What Does Cyber Insurance NOT Cover?

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Net Friends

With internet-based risks steadily increasing, cyber liability insurance has swiftly become a necessity for any modern business. Cyber attacks are expensive with data breach costs reaching $4.24 million in 2021. While it's important to build a strong cybersecurity culture, it's also critical to invest in cybersecurity insurance. Learn more about what's covered under a cyber insurance policy in our companion article.

Companies are increasingly interconnected with a greater reliance on digital and cloud technologies. Concurrently, experts now predict that ransomware attacks will become more frequent and severe. Knowledge is power, so understanding your cyber liability coverage can give you peace of mind. Let's also assess the liability limits of cybersecurity insurance, so you know the full spectrum of your internet-based risks.

What Does Cyber Insurance NOT Cover?

It's always important to review the fine print. Let’s investigate what your cyber insurance policy might not cover:

Professional Liability 

Professional liability insurance safeguards professionals such as physicians, lawyers, and accountants from negligence, malpractice, misrepresentation, and other claims brought by their clients. However, general liability insurance and cyber insurance do not offer coverage in some instances.

Always consult with your insurance broker and be cautious of the fine print on any insurance policy.

For example, if you run a medical practice and your office suffers a data breach, some of your clients’ records will likely get exposed. While having cybersecurity insurance is essential, depending on the details of your coverage and the circumstances around the exposed records, you might face legal exposure to lawsuits that clients bring against you due to the breach.

Customer Losses

Cyber insurance covers the costs of your business’ disruptions, but cyber insurance does not cover those of your customers and clients. Consider a scenario where a logistics business gets hacked, causing a negative impact to their customers’ interconnected systems. In this case, the logistics company's cyber coverage may only apply to the recovery efforts of its own operations, but not to those of its customers. 

Third-Party Losses

Data recovery costs are covered by a cybersecurity insurance policy, but there are some restrictions. The catch is that it only covers first-party or direct impact costs. However, if a third party loses your digital assets, you will have no liability coverage. 

For example, if your company’s network suffers a cyber attack, all your data breach costs are covered by your cyber insurance policy. However, if the IT service provider that maintains your database gets hacked, your policy can’t aid in their recovery of your data.

Therefore, before hiring a Managed Services Provider, always ensure that they have robust cyber insurance coverage. 

Insider Attack

Cyber attacks originate from several sources — including within your organization. Insider attacks are often severe as the perpetrator leverages knowledge of vulnerable areas and may also collaborate with other bad actors.

For instance, an employee with access to customers’ personal identifiable information (PII) and additional sensitive information may steal the data and sell it to a scamming/fraud network. Despite the insidious nature of insider attacks, the resulting breach costs are not covered by your cyber insurance.

System Failure

Your cybersecurity insurance policy is unlikely to cover system failures due to:

— Poor configuration
— Negligence (for example, failure to implement cybersecurity best practices)
— Inadequate maintenance

Net Friends service offerings, such as NetVisor and NetCore, do provide extensive protections for system failures. Customers we support can count on our experts to configure systems properly, leverage best practices to keep them running optimally and securely, and ensure proper maintenance is performed in a timely manner.

Other Areas Not Covered by Cybersecurity Insurance

— System upgrades after a data breach
— Future profits lost due to a breach (such as reputational damage)
— Loss of value from the theft of any intellectual property

RECOMMENDED READING: What Is Cyber Insurance & What Does It Cover?

Secure Cyber Liability Insurance

You can count on Net Friends as the trusted expert and source for "world class"-scored IT services. We can perform an extensive risk assessment that aids you in securing your cyber insurance. Contact us today to ensure a smooth and secure business operation for all situations.

- What Is Cyber Insurance & What Does It Cover?
- Patch Management: What It Is & Why Your Business Needs It
- Top 5 Reasons Why Zero-Touch Provisioning (ZTP) is Critical to Anywhere Operations

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