Cyber Insurance

Any business storing data on a network is exposed to cyber security risks. Data privacy attacks occur every 40 seconds in the U.S. Without cyber insurance, your business could be on the hook for state and federal fines and penalties, a forensic investigation, breach notification costs and even a future class action or third-party lawsuit.

Cyber Insurance Coverage and Policy

Cyber insurance covers the following first-party and post-breach expenses:

• Privacy attorney
• IT forensic investigation
• Compliance with state notification laws
• Credit monitoring for breached individuals
• PR firm for crisis management
• Regulatory fines
• Class action lawsuits resulting from the breach

Find out more about what's covered in a cyber insurance policy.

There is no standard cyber insurance policy that can be applied to every business, so having an experienced broker is key to making sure you’re adequately insured. Maintaining good cybersecurity practices can also help reduce the cost of cyber insurance premiums for businesses.

How Cyber Insurance Works

Cyber Risks and Threats

In today’s digital environment, cyber risks and threats are increasingly prevalent and can severely impact businesses. Some of the most common cyber risks and threats include:

• Data breaches: Unauthorized individuals gain access to sensitive data, such as customer information or financial records.
• Cyber attacks: Malicious actors compromise a business’ computer systems or networks.
• Cyber extortion: Businesses are threatened with a cyber-attack unless they pay a ransom.
• Business interruption: Cyber incidents cause businesses to halt operations, leading to financial losses.
• Cybercrime: Businesses fall victim to cyber-attacks or data breaches orchestrated by cyber criminals.

Mitigating these cyber risks involves implementing robust cyber security measures, such as firewalls, intrusion detection systems, and antivirus software. Additionally, businesses can reduce their cyber risk by adopting cyber insurance policies, which provide financial protection against cyber-attacks and data breaches.

Choosing the Right Cyber Insurance Policy

Selecting the right cyber insurance policy can be a daunting task, but considering several key factors can simplify the process. Businesses should evaluate:

• Coverage: Determine which types of cyber risks and threats the policy covers.
• Policy limits: Understand the maximum amount of coverage the policy provides.
• Deductible: Know the out-of-pocket amount the business must pay before the insurance kicks in.
• Premium: Assess the cost of the policy.
• Insurer reputation: Research the reputation of the insurance provider.
• Claims handling: Investigate how the insurance provider manages claims.

Businesses should also consider their specific risk profile and coverage needs. For instance, a business handling sensitive customer data may require a policy with robust data breach coverage, while a business at high risk of cyber-attacks might need coverage for business interruption.

Knowledge stands between hackers and your sensitive data. But there are common misconceptions about cyberattacks and coverage. Be aware of the following:

Myth #1: A small business like mine doesn't need cyber insurance.

Truth: 85% of data breach insurance claims come from small to medium-sized businesses, and more than 60% of those businesses never recover from a data breach. Regularly backing up your data is one way to minimize the damage that can occur if your business is compromised. What’s more, remote work has created a surge in ransomware attacks aimed at smaller organizations. If a computer is stolen or your network is infected with a virus, backups can enable your business to get back on its feet sooner.

Myth #2: Hackers aren't interested in my business data.

Truth: Any data that can be monetized, such as credit card numbers, health records and contact information, is an attractive target. And if it's easy to get, the more appealing it is to hackers. Even email addresses can be used to lure employees or customers into disclosing personal information. Instruct your employees to not leave laptops unattended in coffee shops or airport lounges and tell them not to use unencrypted smartphones to conduct business and to secure their devices when not in use.

Myth #3: Data breaches are already covered under my general liability insurance.

Truth: No, they are not, and general liability insurers are making sure consumers know by amending their policies to state explicitly that losses due to cyber breaches are not covered. But even with cyber insurance, there are steps you can take to reduce the risk of a data breach in your organization. For example, employees should know and understand the dangers of using unencrypted connections via public Wi-Fi hotspots.

Myth #4: IT vendors have cyber security figured out.

Truth: Two-thirds of data breaches are tied to third-party IT vendors. Cyber security and risk management should work in tandem. For greater peace of mind, be sure that you regularly receive audits and reviews from your data security providers. Those reports should include what they are doing to address their cyber security and governance in the event of a breach.

Myth #5: Cyber insurance is too expensive.

Truth: Although a cyber insurance policy may seem expensive, crisis response costs following a breach can easily climb well into the six-figures. There are also legal costs and settlements to consider. Few events can be more damaging to your business than a full-scale data breach. Cyber insurance is essential to protect your customers and your business.