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Cyber Liability Insurance

The definitive guide to what cyber liability insurance does and doesn't cover.

Purchasing commercial insurance is a great start for protecting your small business against risk, but depending on your company’s operations, your policies may vary. Your business is one-of-a-kind – additional policies or add-ons to the one listed below may be necessary to fill coverage gaps. That’s where Layr can help.

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Here at Layr, we know business insurance can be confusing. Our guides and articles are designed to help you make sense of common coverage and determine whether or not it's right for your company.

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What is Cyber Liability Insurance?

As more and more businesses move online, Cyber Liability coverage is especially important to consider. Cyberattacks and data breaches against online retailers are on the rise, and according to recent data released by CSO, the average cost for a retail or e-commerce data breach increased 9.2% from 2019.

You don’t have to be an ‘online business’ to have cyber exposure.

Even if your company’s only online exposure is a business email account, your business still faces risks like phishing that can be detrimental to your operations. That’s why almost every small business can benefit from a Cyber Liability Insurance policy.
If your business takes orders online, or stores customer data in the cloud, a data breach could be especially damaging to your customers and costly for your business. A Cyber Liability Insurance protects your company from first- and third-party damages associated with data breaches and cyberattacks, so your business isn’t stuck paying for data recovery, the cost of notifying customers, and legal fees out-of-pocket.

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First Party Coverages

  • Loss or Damage to Electronic Data – Losses caused by damage, theft, disruption, or corruption of electronic data are covered under a Cyber Liability Insurance policy. This includes costs to restore or recover lost data and the cost of any third parties hired to save, extract, or reconstruct your data. The data loss must be the result of a covered cyber event, such as a hack, virus, or a denial of service attack.
  • Loss of Income or Extra Expenses – This coverage portion of a Cyber Liability policy replaces lost income and expenses related to a full or partial shutdown of your IT systems that occurs as a result of a covered cyber liability event. While a Business Interruption Insurance (BII) policy typically provides coverage for lost income and expenses related to a business interruption, in the case of a cyber liability event, a BII policy will not respond, it is a Cyber Liability policy that will cover your business.
  • Cyber Extortion Losses – This coverage responds when your business is threatened with a cyberattack or data breach unless you agree to pay some amount of money. A Cyber Liability Insurance policy will help cover the costs incurred by a cyber extortion event, including money paid to the extorter and the costs to investigate the event.
  • Notification Costs – A Cyber Liability Insurance policy responds to help cover the cost of notifying parties affected by a cyberattack, attorney fees related to determining notification obligations, and, in some cases, the cost of providing credit monitoring for affected parties.
  • Damage to Your Reputation – This portion of coverage includes marketing and public relations costs associated with protecting your company’s reputation following a data breach.


Third-Party Liability Coverages

  • Network Security Liability – Cyber Liability Insurance covers the costs associated with lawsuits against your business related to third-party damage from a data breach or to the inability to access data on your IT system.
  • Network Privacy Liability – This coverage responds in the event of a lawsuit alleging that your business did not have adequate protections in place to guard the sensitive data (customer, client, or third-party) stored on your IT systems.
  • Electronic Media Liability – Lawsuits against your business alleging libel, slander, defamation, copyright infringement, invasion of privacy, or domain name infringement as a result of the online publication of electronic data are covered under Cyber Liability Insurance.


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What Isn’t Covered?

A Cyber Liability Insurance policy will not fully cover the costs associated with the theft of electronic funds or monies. To cover the theft of electronic funds, look to a Commercial Crime Insurance policy.

While it’s important to download the latest versions of software to keep up with program upgrades and bug fixes, typically, a Cyber Liability Insurance policy will not cover the cost to do so. This also means that if your company experiences a cyberattack, most Cyber Liability policies will help to restore your company with the software it had prior to the attack.