Data Breach Insurance: What Does it Cover and What Kinds of Organizations Need It?

With all the identity theft and security breaches going on in today’s world, a new kind of insurance has emerged to help companies deal with the liabilities involved; Data Breach Insurance. This insurance covers organizations that have their private data compromised in one way or another.

There are two main areas of coverage offered by Data Breach Insurance Policies: public relations/response expenses and defense/liability expenses.

Public Relations Responses: The most immediate concern for an organization that has been victimized by a security breach is the public relations damage that may occur. For example, when news breaks that an organization has had their customers’ credit card information compromised, they need to send a clear signal to the public that they are taking this very seriously and making sure this security hole has been plugged, and they can be trusted to do business with again. When an entity has Data Breach Insurance, they have coverage not only for PR expenses, but also for assistance in following the best practices for staying in compliance with federal, state, and local laws while responding to what has happened.

Defense/Liability Expenses: Naturally, when the private information of consumers has been compromised, damages will need to be paid. There may be lawsuits involving most (if not all) of the affected customers. Data Breach Insurance offers companies a choice of dollar amounts of liability coverage to take care of judgments, civil awards, and settlements resulting from the security breach.

Who Should Consider Data Breach Insurance? The short answer to this question is any company or organization that needs to store the private data of customers as part of their day-to-day operations. This would include:

• Banks and Financial Institutions
• Accounting Practices
• Law Firms
• Insurance Agencies
• Restaurants
• Retailers
• Hospitals & Medical Practices

Having Data Breach Insurance gives these organizations the peace of mind knowing that if the worst should happen with a customer’s sensitive data, the company is protected and able to continue operating while the situation is being resolved.