Cyber insurance helps protect your business from the financial damage of cyberattacks. It covers things like data breaches, ransomware attacks, and system failures. It acts like a safety net to help your business recover from cyber incidents. However, not all policies are the same, so it's important to understand the details to find the right coverage.

If you want to learn about specific security measures like penetration testing or digital forensics, check out our services.

Key Points

• Coverage Types: Cyber insurance includes first-party coverage (for your losses) and third-party liability coverage (for losses to other people or companies).
• Exclusions: Cyber insurance often doesn't cover negligence, insider threats, or unfixed vulnerabilities.
• Vendor and Offsite Coverage: Check if third-party providers and offsite data are covered in your policy.
• Premium Costs: Better cybersecurity measures can lead to lower premiums and better terms.
• Custom Terms: Cyber insurance is not standardized, so reviewing the details is very important.

Related Terms

Overview of Cyber Insurance Coverage

First-Party Coverage

First-party coverage protects your business from direct losses like data breaches, ransomware attacks, or system failures. For example, if a hacker uses ransomware to lock your files, a good cyber insurance policy will help pay for the costs to recover your data and keep your business running. You can read our in-depth article on ransomware threats and how to handle them.

Third-Party Liability

Third-party liability covers damage your business might cause to others, either by mistake or through a cyber incident. It is similar to errors and omissions (E&O) insurance. For example, if your network is breached and your client’s data gets leaked, this coverage can help pay for the claims that clients might make against you.

Common Exclusions

Cyber insurance doesn’t cover everything. Here are some common exclusions:

• Negligence or failure to address known security weaknesses: If you know there’s a weakness in your system and do nothing, any related damages may not be covered.
• Insider threats: If an employee intentionally causes harm, this is often not covered.
• Nation-state attacks: Cyberattacks linked to political actions, like state-sponsored hacks, are not usually covered.
• Unencrypted data: If sensitive data isn’t encrypted and gets stolen, the insurer might deny your claim. Learn more about encryption.

Vendor and Offsite Coverage

Vendors and offsite data are often overlooked when getting cyber insurance. Many policies have specific rules about third-party providers. For example, if your IT services are managed by a third party and they are breached, you might still be liable for any damage. Make sure your policy clearly includes coverage for these cases. For more on securing vendor relationships, read our article on cloud security.

Key Considerations Before Buying Cyber Insurance

Risk Assessment

Before buying cyber insurance, you should conduct a risk assessment. This helps both you and the insurance company understand the risks involved. It can also lower your premiums if your security is strong. Check out our glossary for a detailed guide on risk assessment.

Premium Costs

Cyber insurance costs depend on factors like industry risk, company size, and current security measures. Different industries are classified by risk levels based on the likelihood and impact of cyberattacks. For example, healthcare and financial services are considered high-risk due to the sensitive data they handle, making them prime targets for attackers. As a result, these industries often have higher premiums compared to lower-risk sectors. Strengthening your security can help lower these costs. Adding features like multi-factor authentication (MFA), firewalls, and regular penetration testing can make a big difference. Learn more about the benefits of penetration testing by visiting our penetration testing page.

How to Choose the Right Policy

Since cyber insurance isn't standardized, it's important to carefully read each policy. Here are some things to consider:

1. Policy Limits: Understand the maximum payout for different types of incidents.
2. Customizable Coverage: Make sure the policy covers what you need, like social engineering fraud or data recovery.
3. Exclusions: Always review what isn’t covered, such as insider attacks or unfixed vulnerabilities.