Cyber insurance is a modern form of cover to protect your business from financial losses resulting from data breaches or hacks. What does cyber insurance not cover? Keeping yourself informed about common exclusion of cyber insurance becomes crucial before buying a policy.

The simplest reason is that claiming something that is not covered by your insurer will end up with rejection. Each insurance provider may have different policies, so it is important to assess what is not covered by your insurer such as injuries, wars, loss of electronic devices, and so forth.

What Is Cyber Insurance?

What Is Cyber Insurance?

Cyber insurance is an insurance product to protect your business from internet-based risks or risks relating to network systems, such as cyberattacks, hacks, data breaches, and many others. Cyber insurance is also known as cyber liability insurance.

The increasing number of cybercrimes makes cyber insurance a must-have for enterprises. The higher risks of ransomware and other types of cybersecurity issues can pose financial losses and damages to your business as you have to be responsible for stolen sensitive information.

Cyber insurance helps limit and minimize the company’s liability to pay for damages resulted from a cyberattack, preventing your business from catastrophic financial losses. This is why many businesses, especially large ones, purchase a cyber insurance policy to mitigate cyber risk.

Who Needs Cyber Insurance?

Is cyber insurance designed for anyone? This insurance product is designed for any organization that mainly uses the internet to run their businesses. If you create, store, and manage electronic data online, it is highly recommended to buy a cyber insurance policy.

Sensitive information of the customers like sales records, contact numbers, and credit card numbers are the main target for hackers. This is why e-commerce businesses can benefit from cyber insurance to prevent unfortunate events caused by cyber-attacks or ransomware.

What Aren’t Covered by Cyber Insurance?

Despite the protection it offers, cyber insurance is not designed to cover everything in your business.  What does cyber insurance not cover? Generally speaking, the coverage of your cyber insurance policy depends on your type of insurance. However, most of them do not cover the following things:

1. Profit Loss

Profit Loss

Most cyber insurance policies will cover operation losses resulted from a business interruption but not lost profits. That means your insurer does not compensate for potential profits you might get during the interruption.

Each insurance provider may have a different period for loss coverage between 1 and 12 hours. Any losses outside this waiting period will not be covered, so you have to work fast to recover the compromised system.

2. Injury and Property Damage

Injury and Property Damage

Nowadays, the internet connects to physical objects, and in the event of cyberattacks, it can cause injury or property damage. Unfortunately, cyber insurance does not cover this type of damage and the business must rely on their own policy for the compensation.

Although cyberattacks rarely cause bodily injury and physical damage, it is worth noting that this unfortunate event won’t be covered by cyber insurance. That means your business must have another option to minimize the liability.

3. Software and Hardware

Software and Hardware

What does cyber insurance not cover? In addition to profit loss and injury, cyber insurance will not cover property damage including your computer, technology equipment, and other hardware items. If a cyberattack causes damage to your hardware and it is unfixable, you have to purchase a new one.

Most cyber insurance policies do not cover new software, too. They are likely to restore software to the version prior to the attack, which potentially lets your business cover the depreciation costs.

4. Lost Equipment

Lost Equipment

Another exclusion of cyber insurance coverage is lost equipment. Many insurance providers will not cover your lost laptop or computer, which means your business needs to spend extra costs for it. However, some insurance companies may compensate your lost device only if it is encrypted.

Whether or not lost equipment is excluded from insurance coverage heavily depends on your policy. Learn your cyber insurance policy and ask your insurer if they cover lost devices due to cybercrime.

5. Damaged Business Reputation

Damaged Business Reputation

Damaged reputation may be difficult to quantify but the effect is significant to the future of your business. Your potential customers may question your business credibility and security system to protect their sensitive information, which potentially harms their trust.

Unluckily, most cyber insurance policies do not cover your reputation damage. They also will not compensate your cost of repairing the damage, leaving the companies struggling on their own.

6. Cost for Technology System Improvement

Cost for Technology System Improvement

What does cyber insurance not cover but your company actually needs? It may be technology and system improvement. A lot of cases of cybercrime is caused by obsolete technology and weak security system, including outdated applications.

However, your cyber insurance provider will not cover your overall costs to improve the company’s technology and security systems. So, if you want to strengthen the security system, it should come from your company’s budget.

7. Cyber Events Caused by Employees

Cyber Events Caused by Employees

After a cyber incident occurred and you file a claim, your insurer will likely investigate. If they find out that the event is initiated or caused by insiders or your employees, they will deny the claim, and the damages will not be covered.

8. Cyber Attack Caused by War

Cyber Attack Caused by War

Most cyber insurance policies do not cover damages caused by invasions or wars. In case a civil war, riots, or invasions occur and cause financial loss or property damages to your network systems, your insurer will be unlikely to compensate your losses.

9. Weak Security

Weak Security

Businesses with a weak security system is a potential target for hackers. If your insurance provider finds that the cybercrime is caused by a lack of security measures, the claim might be denied. Some policies exclude weak security from their coverage, so be sure you know it before purchasing.

The threats of cyber-attacks are on the rise. Cyber insurance is considered an effective solution to minimize and limit the losses caused by cybercrime. What does cyber insurance not cover? Businesses must be aware of the coverage of their policy to plan the worst scenario in the event of cyberattacks.

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