With the growing number of data breaches impacting small business owners and companies, the need for cyber insurance policies is growing more and more vital. Statistics from Harvard Business Review state that the financial consequences of data breaches have risen from five-figure price tags to millions of dollars, as hackers continue to target vulnerable companies-and not just the larger businesses.
To manage business risks more effectively, investing in cyber insurance coverage can help companies recover from a cyber-related security breach, including the loss of personal information. However, the quality of cyber insurance products and policies can vary greatly between insurers.
While most businesses already invest in general liability policy insurance, cyber insurance is often not covered by these products. This focuses on aspects like recovering compromised data, repairing damaged hardware and software systems, and notifying customers in the event of a potential breach.
Cyber security insurance covers certain types of risks including data breaches and network damage that can affect both big and small businesses as well as their customers. During a breach, customer information like Social Security numbers, credit card numbers, and health records can be accessed by hackers in search of sensitive data.
In the event that a business suffers a cyber attack, cybersecurity coverage can financially protect a business from losses associated with fraud, security violations, data destruction, extortion demands, crisis management, and legal claims.
However, insurance coverages do not include potential future lost values and loss of value due to the theft of intellectual property. A cyber policy also does not typically cover any software or security upgrades that need to take place after a data breach or other cyber liability related event.
One of the most prominent cyber risks includes security issues. If a business fails to protect customer data properly, it can suffer a legal backlash from consumers. Companies can only regain their trust if they manage to implement policy changes after a breach has occurred, including liability insurance compensation for those involved and a detailed explanation of the cyber attack.
Security risks are also a significant part of cyber liability insurance policies, as an attack can result in data loss for involved parties. A virus can be introduced into a computer system, unauthorized access can occur. However, a data breach isn't typically covered by general liability insurance, as they are related to cyber security issues.
A cyber incident can also greatly impact businesses in terms of disrupting their day-to-day activities. Insurance companies provide cyber risk insurance to promote business continuity, cover lawsuits, and deal with other aspects including devaluations of collateral and lower revenues. As a result, a small business can greatly benefit from investing in cyber insurance policies for added safety.
Cyber liability insurance policies are especially crucial as they covers first-party costs directly related to a cyber security incident. In the event of network security failures, such as data attacks, a data breach, ransomware, or business email leak, insurance claims can pay for data restoration, legal expenses, public relations resources, and more.
Customer data and other forms of sensitive business data are covered by cyber insurance under privacy liability. When a cyber incident or property damage and privacy law violation occurs, this can risk the safety of those involved, but privacy liability coverage can help cover third-party costs. This includes examples like class action litigation, fines, and penalties that occur from government or legal enforcement.
A company that is heavily dependent on technology to operate should also consider this type of cyber insurance coverage. This plan addresses operational risks and can help prevent financial losses associated with a security breach. Fixed expenses and lost profits can heavily impact small businesses, but insurers can recover losses from third-party hacks and denial of service attacks.
A media liability insurance plan provides coverage for intellectual property infringement outside of patent infringement. Generally, this provides coverage for acts like libel, slander, and domain name infringement in the event of a lawsuit.
Errors and omissions provide coverage for claims related to a cyber event, in the event that a business can't fulfill its contractual obligations or deliver promised services. Businesses in the software and consulting field, and even engineers, doctors, and more should consider cyber liability insurance as a means of dealing with legal disputes and lawsuits from customers.
Although it was originally conceptualized in the late 90s, the cyber insurance market is growing larger than ever, with coverage expanding to meet the needs and demands of modern businesses. Unlike traditional business insurance policies, cyber insurance deals with the negative fallout from data breaches in the virtual world, which more and more businesses are becoming a part of.
When choosing an insurance provider, it's important to look at the benefits that a cyber insurance program can provide for a business. A small business would have different requirements from a larger business, and industry-specific companies need differents variants of cyber liability insurance. The right business insurance coverage can provide financial protection and preserve a brand's reputation.
A risk area that cyber coverage should address is cyber extortion defense. This covers the act of cybercriminals demanding payment by threatening an individual or business. They may threaten to leak classified information if the ransom isn't paid. This is linked to actions including ransomware, email campaigns, and distributed denial of service attacks.
To prevent the loss of data, cyber liability coverage helps deal with the outcome when an unauthorized person gains access to sensitive or confidential data. This can include personal data such as social security numbers, emails, names, and phone numbers, or even financial information like credit card and bank account details from transactions. Any business that stores this data is at risk.
This clause protects businesses that suffer a direct loss of income from property damage or destruction to insured property. An insurance provider will cover the consequences of actions including a data breach, data theft, denial of service, viruses, and malware that can prevent a business from operating normally.
When a cybersecurity breach occurs, your SMB would benefit from a cyber insurance plan that can cover the cost of hiring a forensics team to investigate the data breach. It can cost between $20,000 to $50,000 but can help provide expert evidence that a violation has occurred in the event of a class-action suit and future disputes.
A small business that gets sued for a data breach can carry a heavy financial burden. Under current laws, it is generally the case that the firm or organization responsible for storing user data is the one who needs to pay the fines and fees related to legal action. Having an insurance provider cover the costs of legal support and public relations can help a business stay afloat.
Certain sectors like healthcare, IT and telecom companies, and finance-related industries are especially vulnerable to experiencing a data breach. However, a small business is typically less prepared for cyberattacks compared to larger ones due to their limited capacity.
While an insurance provider can cover some of the financial costs related to a data breach, there are some forms of cyber risk that their plan does not cover. This includes cyber events caused by employees or insiders, failure to correct known vulnerabilities within the company, and any preexisting breaches before the plan was purchased.
The average cost of cyber liability policies costs approximately $1,500 per year for $1 million in coverage, with a $10,000 deductible, but this figure can greatly vary based on the size and industry of the business, amount of data, annual revenue, and chosen coverage terms.
Cyber insurance costs can vary depending on the insurance provider and the insured company's annual income and type of industry. Generally speaking, the company needs to conduct a security audit beforehand and use an approved assessment tool to determine the types of coverage needed along with the total cost of the premiums.
Companies and individuals should also pay attention to best practices when it comes to preventing leaks, to prevent legal claims from impacting their day to day operations. This includes installing antivirus software, conducting cybersecurity training for employees, and using two-factor authentication.
Due to the fact that the cyber insurance market is a relatively new industry, companies should always ensure to closely look over the details of an insurance plan to evaluate whether it can adequately protect them from financial damage in a worst-case scenario. With technology constantly evolving, they should also consider the threat of emerging cyber incidents.
For more tips on the best cyber insurance products and policies for your needs, contact us at Assured Standard for expert recommendations.