Understanding First-Party and Third-Party Cyber Coverages

Cyber threats are on the rise – and so are significant financial losses. This is why, you need to understand the difference between first-party and third-party cyber coverages to protect yourselves against these risks.

First-Party Coverage

First-party, or first-party cyber coverage – directly protects your organization from losses incurred by a cyber incident. For example, data breach response costs include expenses incurred during forensic investigations, legal consultations, and notifying affected parties. Another type of first-party coverage is called business interruption. This sort of coverage compensates you for the lost income during the downtime caused by a cyber event. Lastly, we have ransomware payments. According to a recent Microsoft report, ransomware cyber-attacks have shown a massive increase of 275% – stealing sensitive information and asking for a heavy ransom. This type of coverage pays off the ransom demands; regaining access to encrypted data or systems.  

Third-Party Coverage 

We bet you don’t want to imagine this, but for better understanding, imagine that a hacker accesses your client’s sensitive information, holding you liable for the damages the client incurred. Or worse, a cybercriminal uses the stolen information for other fraudulent purposes/transactions – again, you and your organization would be held responsible and could face costly claims from affected clients. This is where third-party coverage would protect you, mainly against claims made by clients or other parties.  

Now that we understand what first-party and third-party coverages are, it’s safe to say that they are both crucial forms of coverage to offer comprehensive protection. The rise of one cyber incident can simultaneously cause both types of claims, leaving you under heavy financial pressure – if not insured. The better you understand these coverages, the safer you are against the costs associated with cyber-attacks. 

No doubt, having robust insurance can act like a safety net, but as an organization, you may need to do more than just that. Staying proactive to mitigate risks is a crucial part of your industry. Therefore, to mitigate the risks associated with cyber incidents, businesses should start implementing strong cybersecurity measures. This includes regularly updating software and also, making sure that the team is well trained and familiarized with the best cybersecurity practices. Combining these practices can curate an Incident Response Plan for you, which is just as crucial for you as insurance. If things go south, your team should know how to react – what to do and what not to do. If your home team is ready, nothing can go against you.  

It is also crucial for you to ensure that both, first-party and third-party coverage have got your back, as discussed above, they are essential for you and your company. Having a strong and supportive insurance agent by your side can help you navigate around the complexities of insurance – ensuring you get coverage that is just right for you. 

Understanding the differences between coverages is the first step, the next step is grabbing the right coverage. Staying informed and proactive will enable you to remain protected for a safer tomorrow; especially with a recurring rise in cyberattacks. It’s vigilant to Protect Yourself Better! 

For expert advice, contact Shayne Bevilacqua at Professional Liability Insurance Group.  
Call or Text us at +1 (877) PLIG – 123, That’s (877) 754 – 4123.