Almost every day there is something new to be reported on cyber security risks and data hygiene exposures. Financial institutions, social media platforms, political campaigns, or the shop around the corner are all susceptible to data breaches and cyber risks now more than ever. In fact, stocks are soaring for companies who provide coverage against such risks as cyber attacks become more and more common. As the landscape continues to grow and evolve, insurance companies are working hard to reduce exposure for commercial and independent clients.
However, the seeds of confusion continue to be sown, especially when it comes to choosing the right insurance coverage for cyber losses. For companies of all sizes and industries, there has to be an understanding of the value of first-party vs third-party cyber insurance in order to protect against as much possible.
Some insurance carriers put a focus on selling first-party cyber coverage, and some who represent more tech-driven companies, like software companies, tout third-party coverage more aggressively. To avoid any more confusion and to better understand what is better suited for your company or operation, let’s take a look at the two types of coverage.
First-party cyber liability coverage refers to the kind of insurance most non-tech firms go for. This coverage is more than likely adequate for companies to protect against everyday risks, including some data breaches. When a data breach occurs, companies file a claim with their first-party cyber risk policy carrier.
A comprehensive policy can be created to cover the costs of:
- Recouping lost data and records management
- Notifying those affected by a breach
- Providing identity theft protection
- Offering credit monitoring
- Managing brand damage
- Updating systems
A third-party cyber risk insurance policy is designed for individuals and businesses responsible for the systems that allowed a cyber attack or data breach to occur. Third-party insurance protects tech-focused companies, like software firms and tech startups, as well as independent contractors who are responsible for the management of the network that was attacked.
An IT company’s optimal cyber risk insurance policy should include both first- and third-party coverage for IT and tech firms, as they can be exposed to the same risks. Make sure to understand the difference between the two policies and attach the right one to your company. Knowing what you have at risk and what can be exposed will help to plan for the right coverage.
About Financial Guaranty Insurance Brokers
Since 1983, Financial Guaranty Insurance Brokers has distinguished itself as a provider of Professional Liability, Cyber Liability, and Crime insurance products for entities of all types. To receive timely, personalized service from a knowledgeable and experienced staff, call us today at (626) 793-3330 to speak with one of our professionals.