As technology advances, it makes our lives easier. But there's also a risk for homeowners as we integrate smart technology such as smart televisions and security systems into our homes.
Not only does identity theft pose a risk, but you could also be on the hook for damages if you accidentally release a virus or saying something defamatory online and get sued.
Although most homeowners insurance offers some sort of identity theft protection as a rider or endorsement under liability coverage, it only reimburses your costs to get your credit and finances on track after your identity is stolen.
Cyber liability coverage is an add-on to your homeowners insurance that protects homeowners if they release a virus or say something defamatory online and get sued.
What is cyber liability coverage?
According to Bill Martin, president and CEO at Plymouth Rock Home Assurance, cyber liability coverage helps if you accidentally release a virus or say something wrong online. And in the event of a ransomware attack, cyber liability coverage will replace equipment. Some homeowners insurance providers, like Acuity Insurance, also include cyberbullying protection as part of their cyber liability coverage.
If you are sued for saying something online, cyber liability coverage can also offer protection. Cyber liability may already be in your homeowners insurance policy's personal liability coverage, or it may be optional coverage. Check with your homeowners insurance provider.
Identity theft versus cyber liability coverage
Identity theft and cyber liability coverage are not synonymous. Most carriers have identity theft coverage, known as an "identity theft expense reimbursement" endorsement or rider, according to Shane Paltzer, vice president of personal lines underwriting and marketing at Acuity Insurance. He said identity theft basically covers legal expenses to clear up your credit report with the credit bureaus up to a $25,000 limit.
Paltzer said that there is a void in personal lines of insurance for cyber liability. In 2019, Bob Hertel, director of product development, helped create Acuity's cyber program. Acuity's cyber liability product is not sold as a stand-alone policy, but rather as an add-on endorsement to homeowners insurance property and liability protection.
| Identity theft coverage | Identity and cyber liability protection (Acuity) | |
| Legal fees identity fraud | Yes | Yes |
| Help replacing government-issued IDs | Yes* | Yes |
| Repair identity and credit | Yes* | Yes |
| Fees from financial institutions | Yes* | Yes |
| Phishing attack money lost | No | Yes |
| Wire transfer fraud losses | No | Yes |
| Bank account electronic theft | No | Yes |
| Smart home hack data recovery | No | Yes |
| Cyber extortion payments | No | Yes |
| Cyber attack virus clean-up | No | Yes |
| Data breach notification costs | No | Yes |
| Cyber bullying expenses | No | Yes |
*Coverage varies depending on homeowners insurance provider
Data from The Zebra and Acuity Insurance
Acuity's cyber liability protection covers the following:
- Inadvertently transmitting a virus
- Data recovery
- Cyber crime/extortion
- Data breaches
- Phishing attacks
- Smart-home hacking
- Cyber extortion (actual monetary costs)
- Wire fraud (which some banks won't cover, according to Paltzer)
It also covers legal expenses for cyber bullying, plus the cost of therapy or tuition costs for switching schools due to cyber bullying.
Identity theft, on the other hand, merely reimburses you for legal fees spent to clear up your credit report.
Not all homeowners insurance carriers offer cyber liability protection, and coverage will vary depending on your provider. It is best to talk with your insurance agent to determine the difference between identity theft and cyber liability coverage offered.
How much does cyber liability coverage cost?
Cyber liability is an add-on to your homeowner insurance policy. The average annual homeowners insurance premium in the United States in 2017 was $1,211, according to the National Association of Insurance Commissioners (NAIC).
Acuity's cyber liability coverage endorsement is a $35 annual add-on. State Farm and Plymouth Rock Insurance offer a cyber liability add-on from $25-$60 a year.
How to file a claim if your identity is stolen or you're a cyber theft victim
Treat stolen data like a car accident and follow these steps to report and file a claim.
- Notify the police and file a police report. Your insurance company may request a copy of the police report.
- Notify your financial, banking, or credit card institution.
- Notify government agencies if your social security card, passport, or driver's license or government issued identification card is stolen.
- File a claim with your homeowners insurance company. Failure to timely notify your insurance provider can result in denying the claim. They may provide you with a specialist to help you contact the three credit reporting companies (Experian, TransUnion, and Equifax).
- If your homeowners insurance doesn't offer help, you will have to contact the three credit reporting companies (Experian, TransUnion, and Equifax).
- Keep documentation of all unauthorized purchases or access to your data.
Ronda Lee is an associate editor for insurance at Personal Finance Insider covering life, auto, homeowners, and renters insurance for consumers. She is also a licensed attorney who practiced litigation and insurance defense.