Understanding Cyber Insurance: What’s Protected and What’s Not

Learn what does cyber insurance cover, its benefits, exclusions, and how to choose the right policy to protect your business. Read now!

The Importance of Cyber Insurance for Your Business

As cyber threats become more sophisticated, understanding what does cyber insurance cover is crucial for protecting your business from financial and reputational damage. At a glance, cyber insurance can help safeguard your business by covering:

  • Data breaches
  • Cyberattacks
  • Legal expenses
  • Crisis management

In today’s digital age, cyber threats are almost as certain as death and taxes. Businesses of all sizes, from local shops to multinational corporations, are vulnerable to attacks that can disrupt operations, steal sensitive information, and erode customer trust. For example, when Sony’s PlayStation Network was hacked in 2011, the damage exceeded $171 million, showcasing the undeniable impact a cyberattack can have on a company’s bottom line and reputation.

Cyber insurance is increasingly viewed as a necessary investment for businesses to mitigate these risks. Similar to how you’d insure against physical threats like fires or floods, cyber insurance helps cover the costs associated with the aftermath of a security incident, including remediation efforts and legal liabilities.

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I’m Griff Harris, CIC, with over two decades of experience in insurance. I’ve seen the financial fallout from cyber incidents and the vital role cyber insurance plays in recovery. Let’s delve into what this crucial coverage entails and how it can protect your business from unforeseen cyber threats.

What Does Cyber Insurance Cover?

Cyber insurance is a critical safeguard against the financial and operational fallout from cyber incidents. But what does cyber insurance cover exactly? Let’s break it down.

Types of Cyber Insurance

  1. First-Party Coverage
  2. Third-Party Coverage

First-party coverage protects your business directly, while third-party coverage protects you against claims from others affected by your cyber incident. Let’s explore these in more detail.

First-Party Coverage

First-party cyber coverage protects your business’s own data and operations. Here’s what it typically includes:

  • Data Breaches: Covers costs related to data theft, such as legal counsel, data recovery, and customer notification services.
  • Cyberattacks: Includes costs for restoring or replacing data and systems after an attack.
  • Lost Income: Compensates for business interruption and lost revenue due to a cyber event.
  • Crisis Management: Funds public relations efforts to manage the fallout and protect your business reputation.
  • Cyber Extortion and Fraud: Covers ransom payments and related costs if your data is held hostage.
  • Forensic Services: Pays for investigation services to determine the cause and scope of a breach.
  • Fees, Fines, and Penalties: Addresses regulatory fines and penalties related to the cyber incident.

Third-Party Coverage

Third-party cyber coverage protects you from legal liabilities if others are affected by your cyber incident. This typically includes:

  • Legal Expenses: Covers costs for defending against lawsuits or regulatory investigations.
  • Claims and Settlements: Pays for settlements or judgments if consumers sue you for data breaches.
  • Defamation and Copyright Infringement: Addresses claims related to defamation or intellectual property violations.
  • Litigation Costs: Funds legal fees and court costs associated with cyber-related lawsuits.
  • Accounting Costs: Covers costs for accounting services needed to sort out financial impacts of the breach.

Common Covered Scenarios

Cyber insurance policies are designed to cover a variety of cyber incidents. Here are some common scenarios:

  1. Hacking: If hackers infiltrate your system, cyber insurance can cover the costs of stopping the attack, recovering data, and notifying affected parties.
  2. Data Extortion: If criminals demand a ransom to return stolen data, your policy can help cover the ransom and related expenses.
  3. Identity Theft: Covers costs associated with identity theft resulting from a data breach.
  4. System Restoration: Pays for restoring or replacing IT systems damaged by cyberattacks.

Cyber Liability and Data Breach Insurance

Cyber liability insurance is more comprehensive and typically meant for larger businesses. It covers a wide range of cyber threats and their financial impacts, including privacy investigations and lawsuits.

Data breach insurance, on the other hand, is often sufficient for smaller businesses. It focuses on helping you respond to data breaches, including notifying affected customers and managing public relations.

Errors and Omissions Insurance

Errors and omissions (E&O) insurance covers damages caused by mistakes in your technology products or services. For instance, if your software causes a client’s system outage, E&O insurance can cover the resulting claims.

Property Insurance

While not specifically for cyber incidents, traditional property insurance can sometimes overlap with cyber coverage, but it generally doesn’t cover the specific risks associated with cyberattacks.

Understanding these types of coverage and common scenarios helps you see how cyber insurance can protect your business from a wide range of cyber threats. Next, we’ll look at what cyber insurance typically excludes and why robust cybersecurity measures are essential.

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What is Excluded from Cyber Insurance?

