As digital dependence in the workplace increases, businesses across the spectrum are grappling with this reality and what it means regarding efficiency, productivity, and security. The reliance on data technology and the Internet for business operations has invited a pandora’s box of cyber threats that, if left unchecked or inadequately protected against, can spell catastrophic consequences for any organization.
To properly defend against these threats, having cyber insurance is essential. Keep reading to find out what to look for in cyber insurance coverage.
What Is Cyber Insurance?
Cyber liability insurance, also known as cyber insurance, protects against the financial risks of doing business online and storing or processing sensitive information like names, addresses, Social Security numbers, medical records, or credit card information. Once a niche offering, cyber insurance is now a critical tool for risk management.
Cyberattacks and security breaches can result in severe business disruptions and financial hurdles. Cyber liability insurance steps in where traditional general liability insurance policies may fall short—particularly in addressing non-physical business interruptions and data loss incidents. These specialized policies address first-party coverage, which pertains to the losses an organization directly incurs, and third-party coverage, which relates to claims made by others against the organization following a cyber event.
A cyber liability insurance plan should cover the expenses you incur directly as a result of a cyber incident, such as:
- Hiring experts to investigate the incident and assist in compliance issues
- Contacting customers affected by a breach
- Crisis management and public relations needs
- Adding extra staff, equipment rentals, and third-party services
- Credit monitoring and identity restoration services
- Liability and legal defense fees
Why Cyber Insurance Is Essential
Cyber insurance is now more than just an optional safeguard; it is an indispensable asset in the modern business landscape. As businesses become more digitally inclined, the risks associated with online operations become more prevalent and complex. External threats, like viruses, and internal threats, such as an employee stealing customer information, compromise your network. In fact, the increasing sophistication and frequency of cyberattacks can lead to severe operational disruptions and financial losses.
Cyberattacks do not discriminate by the size of a business, and many business owners do not realize that most insurance companies’ general policies do not cover business interruptions from a cyber event. From small enterprises to multinational corporations, any organization can fall victim to cybercriminals whose tactics continue to evolve. For example, the highly-publicized Equifax data breach of 2020 led to nearly $2 billion in losses.
Considering how the average cost of a data breach is $3.9 million, not many small- or medium-sized businesses can survive that kind of financial hit.
InSource Insurance Group understands the importance of cyber liability insurance. We know every business is different, so we create coverage plans to meet your specific needs. Learn how we can protect you today.
What Cyber Insurance Entails
Cyber liability insurance should cover losses caused by data breaches, ransomware attacks, and other cyber events. First-party coverage covers the expenses your firm incurs after a network event, such as a hack of client information. Meanwhile, third-party coverage applies to claims made against your firm by those affected by a security incident, like the costly lawsuits Yahoo settled over $117 million for.
A quality cyber insurance policy should cover:
- Costs for investigating a cyber incident and recovering from it.
- Expenses associated with notifying customers about a data breach.
- Public relations campaigns to manage a company’s reputation following a cyber event.
- Legal fees, including litigation and settlement costs.
- Services for credit monitoring and restoration for affected individuals.
- Compensation for business interruption and loss of income during and after a cyber incident.
- Computer forensics costs
- Data and identity restoration
- Hardware replacement
It is important to note that when you sign a cyber insurance policy, you are required to maintain specific security measures. If you are negligent in your duties of preventing a cyber incident, your insurance provider may deny your claims. Understanding your policy’s terms is critical in protecting yourself from the hardships experienced by not taking preventative measures.
What Cyber Insurance Does Not Cover
Cyber insurance policies are targeted and do not cover all forms of losses. Items generally excluded from such policies include:
- Physical property damage or bodily injury claims
- Loss or theft of intellectual property
- Criminal actions taken by the insured, such as intentional acts or fraud
- Social engineering fraud, unless specifically added to the policy
Key Takeaways
- Cyber insurance is becoming an indispensable tool as businesses increasingly rely on digital operations, exposing them to heightened cyber threats and potentially catastrophic consequences.
- Cyber insurance provides financial protection against cyber-related incidents, including data breaches and business interruptions, beyond what traditional liability policies cover.
- Coverage includes immediate costs incurred from a cyber incident and potential lawsuits, while excluding physical damages, intellectual property loss, intentional criminal acts, and social engineering fraud (unless specified).
- Policyholders must adhere to specific security measures to maintain coverage, underlining the importance of proactive cyber risk management.
Secure Cyber Liability Insurance With InSource Insurance Group
Cyber liability is a highly specialized insurance product that requires detailed knowledge to ensure your business is appropriately covered. Trust the experienced professionals at InSource with all your cyber insurance needs. The risks of modern technology can affect any business. To protect your future, contact us today.
