Cyber Insurance is commercial coverage that allows organizations to protect their businesses from the risk of cybercrime activities such as data breaches and cyberattacks. This insurance product helps with computer-related risks that your commercial property or general liability coverage does not cover.
If your business makes use of computers to store, receive, or send information like tax returns, medical records, addresses, customer names, credit card information, employee records, or customer invoices, you should consider purchasing cyber insurance. It will help cover different losses that your business may suffer due to a cyberattack.
How Does It Work?
You can purchase the cyber policy from any company that sells other business insurance, like liability or property insurance. The cybersecurity policies usually include:
- First-party coverage for losses that affect your business directly
- Third-party coverage for losses caused to others due to your business
Generally, the policy helps cover financial losses from a cyber-attack or data breach. It also covers the costs of fixing the problems. This includes investigation fees, crisis communication, legal services, and customer refunds.
What Does Cyber Insurance Cover?
Just like I have mentioned above, cyber liability insurance helps protect your business from the costs of a cyberattack. This includes things like:
- Investigative services to find out what happened
- Recovering data
- Regaining control of your identity if it gets stolen
Also, it may cover the fees if your customers or business partners are affected by the breach. This includes;
- Legal fees
- Notifying customers
- Settlement costs
However, this insurance policy can cover different cyber threats such as network intrusions, cyber extortion, data breaches, denial of service attacks, and network outages.
Other expenses covered by cyber liability insurance include:
- Lawsuits from customers and employees due to privacy breaches
- Lost business income from network outages
- Public relations efforts to bring back your company’s reputation after a data breach
- Ransom payments to regain data access
- Regulatory fines
What Does Cyber Insurance Not Cover?
Checking your policy for exclusions is an advisable act. Some of the common events that may not be covered by the cyber policy include:
- The policy won’t cover business interruption costs due to system failures controlled by third parties. Expect interruptions that are covered by the dependent system failure.
- It may not cover intentional acts such as criminal conduct, fraud, or intentional acts done by you or the people you employ.
- Cyber insurance may not cover subsidiaries if you don’t have management control or major ownership.
Additionally, your policy might not cover claims in the form of criminal proceedings such as a criminal investigation, criminal action, or grand jury proceeding. You can purchase extra coverage that may help fill in gaps in your policy.
Who Needs Cyber Insurance
Just like I mentioned earlier, if your business makes use of computers to store, receive, or send information like tax returns, medical records, addresses, customer names, credit card information, employee records, or customer invoices, you should consider purchasing cyber insurance. Below are some examples of businesses that can benefit from this policy:
- Accountants
- Consultants
- Contractors
- Hair salons
- barbers
- IT services
- Marketing Companies
- Real estate agents
- Restaurants
- Retailers
You may be required to have cyber liability insurance if you are getting business insurance for a startup. So that you can satisfy your investors and board of directors. The amount of coverage you need will depend on your organization’s risk. It is advisable to speak with your insurance agent to determine the right amount of coverage that your business needs.
How Much Does Cyber Liability Insurance Cost?
The cost of cyber liability insurance for your small business will depend on different factors. These factors include your business’s exposure to cyber risk, the amount of coverage needed, your claims history, the number of people who have access to the company’s data and system, your network security, and the company’s revenue.
Difference Between Data Breach and Cyber Liability Insurance
Cyber insurance and data breach insurance are somehow related, but they are different.
Cyber insurance is more comprehensive. It helps to cover both third-party liability and data breach costs. This means it will pay for the damages or settlements if a client sues your business because their data was breached.
Data breach insurance, on the other hand, only covers the costs after your business faces cyberattacks. This may include restoring lost data and notifying the affected clients.
How to Choose the Right Policy For Your Business
The cost of your policy will depend on the industry you operate in and your enterprise revenue. To qualify, you will have to allow your insurance provider to carry out security audits. You can also provide relevant paperwork.
The information obtained from the audit will help guide the policy, the insurers’ offers, and the premium costs. Keep in mind that policies vary between different insurers. So, it is advisable to check your details carefully to make sure the required provisions and protections are covered by the policy proposed.