Are you a business owner or operations manager? Then you know that protecting the huge amounts of data you’re collecting each day is one of the most important aspects of your job.
Whether this is contact information from customers or financial data, it’s your job to make sure that this data is safe. However, even the most secure encryption services may still have loopholes that hackers can take advantage of. Your business is also susceptible to viruses or malware if your employees are working remotely and using the company’s hardware.
With this in mind, you need to be able to protect both your employees and company if the worst happens and you’re hacked. This is where cyber liability insurance comes into play.
Read on to learn the answer to “what is cyber liability insurance” and whether you should make the investment for your business.
What is Cyber Liability Insurance?
When you run any kind of large business that uses technology, you run the risk of data breaches, hacking, and more. Although security measures should be in place to protect both your business and your customers, there are times when even the toughest security measures aren’t enough.
Cyber liability insurance will help keep your business afloat by handling any financial losses due to cyber-attacks. It will also help cover privacy investigations, lawsuits, and more following a cyber attack.
What Does Cyber Liability Insurance Cover?
When you purchase cyber liability insurance, most policies will help you with first as well as third-party coverage. First-party coverage is the money that the insurance company will pay your business directly. This can be money to help inform customers of a data breach, purchase more electronic equipment, or more.
Third-party coverage refers to the cost of your defense as well as any claims or damages made. These are claims made by people who were injured by the cyber attack and resulting data breach. They may have been customers who experienced identity theft after the cyber attack.
Here are a few of the first-party coverages you’re typically able to find in cybersecurity insurance. Consider the following and what would be the most helpful for your business:
Loss or Damage of Electronic Data
This helps cover the cost of recovering, replacing, or restoring any electronic data that was lost or damaged during the attack. In order for the insurance company to payout, the loss or damage needs to be from a covered peril. This also might include the cost of hiring professionals that will help restore data.
Loss of Income
This will cover the income you lose as you try to avoid completely shutting down your business. Some insurance companies may also cover the loss of dependent income. This means that you’ll be reimbursed if your network provider’s system has been hacked or breached, and you’ve lost income as a result.
One of the harsh realities of cyber attacks is that hackers can hold your data hostage. You won’t be able to access your files, and they won’t release them unless you pay a huge sum. Some insurance companies will help cover the cost of any extortion payments you make.
Some states require companies to notify all of their customers in the event of a data breach, but those costs can quickly stack up. Insurance companies will help mitigate those costs. They may cover the costs of offering credit monitoring services and call center creation.
Depending on how bad the cyber-attack or data breach was, your business could take a bad hit to its reputation as customers lose trust. Insurance companies will help cover the costs of public relations and reputation marketing as you try to rectify your public image.
Many insurance companies also offer third-party coverage in the event of a cyber attack, denial of service attack, and more. This is needed when injured parties make claims against your company. Third-party coverage may also be needed for defense costs, though this may limit your insurance.
It’s important to remember that most policies are flexible. If you feel as if there is coverage that you don’t need, you’re welcome to speak with an agent to customize your plan in a way that works for your business.
Security and Privacy Liability
When your company suffers a cyber-attack or data breach, claims can be made that allege your business didn’t do enough to protect customers’ or employees’ data. This helps protect your company from bankruptcy resulting from those claims.
Electronic Media Liability
Insurance companies will also cover lawsuits that accuse your business of libel, slander, defamation, copyright infringement, or more. This is typically the result of private data being breached and then published on the Internet.
Lastly, third-party coverage will also cover any fines or penalties your company suffers as the result of data breach laws. If you need to hire an attorney in order to help you navigate these laws, third-party coverage will also pay for them.
What is Not Covered?
It’s also important to remember that cyber insurance companies don’t offer coverage for every type of claim. In some cases, you’ll need to have separate insurance policies for full protection. This includes:
General Liability Insurance
This can also be called commercial general liability insurance. This helps cover claims if your business caused property damage or bodily injury. It can cover medical costs, reputation management costs, advertising injuries, and more.
Commercial Property Insurance
This type of insurance helps protect any physical assets your company owns, such as furniture, vehicles, equipment, and more. If someone steals your inventory or there’s a fire, commercial property insurance will cover their replacement or repair.
Professional Liability Insurance
Mistakes happen, but honest mistakes still don’t protect you from being sued. If a customer believes that your mistake resulted in their own financial loss, they can take you to court. Professional liability insurance will help cover the costs.
