Let’s go over how these two types of Data Breach Insurance are different and when you might want to invest in each one.
First-Party Data Breach Insurance vs. Third-Party Data Breach Insurance
Which Data Breach Insurance coverage can you benefit from? For most IT consultants, Third-Party Data Breach Insurance makes the most sense. That’s because most IT consultants don’t store much data on their own network that they’re worried about protecting. They’re more concerned with their clients’ data, which is stored on their clients’ servers or somewhere in the cloud.
If a client’s data is compromised, they could turn around and sue you, claiming the compromise resulted from a professional error or oversight on your part. Third-Party Data Breach Insurance would be the policy that could cover the costs of that lawsuit.
For many IT businesses, Third-Party coverage is fairly easy to include in an Errors and Omissions Insurance policy. When it is included, a data breach lawsuit can be treated like any other E&O lawsuit.
If you store customer data on your network (e.g., if you provide data mining or business intelligence services), you may also benefit from carrying First-Party Data Breach Insurance. This is because, should your network be breached, you might be responsible for notifying clients, paying for credit monitoring services, and even paying state fines. First-Party coverage offers funds to do exactly that.
Below, we’ll take a closer look at how each policy works.