With digitisation in the country, it has created an increasing importance of cyber insurance. As more and more data is being transmitted online, there is a need for the protection of this data. The data involves personal information, as well as financial data, which in the wrong set of hands can lead to huge financial losses.
A cyber insurance policy is a safety net that ensures protection to the individual or company from a cybersecurity breach. Using this insurance cover, financial losses can be covered for cyber risks. This policy offers two types of cyber insurance coverage – first-party and third-party coverage. Let us look at them and the types of events that are covered under each of them.
As the name suggests, this coverage provides an insurance cover to the policyholder, i.e. you. Since the insurance policy is a contract between the insurer and the policyholder, the coverage extends the scope to these events. Here are some categories of events classified as first-party coverage.
Damage to electronic data: The cost to replace or restore the data or the programs destroyed due to data breach are covered under this kind. Further, take note that the loss must result from an event that is covered under your policy’s scope like a hacker attack, virus, or more. Further, the cyber insurance policy includes the cost of hiring professionals to restore the data in the security breach.
Loss of income and ancillary expenses: Any loss of income suffered by the individual or the organisation is also covered by the insurance cover. Also, ancillary expenses that might be incurred to recover the data are included too. Please note that this feature is not provided by every company and it is recommended to review the terms and conditions as well as confer with your insurance provider to confirminclusion of the same.
Cyber extortion: First-party coverage is also offered in the event of cyber extortion wherein the hacker breaches the security to get access to data that can be sensitive. The first party coverage of your cyber insurance policy extends to reimburse any payments made by the policyholder against the extortion demands too.
Damage to reputation: When a data breach occurs, reputation is damage is an added loss that occurs in the case of large multinational corporations. Any public relation activity done to protect against the damage is covered under the coverage known as crisis management.
Third-party claims are where neither the insured individual nor the insurance company claims losses. It is also called a liability claim. When a data breach occurs, the person whose data has been compromised may make a claim for insurance against you. In such cases, third-party coverage comes handy. Here are some areas covered by this type of cyber insurance coverage.
Network security and privacy liability: Negligence, errors, or omissions can result in the compromise of data. At such times, claims can be made against you for damages that can be covered under a third-party cyber insurance cover.
Electronic media liability: Any data published by the policyholder of some other person leading to invasion of privacy, copyright infringement, domain name infringement, etc are covered under electronic media liability.
Regulatory proceedings: Lastly, any penalties imposed on the policyholder by regulatory bodies are included under third-party insurance cover.
These are some ways how first-party and third-party coverage of a cyber insurance plan helps you protect against financial losses. Thus, take time and invest in a cyber insurance plan while thoroughly understanding what is cyber insurance and how it protects you.
All the above mentioned covers differ for every insurance provider and are based on their terms and conditions.