Not all cyber insurance is created equal: Pay close attention to cyber insurance policy exclusion
What Does Cyber Liability Insurance Cover?
Cyber insurance can protect against a myriad of situations and are usually custom-designed for your business. Every insurance carrier has their own set of coverage and exclusions.
A cyber liability policy defends your business if it is attacked and sensitive information is compromised.
Most cyber policies have two layers - first-party and third-party. A first-party attack is on your businesses computers or systems, while a third-party attack is directed your client, partner, or vendor system (if you are hosting or are responsible for maintaining their data).
Cyber Insurance Is Not a One-Size-Fits-All Approach
Not all cyber insurance policies are created equal. Long View’s vCISO Services have seen insurers include a number of cyber insurance policy exclusions recently, underscoring the pitfalls of a one-size-fits-all approach.
One of the most common exclusions in cyber insurance policies is the prior knowledge exclusion. This typically states that coverage will not apply to incidents that were known or reasonably foreseeable by the insured prior to the policy's inception.
In other words, if your business was aware of a vulnerability or ongoing cyber-attack before purchasing a policy, any claims arising from that issue may not be covered.
The only clear-cut way to avoid this exclusion is to disclose any known risks or incidents to your insurer before obtaining coverage.
Unencrypted Data Exclusion
Nowadays, cyber insurers require businesses to implement reasonable security measures, including data encryption, to qualify for coverage. If your business experiences a data breach involving unencrypted data, your insurer may deny the claim based on this exclusion.
To minimize the risk of having your claim denied, ensure your business follows best practices for data encryption and other security measures.
Contractual Liability Exclusion
Contractual liability exclusions may limit or exclude coverage for losses arising from your business' contractual obligations, such as indemnity clauses in contracts with vendors or clients.
As a result, if your business experiences a cyber incident that impacts a third-party with whom you have a contractual relationship, you may not be covered for the resulting damages.
Again, review your policy’s contractual liability exclusion carefully and consider negotiating more favorable terms with your insurer or obtaining additional coverage to address this risk.
Understanding cyber insurance policy exclusions is crucial for businesses seeking to protect themselves from potential cyber threats. By being aware of these exclusions, you can work with your insurance broker to tailor a policy that meets your unique needs and provides comprehensive coverage. Long View vCISO Services recommends you regularly review and update your cyber insurance policy alongside your organization cyber security policies to ensure it remains current with evolving risks and industry best practices.
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