How Much Cyber Liability Insurance Do You Need?
Now that you know what cyber liability insurance is and what it covers, it’s important that you obtain the coverage that’s right for your business. For instance, you don’t want to pay for comprehensive cyber liability insurance if you already have Errors & Omissions coverage that includes data breach insurance. You’ll just need the additional third-party coverage that will pay for claims made against your company.
Here are a few questions to ask yourself:
- What are our exposures?
- How are we securing our network now?
- What kind of information do we keep on file?
- How are we backing up our information?
Did you find that your company keeps highly sensitive information and doesn’t have an effective way of securing your network?
This is a good indication that you should look for cyber liability insurance as soon as possible. It’s also a wake-up call to look into secure web development and other services that can help enhance your business’s security.
Data Breach Insurance
You may also come across data breach insurance. It’s important to know the difference between data breach insurance and cyber liability insurance. They’re actually two different types of coverage. You can consider cyber liability insurance as more comprehensive coverage.
Data breach insurance, on the other hand, only offers first-party coverage if PII (personal identifying information) or PHI (protected health information) gets lost or stolen. Data breach insurance will pay for activities such as:
- Notifying all affected customers, patients, and employees of the data breach
- Hiring a public relations firm to help mitigate the damage in reputation
- Offering credit monitoring services to the victims of the data breach
- Investigation of the data breach
- Repairing damaged or stolen equipment
Errors & Omissions insurance often comes with data breach coverage. Since most states have data breach laws, it’s common for companies to have E&O insurance policies. It’s important to take a look at your existing policy to see if this is the case.
Questions to Ask A Prospective Cyber Insurance Provider
If you know you need cyber liability insurance but don’t know where to start, here are a few questions to ask providers. It’s important to receive quotes from several different providers who you trust in order to find the best coverage that meets your budget constraints.
What types of incidents are covered?
Most insurance policies will provide first and third-party coverage, but it’s important that they give you the details of the policy. This is especially important if you already have Errors & Omissions coverage and need a policy that fills in the gaps. It’s also important that you’re aware of any incidents that are specifically excluded from coverage.
Are there any regional restrictions?
Are you covered if a breach occurs outside your country? What if an employee is traveling for business and is hacked on a company-owned device? It’s important that you’re aware of any and all territory restrictions, as breaches can occur wherever and whenever.
How long do I have to report a breach?
For most policies, you have to report the cyberattack during a certain amount of time in order to receive the coverage you need. It may take some time before you actually pinpoint a breach. It’s important that the insurance company you’re considering has flexible reporting times as well as the ability to extend reporting times.
Do you have experience in my industry?
The healthcare industry and many others have specific compliance rules, laws, and regulations. It’s important that the insurance provider you choose has experience with your industry and is aware of how data should be handled.
What is your flexibility?
It’s important that you work with an insurance provider that’s adaptable and flexible. This is because the technology world is growing and expanding at an ever-increasing rate, meaning that your data will be at risk in different ways as the years progress. You don’t want to be strapped with an outdated policy that doesn’t provide all of the coverage you need to protect your business.
How quickly does the provider respond?
You’re obligated to report a cyber attack or data breach during the time required, so your provider should respond in a timely way as well. Ask your prospective provider how long they typically take to respond to claims. If they aren’t able to provide you with a definitive answer, this could be a major red flag to look elsewhere.
What is the cost?
The insurance company should be able to provide you with a detailed quote that highlights all the coverage you’ll receive. It’s also important that they’re upfront about how a data breach or attack will affect your premium later on, as making claims can increase your premiums.
Keeping Your Data Secure
Now that we’ve answered the question “what is cyber liability insurance,” we hope that you have a greater understanding of its importance. As technology develops as well as the ability to gather even larger amounts of data, businesses are leaving themselves exposed to hackers, denial of service attacks, viruses, and more if they don’t have the right protection.
Even if your company is using the most advanced encryption services, you can still be exposed to denial of service attacks, viruses, or malware that leave your data at risk of being corrupted, stolen, or lost. Cyber liability insurance gives you the coverage and peace of mind needed when the worst happens.
Without the risk of bankruptcy, you’ll be able to secure and find lost data, recover your public image with a public relations company, notify all victims of the breach, and more.
Are you interested in making your work life easier and more secure through cloud-enabled architecture? Contact us today to schedule a free of charge, 30-minute cloud architecture evaluation for your company!