Third party cyber liability insurance refers to policies that cover costs associated when others are affected by an online attack on your company.
The law requires businesses to notify individuals impacted by a data breach that might expose personally identifiable information. Some states mandate that an entity pays for a year of credit monitoring, too. This type of policy helps safeguard a company from the expenses related to contacting and protecting clients, vendors or partners involved with the business.
Customers might sue a business if they experience a loss resulting from the cyber attack. Third party cyber liability policies help cover attorney fees, court costs, settlements and judgments. When large companies file these lawsuits, they usually name every party that worked on the compromised system, including freelancers and independent contractors.
Lawsuits might result from the following events:
- A business recommends an insecure system or service to a client.
- An email virus invades a customer’s network due to inadequate security.
- A company uses weak passwords on a client’s information, making it easier for cybercriminals to access the data.
- An entity fails to repair a vulnerability in the server that allows hackers to access private information.
Maintaining vigilant internet security practices and obtaining third party cyber liability coverage are crucial ways to manage data breach risks.