The year 2020 saw a record number of cyberattacks, with 36 billion files being exposed in data breaches within the first half of that year, according to Risk Based Security. The fact that many IT leaders and security experts believe that cybersecurity risks are rapidly rising makes a case for organizations to increase their IT security investments. Here’s a look at why it’s even more important now than ever to have cyber liability insurance as a risk mitigation strategy for small businesses.
What Is Cyber Liability Insurance?
Cyber insurance is a protection against business liability for attacks involving sensitive customer data breach. It can cover claims due to the theft or exposure of social security numbers, health records, and other personal information belonging to business customers.
Does General Liability Policy Cover Cyber Liability?
A general liability policy covers claims/losses arising from your products, services, or operations, such as bodily injury and property damage. However, this policy won’t cover your cyber liability.
What Does Cyber Insurance Cover?
This policy covers the cost of liability lawsuits against your business and expenses like:
- Data breach notifications to victims, which can be costly and may be required by state law
- Customer identity restoration, an optional public relations expense that can help repair your image
- Data recovery
- Computer system/software repair and restoration
Who Needs Cyber Liability Insurance?
You need cybersecurity insurance if any of the following applies to your business or operations:
- You have an online component like a business website
- You handle, store, or transmit digital data
- You rely on information technology (e.g., software, IoT, or cloud computing) to conduct business operation
What Type of Attacks Result in Cyber Insurance Claims?
You can file a cyber insurance claim after an incident like:
- Ransomware (denial of service) attack
- Fund transfer fraud
- Email breach
What Does Cyber Insurance Cover?
While specific protections vary from policy to policy, the following risk items are usually covered:
- Immediate financial cost occasioned by a cyberattack
- Data recovery costs
- System forensics (threat/attack analytics)
- Re-mediating a cyberattack
- The ransom fee if the insurance provider approves of it (however, the FBI advises against it)
What Isn’t Covered by Cyber Insurance?
Cyber insurance doesn’t usually cover all financial loss resulting from a data breach. Some coverage exclusions include:
- The financial cost of intellectual property violations after a cyberattack
- Business lost due to reputational damage
Sometimes, a cyberattack may cause customers to lose faith in your ability to protect their personal data. If they stop buying your services or products as a result, you won’t have cyber insurance protection for the lost revenue.
What Are the Requirements to Apply for a Cyber Liability Insurance Policy?
Insurance companies expect their clients to be proactive in preventing cyberattacks. They don’t want to cover threats that are certain to happen due to negligence on the part of the client’s IT security team.
Therefore, when applying for a cyber liability policy, be sure to provide accurate documentation for your preventive cybersecurity measures. You have to continue building and strengthening your anti-hacking defenses, or you might lose your insurance protections down the line.
Equally important, have a proper grasp of the systems and data that your organization depends on to get adequate insurance coverage.
Cyber Insurance in the Future
If past reports are anything to go by, cyberattacks against businesses will continue to increase in frequency and complexity. All stakeholders, especially insurers and their clients, have to rethink cyber insurance, going forward.
Instead of a reactive approach, insurers are increasingly adopting and encouraging a combination of audit, protection, and loss prevention. They are actively helping their customers to elevate their IT security to detect and thwart attacks before they happen.
These are some of the most important facts to keep in mind about cyber liability insurance. If you’d like discuss your cyber liability coverage needs in detail, contact the experts at Spotlight Insurance Agency today. We are happy to help you customize your data breach protection.