What Does Cyber Insurance Cover?

By Dzhingarov

Cyber-insurance, also known as cyber terrorism insurance, is a specialist lines of insurance dealing with the prevention of losses from cyber attacks, usually from hackers or cyber criminals who use the Internet to try and steal private and financial information. This type of insurance covers a wide range of potential threats, including the possible theft of intellectual property, sabotage of websites, leaking of confidential data through viruses, security breaches and more. The insurance cover protects businesses from these risks and the cost involved in compensating loss can be kept low. This article will discuss some of the different elements of this line of cover and why it is being considered by businesses today.

Cyber Insurance Basics

This type of cover comes with many different levels of coverage depending on what the insurer chooses. A high level of cyber liability insurance usually covers damage incurred due to a cyber attack or data breach. In addition to this it also covers potential negligence charges brought against the business or company if it was found that a cyber attack or data breach had occurred. Most forms of cyber liability insurance don’t cover actual cash damage, only potential losses caused by cyber attacks. Some additional policies however do include specific types of personal or bodily damage that may be claimed if the premises of the business were actually attacked or if a customer’s goods had been damaged as a direct result of the company’s customer negligence.

Policies that cover liability for cyber attacks may also provide coverage for the costs incurred by customers who may have been impacted by these attacks. In order to determine the amount of coverage to provide for these potential customers a risk management analysis needs to be carried out. This is conducted by an independent firm, which is normally hired by the insurance company. This helps the insurer assesses the types of attacks that it is likely to face in the future and therefore the level of liability the company should be prepared to accept.


Different cyber insurance coverage options are available depending on the type of policy that you decide to purchase. Some of these options include: claims for malicious intent, claims for damages for interruption or destruction of work due to attack, claims for negligence or breach of warranty, coverage against errors and omissions, and coverage against acts of terrorism and other similar events. Some policies however only cover claims for actual damages. This means that if the premises of the business were physically damaged or there was an actual cyber attack, then no monetary claim would be covered. A full assessment of the risk of the business occurring in the first place therefore has to be carried out in order to establish the right level of coverage.

Since cyber liability are very different and unrelated things, it is extremely important that the insurer identifies the right mix of risk management criteria in order to determine the risk exposure and price of a policy. Factors such as how prevalent the attacks are, the damage or destruction that may occur and the duration of time that the incidents last are all taken into consideration. In order to get the best value and the lowest price for its customers a great deal of effort goes into the risk management of cyber activities. This is where cyber insurance takes on a greater role and is becoming increasingly popular as a result.

Coverage Types

There are two primary types of cyber coverage that are available to businesses. The first is encryption protection that covers threats against hacking of confidential data. The second type of coverage is digital protection which covers threats including the flooding of networks with malware and viruses. These two forms of protection will vary in their prices and levels of coverage depending upon what the company requires. As well as the cost of these two forms of protection businesses might also have additional measures such as disaster recovery plan to avoid disruption to the business from such events as power cuts, internet outages and others.