According to the Securities and Exchange Commission, 60% of small businesses go bankrupt after a hack, while many others experience financial and reputational loss.
As cyberattacks are becoming more frequent and nuanced, organizations are under tremendous pressure to safeguard themselves from attacks. Common reasons for data attacks include phishing scams, malware, ransomware, improper IT security measures, and insider attacks.
Cyber liability insurance can be a boon with one of these attacks, helping businesses recover from the devastating aftermath of a cyber attack. Helping a business bounce back from the financial setback of data recovery, legal fees, and other expenses.
Today, more and more businesses recognize the need to invest in cyber insurance, but how does one start? What kind of coverage should one acquire? Is first-party cyber insurance better than third-party? Do you need both?
This guide will help answer these questions so you can choose the right coverage to ensure you and your business are protected from all sides.
First Party vs. Third Party Cyber Insurance
There are two types of cyber insurance: first-party and third-party. Each has very specific things and events for which they will cover you.
Let's deep dive to understand the types of coverage.
First Party Cyber Coverage & Risks
First-party cyber liability insurance covers you for losses incurred by your company from your company. For example, if your business were to experience downtime because of a ransomware attack, that would count as first-party damage to your business.
Other types of common first-party claims could include an employee accidentally installing malware, ransomware holding your company data hostage, cyber extortion, and more.
First Party Insurance is a must for any company, but particularly those that collect or store sensitive customer data like personal identification or credit card information. Cybercriminals see these companies as prime targets, with about 30,000 websites hacked globally every day.
First-party coverage includes:
- Notifying the customers of the breach and the personal information exposed
- Covering the cost of credit monitoring services for affected customers
- Investigating the source of data breach/cyber attack
- Restoring the company's reputation by launching a public relations campaign
- Reimbursing the company for revenue loss due to incident-related downtime
- Paying ransom to the cyber extortionists
For a business owner, first-party cyber liability insurance is essential. It covers all costs related to your data and infrastructure restoration in case of an attack or a breach.
Third-Party Cyber Coverage & Risks
Often misunderstood, third-party cyber coverage refers to liability insurance, in which you cover damages suffered by third parties as a result of a cyber attack on your business. Or, on the other hand, insurance that covers you in the event you incur losses from an attack on a third-party vendor with access to your customer or patient data.
For example, if a party claims they've experienced identity theft as a result of a breach of your system and you are found liable third-party coverage should take care of fees associated with remedying this. In addition, if a third party's negligence and lack of security cause a breach that exposes your company, as 51% of organizations claim, third-party coverage could kick in, covering you from major loss or damage.
This type of coverage typically includes:
- Legal Fees and Litigation
- Regulatory fines
- Public Relations
Third-party cyber insurance is not required by law, but it is becoming increasingly popular as the threat of cyberattacks grows. This type of coverage is an important type of insurance for businesses of all sizes. As you can see, it covers you from multiple fronts over which you may have no direct control.
Which Cyber Liability Insurance Coverage Should I Choose For My Business?
Whether you're a small business, enterprise, or organization, it's essential to have a policy that includes both first-party and third-party coverage. Both types of protection are important, especially for businesses and organizations that store others' sensitive data. For example, hospitals and financial institutions are typically most at risk of potential lawsuits because of the large amounts of sensitive data they store and strict government regulations if there's a breach.
Affordable Insurance Coverage Plans For Everyone
Cyber insurance policies don't have to break your bank. At 1Fort, we believe that every business deserves access to powerful cyber protection. We strive to provide brokers and businesses with the coverage they need to feel secure in their digital lives. Our goal is to bridge the gap between cyber security and cyber insurance so businesses can focus on what they do best.
Sign up for 1Fort today, talk with a broker, and see the difference!