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    What Does Cyber Liability Insurance Cover?

    Many business owners have instigated work from home policies following the pandemic, leading to greater cyber security risks. Some challenges include employee access issues, phishing emails, the rise of social engineering attacks, and more. As a result, cyber liability insurance has created new policies to address these cyber exposures.

    With a 2019 report from the World Economic Forum explaining how cyberattacks are the second-highest business risk on a global level, network security failure is something that every company, big and small needs to address. Policies covering the cost of data breaches, fraud, ransomware, and other crisis management expenses help protect your organization from paying high financial and legal costs.

    Cyber Liability Coverage

    Many small business owners wonder whether they need to invest in cyber liability insurance in the first place. However, if your company stores or deals with any customer data on computer systems, you'll need a cyber policy. When it comes to handling credit card numbers and other sensitive data, it's better to be safe than sorry.

    Although the most common targets of hackers tend to be financial providers and those in the healthcare industry, any business can be vulnerable to cyber threats and a ransomware demand, making cyber liability policies a crucial investment.

    A cyber insurance policy can pay for liability claims including:

    • The legal obligation to notify any customers and those involved in the cyber breach
    • The cost of identifying and fixing gaps in your security system
    • The cost of financial monitoring services for those impacted
    • The cost of hiring a public relations firm to deal with reputational damage to your company

    On top of more common types of insurance for your business, a cyber insurance policy is often purchased on top of a general liability policy. While general liability insurance deals with claims related to bodily injury and property damage by your company, cyber insurance deals with claims relating to stolen Social Security numbers, bank account numbers, and health records.

    First-party cyber liability insurance

    First-party coverage deals with costs directly related to your company. In the event that you suffered a data breach, it can shoulder some of the cost of notifying customers and paying for data restoration, as well as paying for credit monitoring services for those impacted by threats.

    It is also known as data breach insurance, which is also recommended for retailers and those whose coverage needs include dealing with sensitive data that can be misused by third parties.

    In summary, first-party cyber liability insurance can cover:

    • Cyber extortion payments fees
    • Business interruption expenses such as renting equipment
    • Monitoring services regarding customer credit and fraud
    • Hiring a public relations expert and dealing with crisis management
    • Notifying customers who have been impacted by the breach
    • Hiring an expert to investigate the extent of the security breach

    Third-party cyber insurance

    On the other hand, third-party coverage deals with claims made against your company by customers. For instance, if you fail to prevent a data breach on your computer system, a customer could sue you for leaking their information. It helps cover the cost of legal fees and any settlements.

    Third-party cyber liability insurance can cover:

    • Legal defense costs for your organization
    • The cost of settlements if clients choose to settle out of court
    • Any fees you are legally obligated to pay after a data breach
    • Other court costs and fees

    This type of cyber liability insurance can provide you protection when purchased on top of your errors and emissions policy.

    Frequently Asked Questions

    Why do I need cyber liability insurance?

    Often, we tend to hear about larger businesses being targeted by hackers. However, small companies are also at risk for unauthorized data access. Small businesses typically don’t have the financial resources to cope after a cyber attack, and cyber liability insurance coverage options can help cover some of the legal fees involved.

    What is not covered by cyber insurance?

    This depends on the insurance company you choose, as some cyber insurance contracts have limitations that your business should be aware of. However, most companies don't cover risks such as:

    • Any potential profit you may lose in the future
    • A loss in value due to theft of intellectual property
    • The cost of hardware and software upgrades after a data breach has occurred.

    Additional Resources

    CyberSecure My Business™

    The National Cyber Security Alliance’s CyberSecure My Business™ is a national program that helps small and medium-sized businesses protect customer information and their employees online. They provide a program with series of workshops based on the National Institute of Standards and Technology (NIST) Cybersecurity Framework to educate the SMB community on cyber risks.

    In this day and age, cyberattacks and data breaches are very pricey and increasingly common. Companies of all shapes and sizes should look into purchasing both first and third-party cyber insurance since statistics show that 60% of small businesses go under within six months of a cyberattack.

    Cyber insurance policies can help your business pay for costly expenses including legal fees, fines, and breach coaches that can get you back on your feet as soon as possible. For more information on what extent of cyber coverage you need for your business, contact us today at Assured Standard.

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    Assured Standard will protect your business with the right insurance, depending on your needs. Now more than ever, it’s crucial to have the right general liability insurance experts on your side. Protecting the future of your business starts today.
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