Cyber Insurance – Third-party Coverage

Cyber incidents, such as data breaches, phishing scams and ransomware attacks, can have dire ramifications for your organization.

The slightest vulnerability in cybersecurity measures or a momentary lapse in judgment by an employee could impose significant financial and reputational consequences.

These incidents may be particularly damaging should they involve third parties, such as clients or customers, who have entrusted you with securing their data.

Fortunately, cyber insurance that includes third-party coverage can provide financial security and peace of mind.

What Is Third-party Cyber Coverage?

Cyber insurance can typically consist of two primary components: first-party coverage and third-party coverage. The former is focused on providing financial relief for a policyholder’s own losses arising from a cyber incident, such as business interruption costs and hiring a public relations team.

Meanwhile, the latter provides financial protections focused on incidents affecting other parties, such as the following:

• Data breach liability coverage may provide financial aid if a cybercriminal or unauthorized party accesses a third party’s confidential information.
• Network security liability coverage can help manage fiscal ramifications should a policyholder’s network security fail, allowing malware infections or other issues that affect third parties.
• Fines and penalties coverage may offer financial relief should cyber incidents impacting third parties involve violations of data privacy rules or regulations.

Third-party cyber coverage can offer financial protection from both the direct costs and losses associated with cyber incidents affecting others, as well as the following legal costs should a lawsuit be filed:

• Attorney fees
• Settlements
• Court-ordered judgments
• Witness fees
• Docket fees

Who Needs Third-party Cyber Coverage?

Given the rising dependence on digital solutions and online technology, most businesses can likely find significant value in comprehensive cyber insurance, including third-party coverage.

Companies that store, transmit or otherwise work with clients’ sensitive or confidential information, or that are entrusted with providing cybersecurity services, may be in particular need of robust coverage. If you are part of one of the following sectors, third-party cyber insurance may be paramount:

• IT consultants—If your business is relied on to provide IT services, even a slight error or omission could incur significant losses.
• Network security professionals—Should a client entrust your company to secure their network, shortcomings could lead to costly lawsuits.
• Health care services—Members of the health care industry work with private medical information and cyber incidents could incur significant penalties, such as those arising from violations of the Health Insurance Portability and Accountability Act.
• Financial services—Banks, brokers and other members of the finance sector inherently work with significant amounts of sensitive data, making them tempting targets for cybercriminals.
• Retail businesses—These businesses often store and work with private customer information, such as credit and debit card numbers. As such, potential data breaches could incur significant consequences.

We’re Here to Help

At V Financial, LLC, our dedicated team of knowledgeable professionals is standing by to assist your business with its coverage needs. Visit our website or call 847-221-8446 to learn more.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.