Surprise! 9 Things Cyber Insurance Coverage Doesn’t Cover

In today's digital age, cyber insurance has become an essential safety net for businesses of all sizes. With the ever-looming threat of cyberattacks, having insurance coverage seems like a no-brainer. However, what many business owners don't realize is that not all cyber insurance policies are created equal. In fact, there are several surprising things that cyber insurance coverage typically doesn't cover. 

Let's dive into some of these lesser-known exclusions:

1. Nation-State Attacks

While cyber insurance often covers common threats like ransomware and data breaches, it may not extend to attacks orchestrated by nation-state actors. These sophisticated attacks can cause extensive damage, yet they may fall outside the scope of traditional cyber insurance coverage.

Adding insult to injury; dealing with the aftermath of a cyber attack goes beyond just financial losses. It can also tarnish your brand's reputation and erode customer trust. Unfortunately, many cyber insurance policies do not include coverage for reputation management or public relations efforts to restore your brand image.

What is a Nation-State Attack?

Countries including the People’s Republic of China, Russia, North Korea and Iran, pose an elevated threat to our national security. These countries are called Advanced Persistent Threat (APT) actors. They are well-resourced and engage in sophisticated malicious cyber activity that is targeted and aimed at prolonged network/system intrusion. APT objectives could include espionage, data theft, and network/system disruption or destruction.

Adding insult to injury; dealing with the aftermath of a cyber attack goes beyond just financial losses. It can also tarnish your brand's reputation and erode customer trust. Unfortunately, many cyber insurance policies do not include coverage for reputation management or public relations efforts to restore your brand image.

2. Intellectual Property Theft 

Intellectual property (IP) theft is a growing concern in the digital realm, yet it's often overlooked in standard cyber insurance policies. If your proprietary information or trade secrets are stolen in a cyber attack, you may find yourself without adequate coverage to recoup your losses.

The most common methods of IP theft online are hacking systems to access source code, media files or confidential data. Confidential data can include inventions, trade secrets, designs, client lists, vendor/pricing relationships, pricing schemes, and other information not readily accessible to the public from a company.

3. Regulatory Fines and Penalties 

In the event of a data breach, businesses may face hefty fines and penalties  for noncompliance with data protection regulations such as DPR or HIPAA. While some cyber insurance policies offer limited coverage for regulatory fines, many have strict limitations and exclusions.

4. Insider Threats 

Not all cyber threats come from external sources. Insider threats, whether intentional or unintentional, pose a significant risk to businesses. However, cyber insurance policies may not provide sufficient coverage for damages caused by employees, contractors or other insiders.

5. Business Interruption Losses

Cyberattacks can disrupt your business operations, leading to significant downtime and revenue loss. While some cyber insurance coverage will reimburse costs for business interruption, the extent of coverage and exclusions can vary widely.

6. Preventative Measures 

Investing in cybersecurity measures such as employee training, software updates and threat monitoring is crucial for mitigating cyber risks. However, cyber insurance typically does not cover the costs of proactive security measures, leaving businesses responsible for their own preventive efforts.

7. Cyber Extortion Without Data Breach 

Ransomware attacks often involve extortion threats to release sensitive data unless a ransom is paid. However, if the ransom is paid without a data breach occurring, some cyber insurance policies may not cover the extortion payment.

8. Acts of War or Terrorism 

In rare cases, cyberattacks may be classified as acts of war or terrorism, which could nullify coverage under standard cyber insurance policies. This exclusion highlights the evolving nature of cyber threats and the complexities of cyber insurance coverage in such scenarios.

9. Unapproved Third-Party Vendors

Many businesses rely on third-party vendors for various services, increasing their exposure to cyber risks. However, if a breach occurs due to a vendor's negligence or security lapse, some cyber insurance policies may not cover the resulting damages.

Cyber Insurance Coverage: Is It Worth It? 

After reading this list of exclusions,  you may be wondering if carrying a policy is a wise move. The answer is: yes, absolutely. Cyber insurance can provide valuable protection against cyber risks. Still, it's essential for businesses to understand the limitations and exclusions of their policies. This is where Entech can be a valuable partner. By carefully reviewing coverage options and implementing additional risk mitigation strategies, businesses can better safeguard themselves against the ever-changing cyber threat landscape. After all, knowledge is power, and being aware of what your cyber insurance coverage won’t cover can help you better prepare for the unexpected. Let’s talk.