First-Party vs. Third-Party Cyber Liability Insurance

All businesses that operate computer systems need cyber liability insurance. Since most businesses use and store data these days, then this is probably a critical component of your business insurance portfolio. While some policies like your general liability or professional liability coverage might offer supplementary cyber liability insurance, a stand-alone plan is a better benefit. This is especially true for businesses that handle the personal information of clients.

Cyber liability insurance is very adaptable and diverse. Most policies will include two types of benefits: First-party and third-party coverage. Each will assist businesses in different ways, including in how they can protect their customers after data breaches.

Understanding Cyber Liability Insurance
A cyber liability is harm that might come to your business or others as a result of problems in your computer systems. It is designed to cover you in cases where viruses, hacks, ransomware attacks or other data theft damages your systems and exposes sensitive data. 

In these situations, you might have to pay for both your own recovery and the losses of others. To do this, you might have to use both the third-party and first-party coverage in your plan.

First-Party Cyber Liability Coverage
A first-party cyber liability policy will help the business itself. Following a data breach or data loss incident, your plan might help you pay for:

• Data recovery, including paying experts to help you fix a problem and gain control of the issues.
• Repairs to your hardware or software systems.
• Income lost as a result of the breach.
• Cyber extortion costs.
• Costs of notifying vendors, customers or regulatory entities about the loss.
• Credit monitoring services and identity theft protection for customers.

Overall, this coverage can help you minimize your own losses for a cyber liability issue. However, to get protection that can assist others associated with the business, then you need the added benefit of third-party coverage.

Third-Party Cyber Liability Coverage
A third-party cyber liability claim might arise as a result of claims made against your business because of cyber security incidents. Some of the claims that third-party coverage might pay are:

• Privacy lawsuits brought by customers or employees who allege that you were responsible for the data loss.
• Regulatory fines if you have to pay the authorities as a result of the loss.
• Allegations of libel, slander or copyright infringement that arise because of the data breach.
• Claims that allege a breach of contract or negligence on your part.

All in all, this coverage helps you respond to the allegations of others that your cyber security incident harmed them. It’s there to make sure that you can take responsibility for others’ problems, and can help you both shore up your reputation and prove your reliability as a business.