What is data breach insurance?
Data breach insurance is a type of cybersecurity insurance. It is designed to cover a range of expenses resulting from a data security breach to your business. Data breaches can happen for many reasons. Hackers could gain access to your company’s network and steal your data, shut down your system, or access patents or proprietary documents. Inside your business, employees could lose, or steal company equipment containing confidential information, share passwords, or accidentally send someone sensitive material. Data breach insurance may cover incidents that occur offline, such as failure to dispose properly of printed documents containing private information.
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When do I need to be aware of data breach insurance?
You may consider data breach insurance if your company digitally stores patents, trademarks, or proprietary materials. You may also want data breach insurance if you collect personal information from customers, such as medical history or credit card numbers. Any data loss, however, could be detrimental to your company and you may benefit from data breach insurance to protect your information.
What is important to know about data breach insurance?
Cybersecurity insurance covers two main types of losses: first party and third party. First-party losses are the expenses you pay out if your digital information is compromised. Third-party losses are paid to cover you if someone sues your company for the data breach. Data breach insurance typically refers to first-party losses. First-party losses can include the following expenses:
- You may need to notify customers about your company's data breach; this step is legally required in most states.
- Your company may offer credit monitoring to customers whose credit card information might have been stolen.
- You may incur expenses hiring a public relations company to help with reputation management following a data breach.
- You will need to pay for the cost of business interruption and asset restoration.