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What Is Cyber Liability Insurance?

Cyber Liability Insurance, also called Cyber Insurance, is specialized commercial insurance designed to address certain risks associated with cyberattacks, data breaches, privacy incidents, network security events and other technology-related exposures.

Depending on the policy, cyber insurance may provide first-party coverage, third-party liability coverage, or both.  First-party coverage generally addresses certain losses experienced directly by your business.  Third-party coverage generally addresses certain claims brought against your business by customers, clients, vendors or other parties.

The exact coverage available depends on the insurance company, policy, limits, exclusions, deductibles, conditions and endorsements.  The Federal Trade Commission recommends that businesses considering cyber insurance evaluate whether a policy provides appropriate first-party and third-party protection for their particular risks.

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Why Does Your Business Need Cyber Insurance?

You may think:

"We're a small business. Why would a hacker target us?"

The reality is that a cyber incident doesn't have to involve a major corporation to cause serious disruption.  Your business may store:

• Customer names and contact information
• Payment information
• Financial records
• Employee information
• Tax information
• Health-related information
• Login credentials
• Business contracts
• Proprietary information
• Customer files
• Vendor information
• Intellectual property

Your business may also depend heavily on:

• Email
• Cloud software
• Online banking
• Electronic payments
• Websites
• Customer portals
• Accounting systems
• Payroll systems
• File-sharing platforms
• Remote access
• Mobile devices

A successful cyber incident could therefore affect both your information and your ability to operate.  CISA provides specific cybersecurity guidance for small and medium-sized businesses because smaller organizations can face significant cyber risks while often having fewer resources available for cybersecurity.

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Common Cyber Risks Facing Businesses

Cyber insurance isn't just about hackers breaking into a computer.  Businesses can face many different types of cyber and technology-related incidents.

Ransomware

A criminal gains access to your systems or data and demands payment or other action to restore access.  A ransomware incident can potentially result in:

• System downtime
• Data loss
• Recovery expenses
• Business interruption
• Forensic investigation
• Legal expenses
• Notification obligations
• Reputation concerns

Whether a particular ransomware-related expense is covered depends on the policy.

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Phishing & Business Email Compromise

A seemingly legitimate email can trick an employee into:

• Revealing login credentials
• Opening malicious files
• Transferring funds
• Changing payment information
• Providing sensitive information
• Giving an attacker access to business systems

Some cyber policies may provide coverage for certain forms of fraud or funds-transfer loss, but coverage varies significantly by policy.  Don't assume that every cyber policy automatically covers every type of wire fraud or social-engineering loss.

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Data Breaches

A data breach can occur when unauthorized individuals gain access to sensitive business or customer information.  Depending on the circumstances, responding to a breach may involve:

• Forensic investigation
• Legal counsel
• Customer notification
• Regulatory response
• Public relations
• Credit or identity monitoring
• Data recovery
• Crisis management

The FTC recommends that businesses respond quickly to data breaches, secure affected systems, investigate what happened, determine what information was compromised, and evaluate applicable notification requirements. 

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Malware & Viruses

Malware can disrupt business systems, damage files, steal information or provide unauthorized access to your network.  Cyber insurance may provide certain coverage for covered malware-related incidents, subject to the policy.

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Network Security Incidents

Your business may experience an unauthorized intrusion, security failure or other network event.  Depending on the policy, cyber insurance may provide coverage for certain costs associated with responding to and recovering from a covered incident.

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Cyber Extortion

Cyber criminals may threaten to release information, disrupt systems or otherwise harm a business unless a demand is met.  Some cyber policies provide coverage for certain cyber-extortion expenses.  However, coverage varies, and businesses should carefully review applicable exclusions, conditions and requirements.

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What Can Cyber Liability Insurance Cover?

Every cyber policy is different.  Depending on the policy, cyber insurance may provide coverage for certain expenses associated with:

Data Breach Response

Potential expenses associated with investigating and responding to a covered privacy or security incident.

