# Cyber insurance

Source: https://contracko.com/glossary/cyber-insurance

# Cyber insurance

Cover for losses from cyber incidents such as data breaches, hacking and ransomware.

## Definition

Cyber insurance covers the financial consequences of cyber incidents. Cover typically includes data-breach response costs, business interruption from system outages, liability towards affected parties, and sometimes ransomware and recovery expenses. It is increasingly relevant given GDPR obligations and contractual data-security commitments. Policies often require the insured to maintain baseline security controls and to report incidents without delay.

## Example

> A SaaS provider's cyber insurer covers forensic, notification and legal costs after a ransomware attack exposes customer data.

## Why this is a business risk

Cyber incidents can generate costs across multiple categories simultaneously: regulatory fines, client claims, business interruption, forensic investigation and reputational damage. A policy that excludes any of these can leave a significant gap. Businesses that accept data-security obligations in contracts without maintaining adequate cyber cover risk a double exposure: the contractual liability and the uninsured cost of the incident response.

## How to manage it

- Map your data-security obligations in every contract and verify that your cyber policy covers each of them, including notification costs and regulatory fines where insurable.
- Maintain the minimum security controls required by your insurer (such as multi-factor authentication and patching schedules), as failing to do so can void cover.
- Test your incident-response plan annually and confirm it aligns with the notification timeframes required by both GDPR and your cyber policy.
- Review the policy exclusions carefully: many cyber policies exclude losses arising from prior known vulnerabilities or from acts of your own insiders.

### How Contracko helps

Contracko's AI review extracts data-security and incident-notification obligations from your contracts so you can verify that your cyber policy covers what your contracts commit you to. Expiry reminders ensure that cyber cover is renewed before it lapses, and the repository keeps the relevant contractual obligations and policy documents in one searchable place.

## Legal references

- [BW 7:925 Dutch Civil Code: insurance contract Dutch law](https://wetten.overheid.nl/BWBR0005290)

Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.

## Relevant for

[Software & SaaS](https://contracko.com/industries/software-saas)[IT Services](https://contracko.com/industries/it-services)[Cybersecurity Services](https://contracko.com/industries/cybersecurity-services)[Financial Services](https://contracko.com/industries/financial-services)

## Related clauses

- [Insurance Obligation Clause](https://contracko.com/clause-library/insurance-obligation)
- [Data Processing Clause](https://contracko.com/clause-library/data-processing)

## Related terms

- [GDPR](https://contracko.com/glossary/gdpr)
- [Data processing agreement (DPA)](https://contracko.com/glossary/data-processing-agreement)
- [Professional indemnity insurance](https://contracko.com/glossary/professional-indemnity-insurance)
- [Public/general liability insurance](https://contracko.com/glossary/public-liability-insurance)

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## Frequently asked questions

Common questions about this term.

- **Q:** Does a standard business insurance policy cover cyber incidents?
  **A:** Generally no. Standard business policies such as the AVB or property insurance do not cover data breaches, ransomware or cyber-related business interruption. A dedicated cyber insurance policy is required for these risks.

- **Q:** Are GDPR fines covered by cyber insurance?
  **A:** Some policies include regulatory fines and penalties to the extent they are insurable under applicable law. In the Netherlands fines imposed by the AP (Autoriteit Persoonsgegevens) may be insurable, but the policy wording and local law determine the actual coverage.

- **Q:** Does cyber insurance cover business interruption caused by a cyber attack?
  **A:** Many cyber policies include a business interruption extension that covers lost income and extra costs during a system outage caused by a covered cyber event. The waiting period (deductible time) and the scope of covered systems vary by policy.

- **Q:** What security controls do insurers typically require before issuing a cyber policy?
  **A:** Common requirements include multi-factor authentication, regular software patching, endpoint protection, employee security training, and a documented incident-response plan. Failure to maintain these can void or reduce cover at the time of a claim.

- **Q:** Does cyber insurance cover third-party claims from customers whose data was breached?
  **A:** Yes, third-party liability is typically a core coverage component: it pays for claims from individuals and organisations affected by a breach, including legal defence costs. The limit available for third-party claims should be calibrated to the scale and sensitivity of the data you process.

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