Understanding Policy Exclusions

When it comes to what does cyber insurance cover, it’s equally important to know what it doesn’t cover. Let’s dive into some common exclusions to help you better understand the limits of your policy.

Preventable Issues: Cyber insurance often excludes incidents that could have been prevented with reasonable security measures. If your company fails to patch known vulnerabilities or neglects basic cybersecurity practices, your claim might be denied.

Human Error and Negligence: Mistakes happen, but not all are covered. If a data breach occurs because an employee clicked on a phishing link or used a weak password, your policy may not cover the resulting damages. For example, if an employee accidentally exposes sensitive data by misconfiguring a server, the insurance might not cover the costs.

Fines and Penalties: Regulatory fines and penalties are typically excluded from cyber insurance. This includes fines from bodies like the Office for Civil Rights for HIPAA violations. However, some policies offer limited coverage for these expenses, so it’s crucial to read the fine print.

Criminal Penalties and Sanctions: If your organization faces criminal penalties or sanctions due to a cyber incident, don’t expect your insurance to cover these costs. These are seen as punitive measures and are generally excluded from coverage.

Importance of Robust Cybersecurity Measures

While cyber insurance provides a safety net, it shouldn’t be your first line of defense. Robust cybersecurity measures are essential for reducing your risk and ensuring that you qualify for better coverage.

Risk Management: Effective risk management involves identifying potential threats and implementing strategies to mitigate them. This includes regular security audits and employee training to recognize phishing attempts.

Security Technology: Investing in advanced security technologies like firewalls, intrusion detection systems, and encryption can significantly reduce the risk of a cyber incident. For instance, using multifactor authentication (MFA) can block most account-compromising attacks.

Preventative Strategies: Proactive measures such as regular software updates, vulnerability scans, and incident response planning are crucial. These strategies not only protect your data but also make your business a more attractive candidate for cyber insurance.

By understanding these exclusions and the importance of robust cybersecurity measures, you can better protect your business and make the most out of your cyber insurance policy. Next, we’ll explore the benefits of cyber security insurance and how it supports your business.

Benefits of Cyber Security Insurance

How Cyber Insurance Supports Businesses

Financial Security: One of the main benefits of cyber insurance is financial protection. When a cyberattack occurs, the costs can be overwhelming. From hiring forensic experts to identify the breach to paying legal fees and offering customer refunds, expenses can quickly add up. Cyber insurance helps cover these costs, ensuring your business can recover without a significant financial hit.

Trust Building: Having cyber insurance can enhance your company’s reputation. Clients and partners will see that you are committed to protecting their data and prepared for potential cyber threats. This commitment can build trust and strengthen business relationships.

Data Protection: Cyber insurance policies often include coverage for data restoration and recovery. This means that if your data is compromised or destroyed, the policy can help cover the costs of restoring it. This is crucial for maintaining business operations and protecting sensitive information.

Client Confidence: Knowing that your business is insured against cyber threats can increase client confidence. Customers are more likely to trust a company that takes data protection seriously and has measures in place to handle potential breaches.

Loss Mitigation: Cyber insurance isn’t just about covering costs after an incident. It often includes access to experts who can help mitigate losses. For example, some policies provide access to cybersecurity professionals who can offer guidance on improving your security posture and preventing future attacks.

Reputation Management: A cyberattack can damage your business’s reputation. Cyber insurance can help cover the costs of crisis management, including public relations efforts to restore your brand’s image. This can be vital in maintaining customer trust and loyalty.

Operational Continuity: Cyber insurance can help ensure that your business operations continue smoothly after a cyber incident. This includes covering the costs of business interruption and helping you get back to normal operations as quickly as possible.

Cyber Insurance as Part of Comprehensive Risk Management

Integration with Security Plans: Cyber insurance should be part of a broader risk management strategy. This means integrating your insurance policy with your existing cybersecurity measures. Regularly updating your security protocols and training employees can make your business more resilient and potentially lower your insurance premiums.

Complementary to Cybersecurity Efforts: Cyber insurance is not a replacement for strong cybersecurity practices. Instead, it complements these efforts. By combining robust security measures with a comprehensive insurance policy, you can better protect your business from the financial and reputational impacts of cyber threats.

In the next section, we’ll discuss how to choose the right cyber insurance policy and the factors that influence its cost.

How to Choose the Right Cyber Insurance Policy

Choosing the right cyber insurance policy can be tricky, but it’s crucial for protecting your business from cyber threats. Here’s what you need to know:

Assessment of Needs

First, assess your needs. Understand what kind of data you handle and what risks you face. Do you store customer credit card information? Do you have sensitive employee data? This will help you decide on the type of coverage you need.

Comparison of Providers

Next, compare providers. Not all insurance companies offer the same coverage. Look for policies that cover your specific risks. Some providers offer additional perks like access to cybersecurity experts or breach response hotlines. For example, Travelers eRiskHub offers a web-based portal with technical resources to help prevent and respond to cyber events.

