The insurance claim must meet several conditions for any insurance company to compensate for a loss. First, the loss must be a result of a covered peril. Second, the peril must be entirely accidental, meaning intentional acts will be excluded. Also, the insurer will only pay up to the limits stipulated in the insurance policy.
All these conditions apply to most insurance policies, including cyber insurance coverage. However, terms vary from one policy to another and from one insurance company to another.
Read to learn about all the important elements of a typical cyber insurance policy.
Cyber insurance typically pays for the financial losses from cyberattacks and other cyber-related criminal activities. This coverage is crucial considering the increased rate of cyberattacks in the U.S. today. To give you an idea, every 39 seconds, a hacker attempts to break into a digital system. Worse still, small and medium-sized businesses in the U.S. lose up to $200,000 per year to cyber criminals.
This shows just how dire the situation is, which is why you need cyber insurance coverage. It’s worth noting that cyber insurance does not safeguard your business from cyberattacks. Instead, it provides a soft landing in case a hacker attacks your system, stealing data or money from you. Cyber insurance coverage pays for liability costs such as defense and compensation costs. Some policies also pay for the costs of data recovery.
As mentioned earlier, insurance companies only compensate for the perils listed in the insurance policy. Even so, it would be best to dig deeper to understand the policy terms for the covered perils. Spoofing attacks usually lead to cyber insurance coverage disputes.
For instance, one company recently lost nearly $6 million to hackers through an email spoofing attack. Upon filing a claim, the insurance company denied it, claiming that the policy excluded financial losses from criminal or fraudulent activities. The insured argued that while this exclusion was there, it only applied to losses caused by in-house criminal activities.
For example, if the insured’s employee hacked the system and stole the $5.9 million, it would make sense if the insurer denied the claim. Since the spoofing attack came from a third party, the insurance carrier had the mandate to compensate fully, as per the insured.
In this case, the insurance provider only offered to pay for the defense costs in the lawsuit. This is despite the insured seeking settlement payment and coverage of indemnity costs emerging from the lawsuit. Clearly, the insured expected more from the insurance company and ended up disappointed.
To avoid such a situation in your business, ensure you fully understand your cyber insurance policy. Understand the inclusions, exclusions, and limits in your policy.
To avoid potential insurance coverage disputes, you should read and understand the terms of your cyber insurance policy. Are you in need of the right cyber insurance coverage? The experts at CF&P Insurance Brokers are ready to assist you with any questions about cyber liability insurance. Contact us today to get a personalized quote.