It’s no secret that cyber crime has been on the rise for several years now. According to a Clark School study conducted at the University of Maryland, a cyber attack occurs every 39 seconds—proving to be a constant threat to businesses each day. Cyber attacks have become so widespread that 78% of organizations in the U.S. have experienced at least one malicious attack within the past year.
Sadly, odds suggest it may only be a matter of time before your company experiences a cyber attack firsthand. This can be very worrisome for business owners as a single breach can have severe outcomes that range from reputational damages to complete loss of business. The National Cyber Security Alliance indicates that the costs between damages, lost time, and legal action is why most small to mid sized businesses are forced to close their doors.
Even with the latest and greatest cybersecurity protections, your company’s safety is never 100% guaranteed. Cyber criminals are constantly refining their strategies to better camouflage attacks and bait your employees into doing the difficult work for them.
Fortunately, there is a way to help safeguard your business even if your cybersecurity defenses are unable to shut down an attack—Cyber Liability Insurance.
Cyber Liability Insurance is “health insurance” for your businesses sensitive data and information. As explained by Nationwide, “Cyber Insurance generally covers your business’ liability for a data breach involving sensitive customer information, such as Social Security numbers, credit card numbers, account numbers, driver's license numbers, and health records.” Without it, your organization stands alone in dealing with the consequences of a breach.
In this article, we will discuss the following:
- Who needs Cyber Liability Insurance?
- What does Cyber Liability Insurance cover?
- What does Cyber Liability Insurance NOT cover?
- And, should you have Cyber Liability Insurance?
Let’s get into it...
Who needs Cyber Liability Insurance?
Any company that uses technology to store sensitive information—whether personal, customer, or financial data—should have Cyber Liability Insurance. It is that simple.
What does cyber insurance cover?
Cyber Liability Insurance helps cover a business from potential financial loss in the event of a data breach or similar cyber event.
In terms of coverage, it is commonly separated into first-party coverage and third-party coverage.
First-party coverage helps a business respond to the damages that occur as a result of a cyber attack on their network or system. Incidents that are commonly covered include:
Loss of Damage to Date
When data or programs are lost, damaged, or stolen, this coverage helps cover the expenses required for recovery.
Loss of Income and Extra Expenses
This covers the loss of income and other expenses that typically would have been earned under normal operations.
This would help cover the sum of money demanded by hackers during an attack. This is especially helpful in the case of a ransomware attack.
This covers the cost of notifying parties whose information has been leaked after the breach. Costs can include hiring call centers or other individuals to make calls on behalf of your business.
Damage to Your Reputation
Reputation is difficult to measure monetarily; however, this covers the cost of lost trust within your organization and the use of PR and Marketing to regain and maintain your previous reputation.
Third-party coverage is meant to protect against customers that have been breached and want to sue your business for negligence.
Network Security and Privacy Liability
This covers the cost of claims against your company for acting negligently and not maintaining appropriate security of personal data.
Electronic Media Liability
If your company’s information is spread online, this would cover the cost of lawsuits against you like libel, defamation, slander, and copyright infringement.
If you are not aligned with regulations in your industry, this would cover the cost should your company have to go to court with the government.
What does Cyber Liability Insurance NOT cover?
Cyber Liability Insurance does not cover bodily injury or property damage, loss of property, criminal activity, or social engineering.
The social engineering aspect of this is very important to understand. Social engineering is a tactic used by hackers to trick your employees into revealing private information or performing an action that results in a negative outcome. To be clear, 98% of cyber attacks use some form of social engineering and social engineering is seen as a gray area in coverage. It really depends on the policy and exclusions provided by your insurer.
Should you have Cyber Liability Insurance?
As mentioned before, if your company is storing or transferring any personal information, you should have cyber liability insurance. The small business narrative of “unlikely to be targeted by hackers” is a dangerous game and often overlooks the necessity for preventative action.
A study by the Kaspersky Lab, a multinational cybersecurity corporation, analyzed the financial impact of cyber incidents on small businesses.
Their research identified the average costs for an incident:
- $188,000 for targeted attacks
- $83,000 for loss of devices with sensitive data
- $79,000 for misuse of IT resources by employees
- $68,000 for viruses and malware
- $21,000 for lost business
- $21,000 for hiring external cybersecurity experts.
As you can see, cyber attacks are extremely expensive and not manageable for many businesses. This is why 60% of companies go out of business within 6 months of a cyber attack—evidence of the need for Cyber Liability Insurance.
Cyber Liability Insurance can act as a safety net for your business. While you should be working proactively to prevent a data breach, exercising cybersecurity best practices and prioritizing a more secure business environment. You will have peace of mind knowing that you planned ahead and purchased Cyber Liability Insurance in the event that disaster strikes. It’s important to not leave any stone unturned and take the appropriate steps to protect your business. Cyber Liability Insurance will help reduce the chances your business suffers irreparable loss during a cyber incident.