In today’s age, technology is a major part of our business operations: from conducting banking to running retail and e-commerce. As our reliance on technology grows, it’s becoming increasingly imperative that we’re aware of the importance of having cyber liability insurance as a failsafe in the event of a cyber attack or other cyber event. These cyber events include a wide range of incidents, such as ransomware, data breaches, and other digital risks. Barkly, a cybersecurity platform, notes that in 2017, 61% of small businesses experienced a cyber attack, up from 55% in 2016, with the number growing each day. Most businesses, regardless of size, face digital threats, including cybercrime, which is a key risk that can result in significant financial and reputational damage. Without proper protection, businesses can fall victim to cyber threats that disrupt operations and cause losses. This is why it is crucial to have insurance in place to help protect your business from the consequences of these incidents. Cyber liability insurance is designed to protect businesses from the financial impact of cybercrime and other cyber events.
So what is cyber liability insurance, exactly, and is it right for you and your business? Cyber liability insurance, also known as cybersecurity insurance, provides coverage for a range of cyber risks. The organization must purchase a policy as a proactive step to demonstrate commitment to cybersecurity. Read below about cyber liability and why it might be an important part of your insurance portfolio. When considering coverage, make sure to select the right cyber insurance policy to ensure comprehensive protection against evolving threats.
What is Cyber Liability Insurance?
Cyber liability insurance (sometimes seen as “cyber risk insurance” or simply “cyber insurance”) is a form of blanket coverage that protects a business in case of financial loss from a cyber attack, such as a data breach and/or computer damage from malicious software. Cyber liability insurance coverage protects businesses from financial losses resulting from cybersecurity incidents, including data breaches, cyberattacks, and legal liabilities. Cyber liability insurance policies are comprehensive options that address a wide range of digital risks, including cyber extortion, funds transfer fraud, and service fraud. These policies provide coverage for both first-party and third-party damages, helping organizations remain resilient against cyber threats. Coverages can include protections for ransomware attack response, third-party vendor liability, and regulatory fines. Cyber insurance covers incidents such as data breaches, hacking, extortion, legal expenses, and data theft. The policy also addresses risks like security failure and security incidents, which can result from unauthorized access or breaches. Prior breaches—security incidents that occurred before obtaining the policy—are typically excluded from coverage and can affect eligibility. Ineffective security processes and poor configuration management are common exclusions, as attacks resulting from these preventable issues are not usually covered. Human error, such as mistakes or negligence by employees, is another frequent exclusion in cyber liability insurance. Insider attack, where data theft or loss is caused by employees or other insiders, is also often excluded or limited in coverage. Regulatory investigation costs, including penalties and legal expenses arising from inquiries by authorities after a breach, may be covered under certain policies. Protecting private data is a key focus, as breaches of sensitive information can lead to significant legal and financial consequences. Compared to traditional business insurance like property insurance, cyber liability insurance offers specialized protection for digital risks. You can add cyber coverage to existing business insurance policies for enhanced protection. A cyber liability policy is a specialized insurance product designed to cover costs associated with data breaches, cyberattacks, and legal liabilities, and is especially important for high-risk businesses handling more sensitive data. Insurance providers set requirements and assess risk factors such as business size, industry, and cyber defense measures when offering cyber liability coverage.
Understanding Cyber Risks and Attacks
Cyber risks are a growing concern for businesses of every size and industry. As companies rely more on digital tools and online platforms, the threat of cyber attacks and data breaches becomes ever more real. Cyber incidents can range from phishing scams and ransomware to large-scale data breaches that expose sensitive customer information. The consequences of a cyber attack can be devastating, leading to lost income, legal fees, and long-term reputational harm.
Understanding the types of cyber risks your business faces is the first step in protecting your operations. Data breaches can result in the theft of customer data, while security breaches may disrupt your ability to serve clients or even halt business operations entirely. Cyber insurance coverage is designed to help businesses manage these risks by providing financial protection when the unexpected happens. Most cyber insurance policies offer both first-party coverage, which addresses direct losses such as data restoration and business interruption, and third-party coverage, which covers legal liabilities and claims from customers or partners affected by a cyber incident.
By investing in the right insurance coverage, businesses can protect themselves from the devastating financial consequences of cyber attacks and ensure they have the resources needed to recover quickly. Cyber insurance policies are a critical component of a comprehensive risk management strategy, helping to safeguard your company’s reputation and bottom line.
What Does Cyber Liability Insurance Coverage Include?
Generally, a cyber liability insurance policy covers your business if you experience a data breach, which can result in major fines, legal fees, and potential damage to your business and its reputation. A data breach can be defined as a breach or theft of an individual’s personal information, including Social Security or credit card numbers. Handling customer information such as credit card information and Social Security numbers increases your risk and can influence the cost and coverage needs of your policy. Personally identifiable information (PII) is a key factor in determining premiums, and businesses that handle more sensitive data or have more employees may face higher premiums and insurance costs.
Cyber insurance policy cover typically includes protection against internet-based threats, such as hacking, ransomware, and cybercrime, and provides specific protections beyond traditional insurance and commercial liability policies. Cyber insurance cover addresses a wide range of cyber risks, including digital threats that traditional commercial liability policies do not cover, such as data breaches, ransomware attacks, and cyber extortion. Cyber insurance coverage is a core component of cybersecurity risk management, helping businesses respond to incidents like data breaches, ransomware attacks, and network intrusions. Coverage options can be tailored to address different types of risks and costs, such as forensic investigations, business interruption, and legal expenses.
