Explain the Costs of a Breach and the Effects of Downtime

Many insureds significantly underestimate how much a breach will cost, and think that they can self-insure it.  Outlining step by step what will happen in the event of a breach, with an estimate of the cost, is very useful when explaining the value of cyber liability coverage.


What happens when a company discovers that they have a breach?

Step 1: Consult with an experienced attorney

The first step is to consult with an experienced attorney, who will act as a “breach coach”.  They will be responsible for researching all applicable laws to ensure that you are in compliance with the various state and federal regulations.

Step 2: IT Forensics

Depending on the circumstances of the incident, a specialized Information Technology firm may be needed to investigate the cause of the incident, what data was accessed, how to best prevent another breach from occurring, etc.

Step 3: Customer Notification & Credit Monitoring

Notifying all of the people affected by a breach is required in the vast majority of the states. This alerts the affected people that they need to be watching their credit report and various accounts. As an added precaution and public relations tool, companies usually offer their customers one year of credit monitoring. This makes it easier for the customer to monitor their credit to catch fraud quickly.

Step 4: Interruption Expenses and Income Loss

If your client’s system went down, they may experience an income loss or additional interruption expenses. Additional equipment may be needed along with additional staff expenditures to make sure their business can still operate. Special expenses are provided to help with these costs as well.

Step 5: Public Relations Expenses and Special Expenses

Depending on the size and scope of the breach, hiring a public relations firm is sometimes recommended. A PR firm will help the company get their message out and will help minimize the breach’s impact on the company’s reputation. Special Expenses help prevent and minimize any further damage to digital assets and purchase replacement licenses for computer programs because it was damaged or destroyed by a covered cause of loss.


It is imperative that the above is done quickly and professionally in order to minimize the changes of a costly lawsuit, class action lawsuit, or any regulatory fine. The costs of a breach will increase drastically if the company has to defend against a lawsuit or regulatory action.

At this stage you should know how many records the insured stores, how long it will take them to restore operations in the event of an outage and have calculated how much it will cost if their data is compromised or system is down.