Cyber liability insurance covers the cost for a business to recover from a data breach, virus, or other cyberattack. It also covers legal claims resulting from the breach. Any business that stores sensitive data in the cloud or on an electronic device should have cyber liability insurance.

What Does Cyber Liability Insurance Cover?

Cyber liability coverage can vary widely based on which insurer you’re purchasing the insurance from.  The reason is that there’s no such thing as standard cyber liability insurance. Insurers have started offering cyber coverage only within the last couple of decades.

Judy Selby, a cyber law expert and principal at Judy Selby Consulting LLC, says, “Unlike many other more traditional lines of insurance, there is no standard policy form for cyber insurance. Each cyber insurer has its own policy form, utilizing its own, unique policy language. This creates challenges for companies trying to compare one cyber insurance policy with another.”

Despite the variations, Selby says most insurers offer two types of coverage within a cyber liability policy:

1. First-party Coverage

This coverage pays for immediate expenses that a company incurs after a cyber breach. This includes:

Cost of notifying employees and the public

Repairing any damaged software or hardware

Protecting the company’s reputation with a marketing and public relations response

Business interruption costs and missed income while business operations are suspended

Extortion money (used to appease a hacker who threatens your data or systems unless you pay them a ransom)

Other ancillary costs, such as paying for credit monitoring for customers

2. Third-party Coverage

This coverage helps the company defend against lawsuits and legal claims. This includes:

Privacy lawsuits claiming that you breached the privacy of customers or employees

Fines from regulatory bodies

Media liability claims, such as copyright infringement, libel, or slander.

Breach of contract or negligence claims

On top of first- and third-party coverage, some insurance companies also provide risk mitigation services to help you identify and avoid cyber threats before they happen. After a breach has occurred, some insurers will set up a hotline that customers and members of the public can call to get more information.