As with other policies, you can choose your amount of coverage, but usually, it also covers:
- Recovering data
- Recovering and restoring identities of affected customers
- Repairing damaged computer systems
- Customer notifications about the breach
- First-party coverage, which pays for losses directly incurred by your business, such as data restoration and notification costs
- Third-party coverage, which covers liabilities and legal costs arising from client-related data breaches or cyber incidents
- Third-party cyber coverage, which pays for legal costs and liability claims involving clients or third parties, is especially important for IT professionals and tech companies
- Incident response, providing immediate response actions and guidance after a breach
- Public relations costs, helping manage your company’s reputation and communication after a cyber event
- Legal costs, covering expenses for legal defense and settlements after a cyber incident
- Ransom payments, covering ransom demands during a ransomware attack
Some cyber insurance policies may also address bodily injury resulting from cyber incidents, such as attacks on connected devices or medical equipment.
In the event of a data breach, most states are required to notify customers. This can be costly to your organization. Electing to have cyber liability insurance will assist with the necessary financial resources to comply with local and state law. Cyber insurance can also help with ransom payments if your business is targeted by a ransomware attack, and can provide more coverage for businesses facing higher risks or handling more sensitive data.
Cyber Insurance for Small Business
Small businesses are increasingly targeted by cyber criminals, often because they have fewer resources to dedicate to cybersecurity and may have poor security processes in place. Unfortunately, a single cyber attack can have a significant impact on a small business, leading to financial losses, compromised customer data, and even the closure of the business.
A cyber liability insurance policy is an essential tool for small businesses looking to protect themselves from the fallout of data breaches, cyber incidents, and other cyber risks. Cyber insurance policies for small businesses typically include coverage for both first-party losses—such as the costs of restoring data and notifying affected customers—and third-party coverage, which helps with legal expenses and claims from clients or partners impacted by a cyber event.
When choosing a cyber insurance policy, small businesses should look for coverage options that address their unique risks, including protection against cyber attacks, data breaches, and security failures. By working with a reputable cyber insurance provider, small businesses can tailor their coverage to fit their needs and reduce their exposure to cyber risks. Investing in cyber insurance not only helps protect your business operations and customer data, but also provides peace of mind knowing you have a safety net in place should the unexpected occur.
Managing Data Breaches
A data breach can be one of the most challenging events a business faces, with potential consequences ranging from legal fees and regulatory fines to reputational harm and lost customer trust. Effectively managing a data breach is crucial to minimizing the financial and operational impact of a cyber incident.
Having a comprehensive response plan in place is essential. This includes promptly notifying affected customers, conducting thorough forensic investigations to determine the scope of the breach, and offering credit monitoring services to help protect those whose information may have been compromised. Cyber insurance policies can play a vital role in this process by covering the costs associated with managing a data breach, including legal defense costs, regulatory fines, and other related expenses.
By securing a robust cyber insurance policy, businesses can ensure they have the financial support needed to navigate the aftermath of a data breach. This not only helps cover immediate costs but also supports long-term recovery efforts, allowing your business to maintain its reputation and minimize financial losses in the wake of a cyber incident.
Cyber Insurance Costs
The cost of cyber insurance can vary widely depending on several key factors. The type of business you operate, the amount and sensitivity of the data you handle, and the strength of your security measures all play a role in determining your premiums. For example, financial institutions and healthcare organizations that manage more sensitive data often face higher cyber insurance costs due to the increased risk of cyber incidents.
When evaluating cyber insurance options, it’s important to consider the types of coverage available. First-party coverage protects your business from direct losses, such as data restoration and lost income following a security breach, while third-party coverage addresses claims and legal expenses resulting from damages to others. The level of coverage you choose, as well as any additional features or endorsements, will also impact your overall insurance costs.
Cyber insurance providers offer a range of pricing options, including monthly and annual premiums, to help businesses manage their insurance expenses. By carefully assessing your cyber risks and selecting the right coverage options, you can ensure your business is protected from financial losses caused by cyber incidents—without overextending your budget. Investing in cyber insurance is a proactive step that helps safeguard your business’s future and ensures you can continue to operate even in the face of a serious security breach.
How Cyber Liability Insurance Can Benefit Your Company Against Cyber Risks
Any business, whether a mom-and-pop store or a large corporation, that incorporates technology in its daily operations should elect to receive cyber insurance. This is especially important for large corporations that oversee personal and private information of a large consumer base. The amount of customer information, such as credit card details or Social Security numbers, you handle can impact your coverage needs and insurance costs. More employees can increase the likelihood of security breaches and claims, affecting your rates.
As technology becomes more advanced and is increasingly used for business operations, there are growing risks for data breaches and other cyber attacks. Each year, cyber attacks become more sophisticated and target more companies. Don’t fall prey to complicated cyber attacks that leave your company at risk of significant financial loss. Cyber defense measures, such as multi-factor authentication, are important for eligibility and can help lower your premiums. Errors and omissions insurance, or omissions insurance, can provide additional protection for professional liability related to cyber risks and service mistakes. Cyber liability insurance can also extend protection to your client’s business in case of legal actions or damages resulting from cybersecurity incidents.
Elect to receive cyber liability insurance and make sure you’re not blindsided by a cyber attack. They can strike at any time, often by accessing your systems through vulnerabilities. The cost of cyber insurance varies based on business size, industry, data handled, and coverage limits, with higher premiums for businesses in higher-risk industries or those handling more sensitive data. Understanding your cyber insurance cost and coverage options is essential for comprehensive protection.
Pepper, Johnstone & Company protects your family with a choice of multiple insurance agencies to choose from, for home, auto, and business. We’ve helped countless people save money on their insurance while making sure they’re properly covered. Visit us today at our website, or give us a call at 866-381-5821 to get us working on a quote for you today. You can also request a cyber liability insurance quote here.