Cyber insurance liability is one option that helps protect your business against losses resulting from cyberattacks.
What is Cyber Insurance?
This is a specific insurance product intended to protect businesses from internet-based risks and, more generally, from risks relating to information technology infrastructure and activities. It is designed to help businesses hedge against the potentially devastating effects of cybercrimes such as malware, ransomware, distributed denial-of-service attacks, or any other method used to compromise a network and sensitive data.
The cost of dealing with a data breach goes beyond repairing the database, strengthening security procedures, or replacing lost laptops. Regulations requiring notifications to affected customers also drive up costs for companies when a data breach compromises personal or confidential data. Traditional business insurance may not be enough to protect companies from cybercrime.
Types of Cyber Liability Insurance Coverage
Cyber liability insurance generally comes as either first-party coverage or third-party coverage. These policies protect businesses in different circumstances.
- First-Party Coverage
First-party coverage covers the cost of things like
investigation of the incident.
Ransomware attacks are based on coverage limits.
Risk assessment of future cyber incidents
Lost revenue due to business interruption
Notifying customers about cyber incidents and providing them with anti-fraud services such as credit monitoring
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Third-Party Coverage
This can protect your business if a third party sues you for damages as a result of a cybersecurity incident. The insurer generally pays for
Attorney and court fees associated with legal proceedings
Regulatory fines for non-compliance
Settlements and court judgments
What Cyber Liability Insurance Covers
Every company or business experiences cyber risk, no matter its size. But the bigger the business, the more areas of vulnerability it has. Generally, cyber insurance is designed to protect your business from these risks.
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Privacy Liability Coverage
Privacy liability coverage is very important for every company, particularly those with information or privacy risks. Customer and employee information can be sensitive, and breaches or violations that expose such data not only threaten the security of those compromised but also expose your business to liability.
Privacy liability coverage protects your company from these liabilities arising out of a cyber incident or privacy law violation.
Here are two examples of what privacy liability coverage covers:
Defending your organization from customer class action litigation and funding a potential settlement in the event of a cyber incident or data breach
Legal expenses, fines, and penalties incurred due to regulatory investigations by the government or law enforcement, both federal and foreign,
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Network Security
Network security coverage protects an organization during network security failures, such as data breaches, cyber extortion demands, malware infections, business email compromise events, and ransomware. It covers first-party costs incurred directly as a result of cyber incidents.
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Network Business Interruption
Network business interruption coverage helps companies facing operational cyber risks. It includes losses arising from system failures, such as human error or failed software patches, and security failures, like a third-party hack. For example, when an on-premises network shuts down due to an incident, organizations relying on the network to operate can use this coverage to recover lost profits, fixed expenses, and additional costs incurred while being affected by the incident.
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Errors And Omissions Coverage
The policy kicks in if an incident occurs in a customer’s business because of an error on your part. You should consider buying this coverage if your business manufactures a technology product or provides technology services.
For example, if a customer’s financial data is stolen from your computer, first-party or liability insurance would provide coverage. However, if you write an accounting software program that has an error in the code and the customer’s data is stolen directly from their computer as a result, errors and omissions provide coverage.
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Media Liability Coverage
This provides coverage for intellectual property infringements other than patent infringement resulting from advertising your services. It often applies to both your online advertising, social media posts, and printed advertising.
What is not Covered by Cyber Liability Insurance
Cyber insurance is intended as a safety net to protect businesses against losses resulting from hackers or other cybercrime. However, there are some things that most policies do not cover. Some are.
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Lost Equipment
Depending on the individual policy`s exclusions, the basics of cyber liability insurance generally do not extend to cybercrime that originated due to a lost company laptop or portable device. Sometimes, if the device is encrypted, this exclusion does not apply, so it`s important to ensure proper security is enacted on all devices.
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Prior Breaches
Security events or breaches occurred before the organization purchased a cyber insurance policy.
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Human Error
Cyberattacks are caused by human error by the organization’s personnel.
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Poor Security Processes
Attacks that occur due to ineffective security processes or poor configuration management
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Pre-Existing Vulnerabilities
Breaches that occurred because the organization failed to address or correct a previously known vulnerability
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Technology System Improvements
Costs related to technology improvements, such as hardening networks and applications,
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Sales Losses
While most cyber policies will cover operation losses, such as payroll, in the event of a business interruption event, many cyber policies don`t cover lost profits. Additionally, cyber insurance coverage often includes a waiting period for business interruption, where losses are only covered after a designated period ranging from 1 to 12 hours.
Frequently Asked Questions?
What are the Benefits of Cyber Insurance for Businesses?
No matter what the policy includes, every business stands to gain from having cybersecurity insurance.
Here are some of the top benefits it offers:
- Risk Mitigation
To qualify, your organization will need safety measures such as firewalls and password management. These tools alone will make your business a harder target for hackers and scammers to infiltrate, reducing the risk of an attack.
- Competitiveness
Cyber liability insurance is likely to become a contractual requirement for your organization, either by customers, your external IT provider, or maybe even your insurance carrier. Having a cyber insurance policy before it’s required could help differentiate your organization.
- Peace of Mind
Cyber insurance will provide you with peace of mind that you’ve taken action to ensure the best outcome from a cyber incident.
- Limited Financial Liability
With cyber insurance, your organization will be in a better place financially to respond to cyberattacks. The financial compensation will help you be able to quickly respond and lessen the burden on your organization.
- Recovery Resources
Your cyber liability insurance policy will cover the cost of professional services to aid recovery. These might include the services of experienced crisis management professionals.
- Consideration for Selecting the Appropriate Cyber Insurance Policy
Pricing cyber risk will typically depend on an enterprise`s revenue and the industry it operates in. To qualify, they will likely need to allow an insurer to carry out a security audit or provide relevant documentation courtesy of an approved assessment tool. The information accrued from an audit will determine the type of insurance policy the provider can offer and the cost of any premiums.
How to reduce cyber risk in business
Cyber risk is a significant concern for companies of all sizes and across all industries. Organizations need to take decisive actions to strengthen their cyber defenses and manage their cyber risk through a combination of cyber insurance, secure devices, domain expertise, and technology.
Conclusion
A cyberattack can have serious repercussions for businesses as well as individuals. It is good to be prepared to deal with any such event. A cyber insurance policy will not just protect you in case of a cyberattack but will also help reduce such risks by checking for their occurrence.
While investing in a cyber insurance plan, also take measures to make your digital world more secure. Maintain a backup of important data.
