What Is Cyber Liability Insurance Coverage?
More businesses than ever rely on cloud storage solutions and mobile devices with remote access to company networks, so cyber risk mitigation has never been more urgent. Hybrid and remote work environments offer exceptional advantages, but your business must protect its interests with a robust cyber coverage policy.
Cyber insurance coverage is a policy that protects businesses against disasters caused by cyberattacks or data breaches. It's armor against legal defense costs, financial losses and reputational damage caused by data loss, ransom, theft and other cyber risks.
Why Businesses Need Cyber Liability Insurance or Data Breach Coverage
Considering the cost of cyber liability insurance is relatively low and the potential for cyber threats to harm small businesses is high, it's easy to see why you should invest in cybersecurity insurance. Failing to put a recovery plan in place in case of cyber incidents could cost millions of dollars in legal expenses, regulatory fines and revenue loss.
Criminals assume small- to medium-sized firms will likely have fewer enterprise risk management protections to prevent a cyber incident. Unmitigated cyber extortion or theft could be fatal for a new or small company.
Security breaches involving payment cards could significantly damage a business of any size due to lost income, legal fees and ongoing reputational harm.
What Is Data Breach Insurance?
A data breach insurance policy focuses explicitly on unauthorized access, causing data breaches of protected health information (PHI) and/or personally identifiable information (PII).
This type of cyber risk insurance covers data that's exposed either accidentally by human error or on purpose by hackers. It covers first-party losses for your company if an unauthorized person gains access to its PHI or PII data for any reason.
Data Breach vs. Cyber Liability Insurance Cover
Whether you opt for security breach insurance, cyber liability coverage, or both depends on your company's infrastructure. Organizations with sizable PII and PHI databases, such as accountants and health care practices, require data breach insurance. If your network stores customers' personal information, you'll need cyber liability insurance to protect your business from a cyberattack.
Today, most companies operate online in some capacity and store customer and employee information digitally, which means the majority also require cyber insurance or data breach insurance.
What a Cyber Liability Insurance Policy Typically Covers
Typically, cyber insurance covers the following:
- Network security coverage for network security issues such as company emails being compromised, malware infection, data breach or ransomware — covers first-party costs such as credit monitoring services and IT forensics
- Privacy liability coverage associated with a cyber event or privacy law violation — third-party coverage of legal fees and government- or law enforcement-issued penalties
- Network business interruption covering operational cyber risks such as hackers and computer system breakdowns
- Repair costs for damaged systems
- Data restoration to recover lost information
- Crisis management, including PR experts and legal counsel
- Notification of all affected customers
What's Typically Not Covered by a Cyber Insurance Policy?
Cyber insurance coverage isn't a general liability insurance policy and doesn't cover the following:
- Professional mistakes or omissions, which are covered by professional liability insurance
- Potential future profit loss
- Property damage or bodily injury
- Data lost due to dishonesty
- Social engineering
- Loss of value as a result of intellectual property loss
- Loss of property
- Cost of upgrading systems
- Weak security protocols
All businesses must have a robust cybersecurity strategy at the heart of their operation. Insurance is more of a reactive measure that can buffer a few of the consequences of cybercrime, but only a plan managed by a team of experts can help prevent it from happening.
Who Needs Cybersecurity Insurance?
Traditional insurance policies weren't created with the ever-evolving threat of cybercrime at their core. Any business that stores sensitive data online with a policy that doesn't cover cyber threats might consider investing in a cyber insurance policy. It protects businesses by providing access to financial support and expert help throughout a data breach or cyber event's investigation, notification, recovery and post-recovery phases.
If your company can't afford the hefty cost of cyber insurance, a managed cybersecurity strategy is the number one defense. Plus, in many cases, insurers prefer to partner with companies that already have stringent security measures in place.
What Happens After a Cybersecurity Breach?
Phishing, viruses, ransomware and baiting are common cyberattacks that lead to sensitive information getting into the wrong hands. When cybersecurity is compromised, cyber insurance carriers can help you take damage limitation steps, such as:
- Containing the data breach
- Assessing the damage
- Creating a response plan
- Determining the source
- Fixing vulnerabilities
- Informing all stakeholders
- Developing a post-recovery plan
- Testing defenses
- Updating protocols
Costs of Data Breaches and Cyberattacks for Your Business
Security breaches can be catastrophic for businesses, leading to hefty fines, customer data theft and legal ramifications. Below is a breakdown of the biggest costs of cybercrime and data loss.
Revenue Loss
No matter what type of cyberattack your company is subject to, revenue loss is inevitable if it doesn't have cyber liability insurance coverage. DDoS attacks could prevent people from making purchases on your website, while large-scale customer data theft could lead to reputational damage that renders your brand undesirable to customers.
Fines and Fees
The Payment Card Industry Security Standards Council issues penalty fines for serious security breaches. Other card networks and regulatory agencies may also consider fining companies for data breaches.
Investigations
If your business leaks sensitive data, you'll be responsible for conducting a thorough forensic investigation into the causes. While this is essential for preventing future attacks, it can be expensive without insurance.
Security Costs
Costs such as credit monitoring, identity theft repair and card replacement can quickly add up. In addition to the direct costs incurred by your business, you'd be responsible for recovering third-party losses due to your security breach.
Reputational Damage
A good reputation is one of the few requirements for all successful businesses. While huge corporations can afford large research and development teams and rebranding, most ordinary companies rely heavily on reputation. Consumers value privacy and security highly, and many would avoid a company known for losing customers' personal information.
Loss of Trust
Trust is the reason buyers feel comfortable entering their payment information into your website. If they don't feel you can sufficiently protect their bank details, they'll hesitate to buy anything from your site. Having cyber insurance is critical for maintaining customers' trust in case of a digital attack.
Does Cyber Insurance Coverage Have a Deductible?
Like any type of policy, cyber insurance coverage includes a deductible. That means there's a certain amount your company needs to pay out-of-pocket following a cyber incident before the insurance agent steps in and covers costs.
Protect Your Business From Cyberattacks With Haycor Computer Solutions
You must have robust cybersecurity measures to receive a payout in case of a data breach. Plus, the lower the risk you pose to the insurance provider, the cheaper your rates will likely be. For companies that can't afford cyber liability insurance, consider cybersecurity management from Haycor as a more affordable and proactive alternative.
Let Haycor Computer Solutions help you implement and maintain best-practice security practices to ensure you meet regulatory standards and prevent data from falling into the wrong hands. Call us today at (647) 370-9553 for a quote.
