The likelihood of your business being a victim of cybercrime grows every day. Data breach costs reached US$ 4.24 million, according to IBM and Ponemon Institute’s latest data breach report. Get cyber insurance to be prepared. Cyber liability insurance protects your business if it is the victim of a cyber attack. Unless you’re a cash-only business that only communicates via pen and paper, consider cyber insurance coverage immediately. Read on to learn all about cyber liability, the benefits of cyber coverage, and how to reduce data loss from a security breach.
Do I Need Cyber Liability Insurance?
Whether you run a small business or a large corporation, yes, you need cyber coverage. Everyone and everything is digitally connected. The difference between everyday people and businesses is that businesses have more cash flow. As a result, a large or small business becomes a big target. Also, businesses handle a myriad of people’s personal identifiable information (PII) and personal health information (PHI), making businesses a data goldmine for cybercriminals.
PII and PHI are sensitive information, including:
- Credit card and bank account information
- Social security, passport, and driver’s license numbers
- Customers’ names, email addresses, phone numbers, and residential addresses
- Medical information
Consider cyber insurance for your company if you have any of the following business:
- Hospitality such as restaurants and hotels
- Retailers including e-commerce
- Tech industry
- Hair salons
- Marketing companies
- Financial firms
Why is Cyber Insurance Important?
Your business took hard work for you to build, and it can be destroyed in an instant by cybercriminals. Insurance protects your asset. It gives your business a fighting chance to continue moving forward if it falls victim to a cybercrime. Not only do cyber-attacks result in monetary costs, but also the following:
- Employee productivity loss
- Business operations slow down or completely stop
- Potential loss of a partnerships
- Bad customer experience
- Damaged reputation
What Are The Four Main Covers Under Cyber Liability Insurance?
Insurance policies vary by what cyber liability is covered, deductibles, and insurance limits. The majority offer businesses coverage for damages that fall into two categories: first-party coverage and third-party coverage. First-party coverage is for out-of-pocket expenses such as lost business revenue and credit monitoring. Examples of third-party coverage are litigation fees, settlement costs, and PR management.
Generally, the following cyber liability perils are covered:
- Cyber extortion: extortion-based ransom costs, hiring a negotiator
- Data recovery and restoration: cyber forensic costs, retrieving lost data, restoring company network, patching and repairing data system, hiring IT experts
- Cyber attack restitution: credit monitoring and protection services, notifying customers of a data breach, establishing a call center for customer outreach and support
- Cyber attack ramifications: public relations costs, civil lawsuit settlement costs, legal defense fees, government regulatory fines
It is vital to find a befitting insurance company to protect you from cyber liability. Every policy picks and chooses what cyber liability to cover. Some providers exclude the data breach peril from coverage or offer a completely different cyber insurance policy. Other insurance companies do not cover the cyber liability phishing because it is considered “social engineering”. Another insurance agency might cover lost revenue. Take time to get an idea of what your business needs a cyber insurance policy to cover.
- How big is my business? How much revenue does it make?
- How much sensitive data does the business handle?
- How many employees does the business have?
Fine or penalty (first-party coverage): Your customers’ information is leaked. The EU determines that your company is not in compliance with the General Data Protection Regulation (GDPR) and fines your business. Cyber liability coverage will help pay.
Phishing (first-party coverage): There is a breach in security to your network and a cybercriminal monitors your system’s activities. The criminal’s opportunity arises when your finance department receives an invoice. The scammer poses as the original sender by sending a similar-looking invoice but with different payment information. This is called phishing, and now you’ve paid a criminal instead of your business associate. Insurance will help your company.
Cyber extortion (first-party coverage): The company’s network is infected with ransomware, initiating a denial of services (DoS) cyberattack. Insurance will provide cyber resources and reimbursement for the ransom and cyber investigation fees.
Litigation (third-party coverage): A therapist is hacked, and clients’ treatment information is publicly released. Clients sue the therapist for negligence. Insurance will help pay defense and settlement fees.
Notification (first-party coverage): An accounting firm lets its security service renewal lapse, making them vulnerable. During the time-lapse, there was a breach, and a criminal steals all of their customers’ personal data. Now they have to set up a call center to notify everyone. Insurance covers the costs of this cyber liability.
What is Not Covered by Cyber Insurance?
Generally, the following are not covered under insurance:
- Prior cyber vulnerabilities and attacks initiated before the policy date
- Cyberwarfare or cyber terrorism
- Contractual liabilities
- Personal injury and commercial property damage
- Technology errors and omissions liability (Tech E&O liability), meaning your software or service did not perform as promised
How Much Does Liability Coverage Cost?
A small business might pay US$ 650 a year for insurance with a US$ $10,000 deductible and US$ 250,000 insurance limit. A large business might pay a US$ 1,500 annual premium with a US$ 10,000 deductible and US$ 1,000,000 limit.
Cyber Liability Risks
Cybercriminals have all kinds of reasons for attacking a business. Motivations range from activism to financial gain to pure entertainment. Regardless of the reason, get insurance because a breach of security can result from any of the following:
- Phishing and social engineering schemes
- Zero-day cyberattacks
- Artificial intelligence
- Cloud solutions
- Internal threats: an employee maliciously attacks the network, falls prey to phishing, accidentally leaves a company-provided laptop or phone
- Remote working
Security Strategy to Mitigate Cyber Liability
If you’re proactive about your company’s network security, you can prevent, react, and minimize the effects of a cyber attack. Consider devising a cybersecurity risk management plan. Steps to take include:
- Investing in a cybersecurity team
- Implementing threat modeling
- Identifying security risks
- Understanding the potential damage of each breach of security
- Diminishing each cyber security risk
- Training and educating your staff about cyber security
- Implementing security automation
- Having real-time network data
- Investing in an insurance policy
Is There a Cyber Insurance Policy For Individuals?
Yes, through their home insurance coverage.
Does a Cyber Liability Policy Provide Coverage For Legal Fees And Lawsuits?
Typically, yes. Check with insurance providers to be sure.
Do I Need Other Insurance Policies For my Business?
Yes. Consider the following insurance options:
Technology Errors and Omissions (Tech E&O) Insurance
Suppose you provide a product or service that has to do with technology. In that case, you will want insurance that provides coverage if you’re sued for the performance of your software or service. Let’s say you’re a web developer who crashes your client’s website, and you have no way of retrieving it. Your Tech E&O insurance will provide coverage.
General Liability Insurance
General liability insurance is business insurance. It protects your business when a claim is made against it. Physical injury, property damage, and reputation damage are several examples of liability insurance coverage.
If your want to learn more about the benefits of small business insurance, click here.
Commercial Auto Insurance
If your small business owns a vehicle or you’re an independent courier under contract, you need commercial auto insurance.