Understanding Terms and Conditions

Read the fine print. Make sure you understand the terms and conditions of each policy. What is covered? What is excluded? Some policies might exclude issues caused by human error or negligence. Be clear on what you’re getting.

Factors Influencing Cyber Insurance Costs

Several factors can influence the cost of your cyber insurance:

  • Revenue: Higher revenue often means higher premiums.
  • Industry: Some industries, like finance or healthcare, face higher risks and, therefore, higher costs.
  • Security Posture: Strong security measures can lower your premiums. Insurers might require a security audit or documentation from an assessment tool.
  • Claims History: If you’ve had previous claims, your premiums might be higher.

Griffith & Harris Insurance Services

At Griffith & Harris Insurance Services, we offer expert guidance and tailored insurance solutions to meet your unique needs. Our custom “Personal Risk Management Planning” (PRMP) process ensures all elements of risk and exposure are addressed long before a claim ever occurs.

Our team of knowledgeable agents, with over 10 years of experience each, is committed to providing superior expertise and responsive service. We strive to protect your assets and ensure that unforeseen circumstances will never jeopardize your legacy.

By understanding your specific needs and comparing different providers, you can find the right cyber insurance policy to safeguard your business from cyber threats.

Next, we’ll explore the benefits of cyber security insurance and how it supports businesses.

Frequently Asked Questions about Cyber Insurance

What does cyber insurance actually cover?

Cyber insurance can provide a safety net for your business in the event of a cyber incident. Here are the primary areas covered:

  • First-party coverage: This includes losses directly affecting your business, such as data destruction, hacking, data extortion, and data theft. It can also cover legal expenses and related costs.
  • Third-party coverage: This covers losses suffered by others due to a cyber event related to your business. For example, if a data breach exposes customer information, this coverage can help with the resulting claims.
  • Data breaches: Insurance can cover costs related to the investigation, crisis communication, legal services, and customer notifications.
  • Cyberattacks: Coverage extends to restoring or recreating data, as well as system restoration.
  • Legal expenses: Cyber insurance often includes legal support to navigate the complex legal landscape after a cyber incident.

What are the real benefits of cyber security insurance?

Cyber insurance offers several key benefits:

  • Financial security: It helps cover the costs of investigations, credit monitoring services, legal responsibilities, and other expenses related to data breaches.
  • Trust building: Having cyber insurance shows your commitment to protecting client data, which can boost your reputation and build trust with customers and partners.
  • Operational continuity: Insurance can provide compensation for business interruption, loss of revenue, and computer system restoration, ensuring your business can continue operating smoothly after an incident.
  • Peace of mind: Knowing you have financial protection in place allows you to focus on your core business without constantly worrying about potential cyber threats.

What is typically excluded from cyber insurance coverage?

While cyber insurance covers many areas, there are some exclusions to be aware of:

  • Preventable issues: Incidents that could have been avoided with proper security measures are often not covered.
  • Human error or negligence: If the cyber incident is due to an employee’s mistake or lack of action, it may not be covered.
  • Regulatory fines and criminal penalties: Fines and penalties imposed by regulatory bodies or as a result of criminal actions are usually excluded.
  • Sanctions: Any incidents resulting from sanctioned activities or entities are not covered.

Understanding these exclusions is crucial for ensuring your business is fully protected. Invest in robust cybersecurity measures to complement your cyber insurance policy and minimize the risk of uncovered incidents.

Next, we’ll explore the benefits of cyber security insurance and how it supports businesses.



Cyber threats are a significant concern for businesses of all sizes. Cyber insurance can help protect your business from the financial fallout of data breaches, cyberattacks, and other internet-based threats. Understanding what does cyber insurance cover is critical to ensure you have the right protections in place. Coverage typically includes first-party expenses like data recovery, legal counsel, and business interruption costs, as well as third-party liabilities such as payments to affected consumers and litigation costs.

Importance of Coverage

Cyber insurance is not just a safety net; it’s a strategic asset. It helps businesses navigate the complexities of cyber incidents, providing financial support and crisis management when you need it most. With cyber threats evolving constantly, having a comprehensive policy can mean the difference between a quick recovery and a prolonged crisis. This protection is essential for maintaining trust with your customers and ensuring the continuity of your operations.

Call to Action for Policy Review

Is your business adequately protected against cyber threats? Now is the time to review your insurance policies and ensure you have the right coverage. At Griffith & Harris, we specialize in tailored cyber insurance solutions designed to meet your unique needs.

Contact us today for a free consultation and safeguard your business against the unexpected.

Invest in your peace of mind and protect your legacy with Griffith & Harris.

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