Before purchasing a specific cyber insurance plan, it’s a good idea to review important details regarding each area of coverage. Each plan may have a different structure of coverage that can be compared to the cyber risks identified during a company’s business continuity and IT security planning to ensure your business has adequate coverage for all potential cybersecurity risks. 

Standard cyber insurance coverage supports first-party and third-party expenses. First-party coverage is related to the direct costs that a business incurs as a result of a cybercrime or data breach.  Third-party cyber expenses may be incurred as the result of litigation that is initiated by other entities, often as the result of compromised sensitive information, and can include legal fees and regulatory fines. In this post, we’ll review the standard coverage options that a cyber insurance policy will provide. 

Business Interruption and Extortion Coverage

There are a variety of potential cybercrimes and incidents that can cause direct or indirect harm to business operations. Coverage for cyber insurance is offered to address particular issues and costs that may arise after one of these events and help a business recover as quickly as possible. 

• Cyber Extortion. The use of ransomware is rising in recent years and may allow a criminal to gain access to sensitive files and systems. In many cases, there may be a demand for a ransom payment in order to restore access. Cyber insurance can offer support for hiring negotiators and reimbursement for ransom payments. 
• Computer Attack. A targeted attack on a computer system can cause damage to data storage, networking, and other important hardware of software components. This can result in outages that affect a company’s ability to operate in a secure and safe manner. Cyber insurance coverages can be applied to data re-creation services, future loss avoidance, and resources used to recover from system outages. Additional reimbursements can often be applied to business contingency expenses and extended income recovery. 
• Misdirected Payment Fraud. If an attacker hacks into a system directly or tricks an employee into opening a malicious email, it may be possible for them to misdirect a payment. This can cause an unintended fund transfer, and cyber insurance can assist in recovering these direct costs and associated expenses. 
• Computer Fraud. A third-party individual or group who has gained access to a secure system can interact with data or information in a way that defrauds the business. This can include erroneous data entries, tampering with secure information, and other deceitful practices. 
• Telecommunications Fraud. In some cyber incidents, a telecommunications system may be compromised and affected by the event. Cyber insurance can cover costs related to a disruption of service or complications that impact a telephone service provider. 
  

Public Relations & Identity Recovery Coverage 

Many times, when data is compromised during a cyber incident, it may impact sensitive customer or employee information. One example is data related to the Healthcare Insurance Portability and Accountability Act (HIPAA). A company has obligations related to state and federal regulations to notify and protect individuals whose data they access and process in the course of business. Expenses covered by cyber insurance that are related to affected individuals may include:

• Lost wages
• Child and elder care
• Mental health counseling 
• Miscellaneous costs
  

Reputational damage may also require time off for the purposes of identity recovery, which may be reimbursed in some cases. Additional support that cyber insurance can provide a business includes expenses related to hiring a PR firm and implementing improvements that may be recommended after an investigation. 

Crisis Management Coverage

The number of resources required to recover from a cybersecurity incident can be far-reaching and require third-party support. Cyber insurance coverage provides support for many important areas to assist a company in investigating, coordinating, and securing recovery services. These expenses may include:

• Incident response
• Regulatory fines
• Notification of affected parties 
• Payment card industry (PCI) assessments, fines, and penalties
• Hiring of a forensic accounting firm
  

There may also be additional services and expenses required to review information systems, prepare backups, and identify the exact scope of a breach. 

Third-Party Lawsuit Coverage 

Another major area of cyber insurance coverage involves potential litigation from third parties. There can be a wide range of liabilities that a company may be exposed to in a cybercrime or data breach event. Two of the most common categories of liability relate to network security and electronic media. 

• Network Security Liability. Many cybercrimes, including ransomware and distributed denial of service (DDoS) attacks, may result in the loss of data related to a business or individual. Support from cyber insurance can help cover the costs of security legal resources, defense preparations, and losses related to the disclosure of third-party data. 
• Electronic Media Liability. Compromised electronic media can result in potential liabilities related to copyright infringement, trademarks, and service marks. Cyber insurance coverage provides reimbursement for expenses related to legal violations such as unintended defamation and violation of privacy rights.  
  

Cyber insurance coverage provides support in a number of different areas that may impact a business that has experienced a cybercrime or data breach incident. It may never be possible to prevent all forms of cybercrime, but supplemental insurance is an effective way to reduce risk and potential legal exposure. Understanding these types of coverage can help you select a policy and provider that match well with your cybersecurity and overall business needs.