What are the Exclusions in Cyber Liability Insurance Policy?

Posted on: Nov 7, 2022 | 3 mins | Written by: HDFC ERGO Team

What are the Exclusions in Cyber Liability Insurance Policy?

Published on November 07, 2022. EST READ TIME: 3 minutes

In Insurance, every policy has its own set of inclusions and exclusions and cyber insurance is no exception. These are important to know the admissibility of a claim and for the insurance company to know the amount of the claim. The policy document has all these details and it is the responsibility of every policyholder to read the document in detail.

There are many companies and individuals who are opting for a cyber insurance policy and this is because the number of scams and hacks is increasing day by day. Cyber-attacks and hacks have become very common and having cyber security insurance are mandatory. One thing that must be kept in mind is that having a policy is not enough. You should read the inclusions and exclusions carefully and in detail.

Cyber insurance is relatively new in the country and it is difficult to assess its exclusions. Let us discuss the main exclusions for better clarity.

The following are the main exclusions of a cyber insurance policy:

• Infringement of Software, Patents and Copyrights

Cyber insurance does not cover any infringement of software, patents and copyrights and these are covered in an Intellectual Property Insurance Policy.

There can be some instances where cyber security insurance will cover the defense costs of a claim of infringement of copyrights, but for this to be covered a third party or a non-management employee has to be responsible for the claim.

• Invasions and Wars

Any invasion or war can cause a lot of destruction. Mostly a cyber security insurance policy will not cover the damage that is caused due to invasion, war or insurrection.

• Damages and Injuries

A cyber insurance policy covers data breaches and this necessarily does not need to physically injure a person thus, a physical injury is not covered. There are some policies which will cover the mental stress and distress that can be caused due to data breaches and claim.

• Security Measures

A cyber insurance policy covers a hack or scam that is done in cyberspace. However, sometimes these can be avoided if adequate security measures are taken. In case of a hack or a scam, if the insurance company finds out that security measures were not enough, they are well within its right to deny a claim. This is not exclusion in most policies but the policyholder is expected to take these measures.

• Loss Due to Third Party

An insurance company can deny a claim if they find out that the loss has occurred due to a breach that has happened in the system of a third-party vendor.

• Loss of Electronic

If the employee of a company loses a portable electronic device issued by a company, then this will not be paid under a cyber security policy. Loss of portable electronic devices and other electronic items is covered under a property insurance policy which is a must-have for all.

• Improper Conduct

If the policyholder has been dishonest when buying the policy or has not given correct and complete information, the claim can be rejected by the insurance company and no loss will be assessed. Also, if there is any illegal activity that causes the loss or it has been intentionally done, then the loss will not be covered under the policy and will be rejected by the insurer.

• Unsolicited Communication

Any risk that happens to any unsolicited communication is not covered under the cyber policy. Communication can be in any form like videotaping, audio recording, telephone marketing, etc. If there is any breach of data or loss that happens due to this, the insurance company will not pay the claim and it will be rejected.

• Immoral Services

While processing the claim and in the course of the investigation, if there is a finding that the loss happened due to any activity which was extremist, racist, obscene or any pornographic service, the claim will be denied and not covered under the policy.

• Unauthorized Collection of Data

If the insured is involved in collecting data which is related to the client or person in an illegal or illegitimate manner, then the loss that happens will not be covered under the policy and the claim will be rejected by the insurer.

Conclusion

A cyber insurance policy is a must-have in the present times when everything is online and there is a high probability of a scam or hack or breach of data. In such times, having a cyber security insurance policy is a must. The policy is a boon if something of this sort happens, but like any other insurance policy, it also has its inclusions and exclusions. It is essential to know the exclusions i.e. the instances that lead to a loss but are not covered in the policy.

This knowledge is necessary to know what measures to take for all claims to be approved and also what will not be covered under the policy. This is necessary to avoid filing a claim which will be rejected. This is why knowing the exclusions and reading the policy is essential.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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