Cyber security insurance: Why is it important? How does it work?

saas-implementation-experts

Date

Why do small businesses need cyber liability insurance?

Small businesses are increasingly becoming a target for cybercriminals. According to the National Small Business Association, 60% of small businesses go out of business within six months of a cyberattack. This is largely due to the fact that small businesses often do not have the same resources as larger businesses to protect themselves from cybercrime.

Even if a company is able to mitigate the damage done by a breach, there can still be significant costs associated with fixing the problem and bringing the business back online. Cybersecurity insurance can help bridge that gap by protecting your business against data breaches and theft, system hacking, ransomware extortion payments, and denial of service attacks. In addition, many policies also offer crisis management and public relations services in the event of a data breach.

software-defined-edge-serivce-provider

If your company handles sensitive information, you need a cyber policy

Almost every business these days handles some type of sensitive information. This can include credit card numbers, social security numbers, and even just contact information. If your company falls victim to a cyber-attack, you could be liable for a lot of money. That’s why it’s crucial to have cyber liability insurance to help protect you from financial damages in the event of a data breach.

Cyber policies are not just for businesses that operate in the cybersecurity field. Retailers, Restaurants, Hair Salons/Barbers, Marketing companies, Contractors, and Financial firms should all consider purchasing a policy.

Cyber security insurance for Technology Companies

Technology companies can have complex needs and need other additional types of cyber insurance policies to meet those needs. Things that need to be reviewed and covered are whether the incident occurred in your business or the customer’s business because of an error on your part.

CyberRisk for Public Entities

A data breach can be costly, with the average cost per incident reaching $3.86 million. It can take 280 days to identify and contain a data breach, and in that time the company may have to face lawsuits, pay for credit monitoring for affected individuals, and hire a PR firm. So, cyber insurance can become especially important to help cover some of these costs for public enterprises.

multi-factor-authentication-protection-service

So, what is cyber security insurance?

Cyber insurance is a type of insurance that businesses can purchase to protect themselves from the potential risks associated with using technology. These risks can include things like data breaches, cyber-attacks, and ransomware. By adding cyber insurance to their business insurance policies, companies can be better protected against these types of risks. Cyber insurance also offers broad coverage, which means that it can help protect businesses against a variety of technology-related risks.

What does cyber insurance cover?

The coverage varies from policy to policy, but typically includes protection against things like data breaches, business interruption, and extortion. It’s important to note that errors and omissions insurance is not cyber insurance, and cannot serve as a substitute for proper cyber insurance.

Cyber insurance policies can provide a wide range of coverage for companies in the event of a data breach.

This includes:

  • The costs of notifying individuals whose data has been compromised
  • The cost of civil damages that may be awarded as a result of the breach.
  • Policies can also cover computer forensics, privacy liability, and more.

In addition, cyber insurance policies often provide resources to help policyholders encrypt their data and create secure protocols.

What Is Not Covered By Cyber Liability Insurance and Data Breach Coverage?

Data breach coverage does not cover a company’s data if it is stolen from its own employees, for example, as opposed to being hacked by an outside party.

Won’t my general liability policy cover cyber liability?

General liability insurance policies will not typically cover cyber liability. If you are sued for cyber-related exposure, the coverage will be minimal at best. Social engineering attacks can be considered a special case and may not be covered by general liability insurance.

Unfortunately, if an individual is victimized as a result of following instructions from a fraudulent email or call, this would not be considered a computer system breach and would not be covered by your general liability insurance. However, you can add a social engineering extension to your cyber insurance policy to cover these types of attacks.

security-awareness-training-provider

What Is the Difference Between Cyber Liability and Data Breach Insurance?

Cyber liability is a type of insurance for business owners who need to cover themselves against the risk that their companies might be involved in cybercrime. Data breach insurance, on the other hand, covers the costs of data breaches, such as legal fees and damages.

What is usually covered in Cyber Liability Insurance?

Cyber liability insurance is an important policy to have for larger businesses because it helps protect them (the business) in the event of a data breach. The coverage includes notification expenses, lost income, and fines from state and federal agencies. In addition, legal services are included as part of the policy so that your business has access to attorneys who can help you navigate through a data breach.

What is usually covered in Data Breach Insurance?

Data breach insurance is a specific type of insurance policy that provides coverage for the financial consequences resulting from a data breach. The Data Breach Insurance policy covers not only breaches to computer systems, but also data loss from any other source such as theft, natural disaster, or sabotage.

Data breach insurance is coverage that can help you respond to a loss of personally identifiable information (PII) or protected health information (PHI). This type of insurance usually pays for notification services and public relations firms. In addition, data breach insurance often includes extortion coverage. This means that the insurer will help cover the amount paid if someone takes your data and demands a ransom.

What is First-Party Cyber Coverage and What Should You Look For?

First-party cyber coverage protects your data, including employee and customer information.

This coverage typically includes your business’s costs related to:

  • Data breach notification
  • Remediation of the breach
  • Legal expenses
  • Public relations
  • Crisis management, and
  • Reputation monitoring
  • The incident occurred in the customer’s business, not yours.
  • First-party liability provides coverage on any data that is stolen from your computer.
  • It covers legal fees.
  • It covers court costs.
  • It covers judgments or settlements.

What is Third-party Cyber Coverage and What Should You Look for?

This generally protects you from liability if a third party brings claims against you.

This coverage typically includes:

  • A general contractual indemnity agreement (GDA)
  • A product warranty
  • Legal expenses coverage
  • Data breach notification
multi-factor-authentication-protection

How Much Does Cyber Insurance Cost?

There is no one-size-fits-all answer to this question as the cost of cyber insurance can be influenced by a number of factors, including the size and type of business, its industry, and how much coverage it needs. Generally speaking, businesses with high revenue are seen as being more at risk for a cyber liability event and thus will need to pay more for insurance coverage. Additionally, businesses that are deemed to be high risk (such as those in the technology or health care industries) will need more coverage than those that are low risk.

Cyber insurance premiums are based on a number of factors, the most important being the company’s network security, data access, and claims history. Annual revenue size and business type (industry) are also considered. Businesses with poor cybersecurity will be charged more for cyber insurance policies.

What Should Your Cyber Insurance Policy Cover?

It is important to ask your insurer what specific risks are covered before signing up for coverage, as policies can vary widely in terms of what they cover.

Make sure your policy includes coverage for:

  • Data breaches
  • Cyber-attacks that occur anywhere in the world
  • Protection from malware and ransomware
  • Additionally, businesses should be sure to cover social media usage and online marketing activities

More
Articles

Meet with us.

We’re speaking, sponsoring and attending key industry conferences across the U.S. and coming to a city near you.

Let’s connect » Schedule a meeting with us at one of our upcoming events.