With more than 2,200 recorded cyber attacks every day, insurance coverage for data security has become necessary for every technologically dependent company or organization.
Businesses need a suitable policy to protect them in the event of a cyber security breach. Even if you go above and beyond to protect sensitive customer information, hackers may still find a way to access your data.
However, you can't just sign up for the first cyber liability policy you see online. You need to find a cyber liability plan that provides sufficient coverages, covers daily business operations, and has affordable premiums.
Cyber insurance is a specialty line business policy that provides coverage against internet-based risks such as data breaches and cyber attacks. The coverage extends to both first- and third-party expenses. These fees include, but are not limited to, data recovery, court proceedings, brand management, and regulatory fines.
Businesses can use their cyber policy to:
Data loss is a costly crisis, but recovering compromised information is even pricier. Reports indicate that the average cost of a data breach is $242 per piece of data.
To put this into perspective, small business owners who lose 1,000 various documents would have to shell out $242,000 in the event of a data breach. Meanwhile, for larger organizations that hold upward of 10,000 pieces of business documents and paperwork, data breaches would set them back by at least $2.5 million.
Do not overlook public relations (PR) management. Even if you recover the lost data and settle all the regulatory fines, long-term business continuity would be difficult if you cannot improve your brand's reputation.
Money cannot buy back trust. However, you'll need sufficient funds to cover the cost of reimbursing your customers' monetary losses, monitoring their credit scores, and reaching out to them individually after the attack.
Cyberattacks happen in the blink of an eye. However, the court proceedings following a data breach can span anywhere from a few months to even a couple of years. Since you'll need the help of a professional legal representative, the attorney fees can pile up during that time frame.
Statistics show that defense attorneys charge an average of $100 to $300 per hour. That means that if the case proceeds at a swift six-month pace and you consult with your attorney for no less than 10 hours per week, you'll still end up paying $24,000 to $72,000.
Cyber insurance policies only cover internet-based risks. You'll need another type of specialty line policy to cover the following:
Cases of intentional damage are those wherein the policy owner willingly compromises data to make a claim. This classifies as insurance fraud and is a criminal act punishable in all 50 states.
As the name suggests, cyber insurance only covers internet-based risks and attacks. The policy can provide neither monetary nor legal assistance if the policy owner, employees, or customers are involved in an on-site accident.
Coverages stop at recovering compromised data and restoring system functionality. You cannot use your policy to boost the performance of your security network or computer hardware.
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Cyber liability policies are comprehensive. In most cases, they'll shoulder most of the costs of recovering compromised data, repairing brand reputation, settling court dues, customer credit monitoring, attorney charges, regulatory fines, legal settlements, and lost revenue from the data loss.
Contrary to popular belief, business size isn't a crucial factor when assessing one's cyber insurance needs. A standalone cyber liability policy is essential to any business that stores employee or customer personally identifiable information (PII) electronically. This rule is universal and applies to all entities, whether it's a small data entry agency or a large outsourcing organization.
Data breach insurance provides limited first-party monetary coverage. These policies don't cover third-party monetary and legal losses such as legal defense costs and crisis management fees. Data breach coverage only covers a partial amount of the losses following a cyberattack.
Data protection insurance covers the effects of cyberattacks. The coverage depends on your active policy. For example, if you only have general liability in place, then coverages stop at first-party monetary losses and human error. Meanwhile, those who have comprehensive cyber liability policies can receive extended assistance with first- and third-party monetary and legal losses.
Overall, objective assessment is the key to finding the ideal cyber security insurance policy. Spot the most common data breaches your network security is prone to, quantify how much data you store electronically, then calculate your budget.
That said, we strongly advise against skimping on insurance policies. The pricey premiums might hurt your profits a bit, but the protection they provide in the event of an alarming cyberattack or data breach is invaluable.
Remember: data breaches can cost millions of dollars. Having financial and legal support will significantly increase your chances of survival and long-term continuity.
Struggling to find the right cyber insurance policy for your business? Assured Standard has multiple guides that compare the most popular providers in the country. To learn more about protecting your business through insurance, reach out to the Assured Standard team today!