Data Exclusions in Insurance: The Hidden Risk for Today’s Business Owners

By Jenny Holly Hansen | WBN News | May 13, 2025

In an increasingly digital world, more of our business operations rely on data: storing it, transmitting it, protecting it. And yet, one of the most overlooked risks in commercial insurance is the data exclusion—a clause in your policy that clearly states which data-related incidents are not covered.

This isn’t just fine print. It’s a critical limitation that can leave business owners financially exposed, especially those working in industries that handle sensitive information, customer data, or digital systems.

What Is a Data Exclusion?

A data exclusion in your business insurance policy is a provision that removes coverage for certain types of losses involving data. This might include:

• Loss, corruption, or destruction of electronic data
• Failure to prevent unauthorized access (like a cyberattack)
• Breach of privacy or disclosure of confidential information
• Losses arising from failure to secure data adequately

You’ll often find these exclusions in commercial general liability (CGL) and professional liability policies, where insurers clearly state that damage to electronic data is not considered “property damage,” or that liability from data breaches falls outside the scope of the policy.

Why It Matters

1. You May Think You're Covered—But You're Not

I’ve seen many business owners assume that if they have liability insurance, they’re protected in the event of a data breach or digital loss. But if your policy includes a data exclusion, those types of claims could be denied—right when you need coverage most.

2. Modern Risks Are Increasingly Data-Based

From cloud storage failures to ransomware attacks, today’s risks are more digital than physical. If your insurance is built for the brick-and-mortar world but your business lives in the cloud, there’s a gap. Data exclusions expose that gap clearly.

3. Legal Costs Add Up Fast

A single data breach—even a small one—can trigger lawsuits, regulatory investigations, and notification requirements. Without proper coverage, these costs fall entirely on the business owner.

What Business Owners Should Do

Review Your Policy for Exclusions

Don't assume you're covered. Look for specific language excluding “electronic data” or “data loss.” If it’s unclear, ask your broker to explain the policy wording and what’s not included.

Consider Cyber Liability Insurance

Most general policies exclude digital risks by default. A dedicated cyber liability policy can fill that gap, covering incidents like data breaches, ransomware, phishing attacks, and the legal aftermath that comes with them.

Tailor Coverage to Your Operations

If your business collects customer information, handles payments, uses cloud-based systems, or provides digital services—then you’re exposed to data-related risks. Your insurance should reflect that reality, not a generic template.

The Bottom Line

Data exclusions are easy to overlook—but the financial consequences aren’t. In today’s business environment, protecting your operations means understanding not just what your policy includes, but what it deliberately leaves out.

Because in insurance, it’s not the risk you see that costs you—it’s the one you didn’t know you had.

Let’s Keep Talking:

Jenny is a business insurance broker with Waypoint Insurance. With 19 years experience, she will well versed in the technical aspects of business coverages.

She can be reached at 604-317-6755 or jholly-hansen@wbnn.news. Connect with Jenny on LinkedIn at https://www.linkedin.com/in/jenny-holly-hansen-365b691b/.  Connect with Jenny at BlueSky: https://bsky.app/profile/jennyhollyhansen.bsky.social

Let’s Meet Up:

Jenny Holly Hansen is a cohost with Chris Sturges of the Langley Impact Networking Group. You are welcome to join us on Thursday’s from 4pm to 6pm at: Sidebar Bar and Grill: 100b - 20018 83A Avenue, Langley, BC V2Y 3R4

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