Cyber Insurance: Coverage, Limitations, and More
As leading cyber & data privacy specialists, By Design Law offers comprehensive protection strategies to a wide range of clients, from individuals to large organizations. Ready to meet your cybersecurity concerns head-on? Call us at (206) 593-1519 to schedule an initial consultation.
In the wake of technological advancement, nothing remains static.
Innovation touches every aspect of human life and shapes the meaning of even our most basic concepts, like safety and protection. Once we feared sabertooth tigers; now we worry about home invasion. However, the biggest threat to many people living in the information age doesn’t exist in the real world, but online.
Here’s what you probably don’t realize: You are much more likely to be the victim of a cyber attack than the victim of a burglary, home invasion or even an IRS audit.
In fact, data suggests that your chances of experiencing a data breach may be as high as one in four, and it isn’t just individuals who are at risk. According to the World Economic Forum’s 2023 Global Risks Report, cybercrime ranks as the eighth most severe global risk in the next two to 10 years. Luckily, there are ways to effectively safeguard your most sensitive online data.
For individuals and organizations that frequently deal with digital threats, cyber insurance may offer an appealing option. While it provides a number of potential benefits, cyber insurance may not be the best answer to your online security concerns.
Keep reading to learn everything you need to know about cyber insurance—including what it covers and what it doesn’t—and how our privacy specialists can create a customized protection plan to defend your digital assets.
Are you reeling from a recent cyber attack? Confused about the regulatory implications of GDPR, HIPAA or CCPA? We have the answers you need. Getting started with us is easy—simply contact us online to schedule a free consultation .
What Is Cyber Insurance?
Cyber insurance (also called cyber liability insurance or data breach insurance) is a type of insurance coverage designed to shield organizations from financial losses when they sustain online attacks. Like other types of insurance, it provides compensation to cover customers’ financial losses in the aftermath of a cyber incident.
Coverage Areas
Cyber insurance policies can cover financial losses related to a variety of attacks, including data breaches, ransomware attacks and network intrusions. Although coverage varies by policy, most insurers offering the following:
- First-party coverage . As the name suggests, first-party coverage addresses the direct losses incurred by the insured party. It typically includes expenses related to incident response, forensic investigation, data breach notification, credit monitoring, business interruption/loss of income, data restoration, cyber extortion and ransomware payments.
- Third-party coverage . Rather than applying directly to the insured party’s losses, third-party coverage is concerned with liabilities that arise when a cyber attack affects external parties. Policies may apply to network security liability, media liability, regulatory fines and penalties, supply chain management, cyber liability of service providers or any other third-party-related expenses that may arise in connection with a cyber attack.
Before settling on a particular cyber insurance policy, it’s crucial to review your unique needs with a legal advisor who specializes in cyber and data protection. Equally important, you need to understand the potential shortcomings of whatever cyber insurance policy you choose.
Limitations of Cyber Insurance
Like all insurance policies, perhaps the biggest limitation of cyber insurance is that it doesn’t actually offer protection—only restitution after an attack. Cyber insurance lacks the mechanism to prevent a cyber incident.
Additionally, cyber insurance has several policy limitations . Common exclusions include losses related to war or terrorism and intellectual property infringement claims, as well as bodily injury, property damage and fraudulent acts committed by the insured party. These are only a few of the many reasons it’s essential to understand the breadth and limitations of coverage.
Cyber Attack Risk Management
Cyber insurance is a great way to cover your financial bases and ensure you’ll be compensated in the event of an online attack. However, real cyber defense strategies focus on prevention and risk management. Here are some of the most effective tools for mitigating online risk and guarding your digital assets from exposure:
- Cybersecurity assessment. A thorough, expert cybersecurity assessment is crucial to identifying possible vulnerabilities within your organization’s network infrastructure, storage systems and general processes. Potential security measures include firewalls, encryption and top-quality authentication .
- Employee awareness. Proper employee training is a frequently overlooked yet critical component of a comprehensive cybersecurity strategy. Training may involve education about common cyber threats and phishing scams, as well as best practices for handling data. Training should also emphasize the necessity of choosing strong passwords and quickly reporting suspicious online activity.
- Incident response planning. To mitigate the fallout after a cyber attack, your organization needs to have a detailed response plan that’s ready to go. It should detail each team member’s role, responsibilities and a clear chain of command so that you can begin risk management immediately.
- Data backup. An easy way to mitigate the potential impact of potential ransomware attacks or data loss is by regularly backing up critical data and systems. Don’t make the mistake of assuming that your digital assets are being backed up correctly; you should test their effectiveness before an actual incident occurs.
- Risk management for vendors. When you run an organization, it isn’t just your own cybersecurity you need to worry about—its the security of your third-party vendors, too. Cyber risk management can help you ensure vendors and suppliers are meeting your security standards and contractual obligations regarding data .
- Regulatory compliance. A regulatory compliance specialist can help you stay informed about relevant data protection regulations so that your company remains in full compliance with laws like the General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA).
- Frequent monitoring and updates. It’s necessary to regularly update your software and security patches and to continuously monitor your network, systems and applications. Doing so can help you detect potential vulnerabilities and unauthorized activities.
No matter your organization’s size or sector, you need a comprehensive cybersecurity and data protection strategy. However, it’s not easy to come by if you don’t know where to look. Fortunately, you’re already in the right place.
By Design Law: Authorities in Cyber Protection and Data Privacy
Cyber insurance may provide you with compensation after a cyber attack occurs, but it can’t keep you safe from one. To prevent cyber threats from becoming a reality, you need a full-spectrum cybersecurity strategy.
At Design by Law , we specialize in comprehensive risk management and powerful data protection. With a deep understanding of regulatory laws, data management, cybersecurity and more, you can rest easy knowing our legal experts have you covered.
Ready to make it happen? Getting started with us is easy. Give us a call at (206) 593-1519 or contact us online to schedule a free consultation with one of our talented legal representatives today.
