digital risks and threats your business faces every day. Increasingly, it seems as if every couple of months, a large, mainstream company shares news of a data breach or security leak. As a business owner, you’ve probably spent time educating yourself on how to protect your company from cyber threats. But, what happens when your company’s cyber defenses fail? That’s where insurance comes into play–specifically, Cyber Liability Insurance.

What is Cyber Liability Insurance?

Let’s start with an overview of what Cyber Liability Insurance is. Generally, Cyber Insurance provides protection when a company experiences a loss or data breach of sensitive or private information. This includes things like email addresses, personally identifying customer information, corporate confidential information, credit card numbers, or health records.

Third-Party Protection

Most Cyber Liability policies only respond by covering third-party damages or damages affecting someone who is not the policyholder. This means that losses incurred by third-parties–your customers or users–are covered, but you and your company may not be. Some examples of what would be covered by third-party coverage are:

  • Costs to defend and settle a lawsuit if the policyholder is sued by the victim or victims of a data breach.
  • Costs credit card companies incur to reissue lost or stolen credit cards as a result of a data breach.

First-Party Protection

A policy that protects against third-party damages might be adequate for some companies. However, for most companies, third-party damages only account for a portion of the costs incurred in the event of a cybersecurity-related incident. 

First-party damages are damages experienced by the policyholder themselves. Damages like reputational harm and the costs associated with security overhauls are often considered first-party. Crucially, first-party damages are not covered by most basic Cyber Liability Insurance policies. Examples of first-party damages that would likely be covered by a Cyber Liability policy like the instant-issue policy we offer at Layr include:

  • Revenue a company loses as a result of a data breach or hack.
  • Reputational damage incurred because of a cyber incident.
  • The cost of performing a forensic investigation to determine the extent of a breach.
  • The costs of notifying affected parties that they are victims of a breach.
  • The cost of providing identity theft protection to individual victims.
  • Fines handed down by the payment card industry in cases where credit card information is lost or stolen.
  • The costs of upgrading systems and hardware to resume credit card processing after credit card information has been stolen.
  • Paying a ransom to release hijacked systems or data.
  • Money lost as a result of unauthorized bank transfers or illicit payroll runs.
  • Whaling, or cases where a company representative is tricked or coerced into sending or moving money.

First-party damages like the ones listed above can be costly. The best way to protect your company and ensure you aren’t stuck paying out-of-pocket for significant expenses is to purchase a Cyber Liability policy that provides protection for both first and third-party damages and integrates seamlessly with more traditional insurance lines like Commercial Crime Insurance and Property Insurance.

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Layr’s Instant-Issue Cyber Liability Policy

Our instant-issue cyber liability policy provides $100,000 in protection against first-party damages as well as many third-party damages. This policy can be purchased as a standalone policy or in addition to your existing business insurance and offers a fast and economical way to get protection in place in a few clicks.

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In the case of larger companies, when $100,000 may not be enough, we have a more robust Cyber Liability policy that is also instant-issue. You can see a tailored Cyber Liability policy quote along with Commercial Crime and Property policies that specifically respond to threats larger companies are most likely to face. As a business owner, protecting your company is a top priority. You will likely have critical gaps in your coverage if you don’t accurately acknowledge and communicate threats your company faces to your insurance broker.

Like you, we hope our Cyber Liability Insurance never has to kick in. In addition to insurance, we strongly believe that most cyber defense strategies can have a significant impact on reducing the likelihood of ever having a cyber insurance claim. Nonetheless, being vigilant about cybersecurity by having the appropriate coverage and policies in place is a critical part of keeping your company safe online.