Legal Expenses

Coverage may be available for certain legal services related to a covered cyber incident.

Forensic Investigation

Specialists may be needed to determine what happened, how an incident occurred and what systems or information were affected.

Customer Notification

A covered breach may require notification to affected individuals or other parties.

Data Recovery

Some policies may help with certain costs associated with restoring or recovering damaged, corrupted or lost data.

Business Interruption

A covered cyber incident may disrupt your ability to operate.  Depending on the policy, business interruption coverage may help address certain lost income or additional expenses resulting from a covered cyber event.

Cyber Extortion

Certain policies may provide coverage for qualifying cyber-extortion events and associated response expenses.

Crisis Management

Some policies may provide access to crisis-management, public-relations or related services following a covered cyber event.

Third-Party Liability

If a covered cyber incident results in a claim by a customer, client, vendor or other third party, the policy may provide certain liability protection.

Regulatory Response

Depending on the policy and applicable law, coverage may be available for certain costs associated with regulatory investigations or proceedings.  The FTC identifies many of these categories—including legal counsel, notification, data recovery, business interruption, crisis management, cyber extortion, forensic services and third-party claims—as potential components of cyber insurance coverage.

Coverage is subject to the actual policy language, limits, exclusions, deductibles, conditions and applicable law.

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First-Party vs. Third-Party Cyber Coverage

One of the most important concepts when evaluating cyber insurance is understanding the difference between first-party and third-party coverage.

First-Party Cyber Coverage

First-party coverage generally addresses certain losses incurred directly by your business following a covered cyber incident.

Potential areas can include:

• Data recovery
• Business interruption
• Incident response
• Forensic investigation
• Legal expenses
• Customer notification
• Crisis management
• Cyber extortion
• Certain fraud-related losses

Think of first-party coverage as:

"What does this cyber incident cost my business?"

Third-Party Cyber Liability Coverage

Third-party coverage generally addresses certain claims made against your business by others following a covered cyber or privacy incident.

Potential claims may involve:

• Customers
• Clients
• Vendors
• Business partners
• Other affected parties

Depending on the policy, coverage may address certain:

• Legal defense costs
• Settlements
• Judgments
• Privacy claims
• Network security claims
• Regulatory proceedings
• Other covered third-party liabilities

Think of third-party coverage as:

"What happens if someone else claims our cyber incident harmed them?"

The FTC and NAIC both identify first-party and third-party coverage as important considerations when evaluating cyber insurance. 

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Businesses That May Need Cyber Liability Insurance

Cyber risk isn't limited to technology companies.  Cyber insurance may be relevant for many businesses, including:

Professional Services

• Accountants
• Bookkeepers
• Consultants
• Attorneys
• Real estate professionals
• Financial services businesses
• Marketing companies

Healthcare-Related Businesses

Businesses that handle sensitive patient or health-related information may have significant privacy and data-security exposures.

Retail Businesses

Retailers may process payment information and maintain customer records.

Contractors

Contractors increasingly rely on email, cloud systems, electronic payments and online project-management platforms.

Property Management Companies

Property managers may handle tenant information, owner information, financial records, payment information and other sensitive data.

Real Estate Businesses

Real estate professionals may handle financial information, identification documents, contracts and other sensitive records.

Government Contractors

Government contractors can face contractual cybersecurity requirements depending on the agency, contract and information involved.

Professional Offices

Medical, accounting, consulting, engineering and other professional offices may rely heavily on digital systems and store sensitive information.

E-Commerce Businesses

Businesses conducting transactions online may have additional technology and payment-related exposures.

Small Businesses

A small business can still experience a significant cyber incident.

You don't have to be a large company to have a cyber liability exposure.

