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Confused about when, how, and if you should get Cyber Liability Insurance for your business? You’re not alone! Cyber Liability Insurance is very new and very detailed. In fact, even underwriters are continuously learning all of its ins and outs.
Thankfully, understanding the basics is completely within reach! This post should get you well on your way to deciding how much Cyber Liability Insurance your business needs. If you still have questions after reading, contact us! We’re only an email away.
Cyber Liability Insurance is an increasing necessity for businesses in all industries, because it protects companies from online risks.
It covers five distinct elements on online security:
Most cyber liability claims begin with a data breach, which is what happens when an unauthorized party accesses your company’s digital assets. Breaches can happen on your business’s network, hardware, software, or mobile devices. They expose sensitive digital assets, cause lawsuits, and cost businesses a lot of money. (The average cost of a data breach for a small business is $86,500!)
Any business that stores information can fall victim to a data breach, but some companies are more at-risk than others. For example, companies that store sensitive data like credit card information are more likely to be targeted by cybercriminals. These companies also tend to have more to lose.
Data breaches can even put an organization at risk for things like insider trading, fraud, cyber extortion, and other criminal activities.
Things that can cause a data breach:
Any business that stores data on their clients needs Cyber Liability Insurance. Without it, you take on the risk of having to restore your company’s digital assets, pay damages, and more. This is a big deal, because you may have more digital assets than you think!
Digital assets can include, but are not limited to:
The cost of a data breach that affects any and all of these assets would add up extremely fast!
There’s no standard for Cyber Liability coverage because different companies have different levels of exposure, which puts them either more or less at-risk. Higher-risk companies should purchase more coverage, but low-risk companies may be able to get away with less. To have a proper analysis done and get you a quote, we would have your organization– likely your IT department– complete a very detailed application.
That said, insurance providers have come together to develop two unique types of Cyber Liability Insurance, to help tech companies respond to and better recover from data breaches; first-party and third-party, both of which cover data breaches.
First-Party Cyber Liability Insurance helps you respond to data breaches on your own data.
A first-party Cyber Liability Insurance policy covers:
Third-party cyber liability insurance helps pay for lawsuits caused by data breaches on a client’s network or systems. This is important because, when companies file data breach lawsuits, they typically name every party that worked on the compromised system. (This includes independent contractors and freelancers.)
Even if you touched just a small part of a project and never had direct contact with the company, you could still face a lawsuit! Thankfully, if a client sues you over such an incident, third-party insurance will help cover attorney fees, court costs, and damages.
Events that might prompt a lawsuit include:
Cyber Liability Insurance ranges from an additional premium of $100/month for very small limits to over $10,000, and up. Small enhancements can be added to basic liability insurance policies with limits as low as $50,000, but most companies require a much larger limit in order to be effective when a loss occurs.
Yes, it most definitely is! Without it, your company could very easily go bankrupt in the event of a data breach. And, if your clients are affected, your reputation could be ruined, too.
When you’re ready to apply for Cyber Liability Insurance, contact our office. We’ll help you get your perfect coverage in order!