Plain-language guide
First-Party vs. Third-Party Cyber Insurance: A Simple Guide
The short answer
First-party coverage helps with your own losses. Third-party coverage helps with claims from others. One attack can lead to both. You may need help to get files back. A customer may also sue your business. Check what your policy covers.
Written by Joseph Boyd, MBA, Founder and Principal Advisor at Infosec Check
Published
Editorial note: this guide uses primary references and is checked when policy or legal guidance changes.
Think “our bills” and “claims against us”
Suppose a thief breaks into an office’s online system. The staff cannot use their files. Some private customer records are exposed.
The office needs help to restore its files. It may lose income while work stops. Those are its own losses.
A customer then makes a claim against the office over the exposed records. That is a claim from someone else.
What is first-party coverage?
It is coverage for certain costs or losses the insured business faces itself. “Insured” means the person or business the policy protects.
Common areas to ask about include recovery, investigation, response, and lost income. Some policies also have coverage for cyber extortion. Each part can have its own terms.
What is third-party coverage?
It is coverage for certain claims that others make against the insured business. Ask about defense costs and covered damages or settlements.
“Third party” does not mean your IT company. It means another person or business making a claim against you.
A simple comparison
| What happened? | Where to look in the policy |
|---|---|
| Your files need to be restored | First-party coverage |
| Your work stops after a covered attack | First-party coverage |
| A customer brings a privacy claim | Third-party coverage |
| Another firm says your network caused harm | Third-party coverage |
The table shows where to ask questions. It does not decide whether the policy will pay.
Three questions worth asking
- Do we have both kinds of coverage?
- Does the cost of a lawyer reduce the money left to pay a claim?
- Do all parts share one limit, or do some have separate limits?
Have the agent show the answer in the policy. A short sales summary may leave out details that matter.
What to read next
See the full cyber coverage guide, then use the questions to ask before buying.
Scope
This guide gives general information. It does not decide a claim or change a policy. Coverage depends on the policy, its added forms, the facts, and the law. Ask a licensed insurance professional about your coverage and a lawyer about legal questions.
Sources
Back to the cyber insurance basics hub: What Is Cyber Liability Insurance Coverage?