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Cyber Insurance for San Antonio Small Businesses

Small businesses often rely on technology for nearly every part of their operation.  You may use:

Microsoft 365 → QuickBooks → Online Banking → Email → Cloud Storage → Website → CRM → Payroll → Payment Processing

If one of those systems is compromised, the consequences can extend far beyond your computer.  A cyber incident could potentially interrupt operations, expose customer information, create legal obligations and require expensive professional assistance.

Cyber insurance can be one component of a broader risk-management strategy.  CISA recommends that small businesses establish cybersecurity practices around areas such as passwords, multifactor authentication, software updates, backups, incident response and employee training.

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Cyber Liability Insurance For Government Contractors

Government contractors should pay particular attention to cyber risk.  Depending on the contract and the information being handled, a contractor may have contractual or regulatory cybersecurity requirements.

Insurance requirements can also be included in contracts or subcontracts.  If you're pursuing government contracts, don't wait until after you receive an award to discover that your contract requires specific insurance or cybersecurity protections.

Sams One Stop/Sams Insurance Group also provides government contracting consulting services, giving us a broader perspective when insurance requirements intersect with contracting requirements.

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What Cyber Insurance May Not Cover

Cyber insurance is important, but it isn't a substitute for cybersecurity.  Policies can contain significant exclusions and conditions.  Depending on the policy, coverage may be limited or excluded for:

• Known security vulnerabilities
• Certain unencrypted data
• Intentional acts
• Certain infrastructure failures
• Certain contractual liabilities
• Certain regulatory penalties
• Losses outside the policy's defined cyber events
• Certain fraudulent transfers
• Certain acts of employees or insiders
• Failure to comply with policy security requirements

This is why reading the policy and understanding its conditions is critical.

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Cybersecurity Is Important.

Insurance Is Only One Part of the Plan.

Cyber insurance should complement—not replace—good cybersecurity practices.  Businesses should consider:

Use Multifactor Authentication

Require more than a password for important accounts.

Keep Systems Updated

Install security and software updates promptly.

Back Up Critical Data

Maintain reliable backups and understand how to restore them.

Train Employees

Employees should understand phishing, suspicious links, password security and other common cyber threats.

Limit Access

Employees and vendors should only have access to the information and systems they need.

Have an Incident Response Plan

Know who your business will contact if a cyber incident occurs.  The FTC and CISA both recommend these types of preventive and response measures for small businesses.

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Our Cyber Liability Insurance Process

Step 1 — Tell Us About Your Business

We'll ask about your business operations, technology use, data, customers, revenue and existing insurance.

Step 2 — Identify Your Cyber Exposures

We'll consider the types of cyber risks that may be relevant to your business.

Step 3 — Review Available Options

We'll help you evaluate available cyber insurance options, limits, deductibles and coverage features.

Step 4 — Choose Your Coverage

Once you've reviewed the available options, you can decide how you want to manage your cyber risk.

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Why Work With Us

Insurance + Business + Real Estate Experience

Sams One Stop/Sams Insurance Group provides more than insurance services.  Our broader services include:

• Insurance & bonds
• Real estate support
• Property management support
• Loan servicing
• Business consulting
• Government contracting consulting

That broader experience can be useful when cyber insurance intersects with:

Real Estate → Business Operations → Property Management → Government Contracts → Professional Services

Our goal is to understand what your business actually does rather than simply selling you a generic insurance product.

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Get a Cyber Liability Insurance Quote

Don't Wait Until After a Cyberattack to Think About Cyber Insurance

Your business depends on technology.  Your customers trust you with their information.  Your employees depend on your systems to do their jobs.  And your revenue may depend on your ability to keep those systems operating.

Cyber Liability Insurance can be an important component of your overall business risk-management strategy.

REQUEST A CYBER LIABILITY INSURANCE QUOTE

Sams One Stop/Sams Insurance Group

San Antonio, Texas

Phone: (210) 788-1034
Email: aaron@samsonestop.com

Serving qualifying businesses in San Antonio and throughout Texas, subject to insurance-carrier availability, eligibility and underwriting.