A single business’s computer networks can touch countless people, not just those who work there. Clients, vendors, employees and even investors might have information stored on these systems. This is why, if a problem occurs that damages data, a business owner has to respond not only for their own sake, but also for the sake of others. The source of protection for such losses usually is cyber liability insurance. Cyber liability policies usually divide into two types of coverage: first-party and third-party protection. Here’s how agents should explain each component to their clients. 

How Cyber Liability Insurance Works 

Suppose that a massive data failure causes your insurance agency to lose thousands of valuable records. Or, what if a ransomware attack occurs, and a hacker holds your data hostage and demands payment to release such information. Not only could your business data be gone, but so to could be the important personal information of clients, like credit card and social security information. 

In these cases, you have to respond appropriately. Ideally, you’ll want to recover lost data and restore the system with minimal hassle. However, such simple actions might be costly. More-complicated losses might lead to heavier demands, such as identity theft protection for your clients. Cyber liability insurance can usually offer incentives to help your business recover. 

Any business, from insurance agencies to clothing stores and restaurants might need this coverage. It contains the resources to help business owners cover these lost costs. However, whether a business needs to use third-party, first-party or both types of coverage depends. 

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First-Party Coverage 

First-party coverage applies to the insured business itself. So, if a company becomes the victim of an event like a hack, virus or natural disaster, first-party protection will apply to the money the business might have to spend during the recovery. Coverage might help them: 

  • Pay to repair or restore computer systems​
  • Recover money lost to ransomware​
  • Afford PR services to help notify customers and the authorities​
  • Offer affected customers identity theft or credit monitoring ​
  • Recover income lost in the shutdown​

Simply put, coverage will make sure your business can afford its own recovery costs of these losses. 

Third-Party Coverage 

Think of third-party coverage like a traditional general liability policy. For example, if a business damages someone else’s belongings, then property damage liability insurance pays that party for their losses, 

So, if a business is in charge of someone else’s data, this coverage can ensure they can repay the other party if something happens to data. Third-party coverage typically applies most to businesses like IT consultants or data hosting businesses. If a mistake causes the loss of another business’s data that the business hosts, this coverage can repay the affected clients. 

Most cyber liability policies offer bot first- and third-party liability coverage. Therefore, work with your clients to set up the appropriate coverage limits for their operational needs.