Cybersecurity is a top priority for businesses of all sizes. Cyber incidents such as data breaches, system hacking, and ransomware attacks can result in significant financial losses and reputational damage. Additionally, a data breach can also result in reputational damage, which can be difficult and costly to repair. Customers may lose trust in a company that has suffered a data breach. This could result in a loss of business and potential legal consequences.
According to a study by IBM, the average cost of a data breach is $4.24 million. This is a significant financial impact that can devastate a company.
Cybersecurity is essential for maintaining information security and protecting against cyber risks. However, it can be difficult to prevent every cyber attack from happening.
Therefore, it’s vital to take cybersecurity seriously and implement strategies to safeguard their digital assets. This can include measures such as regular security audits, employee training on cybersecurity best practices, and investing in cybersecurity insurance coverage.
Cybersecurity insurance can be an important component of an overall cybersecurity strategy. Data Security is one of the most important aspects of modern business
It has become increasingly important for businesses to carry cybersecurity insurance coverage to protect against the financial impact of these incidents. In this article, we will provide an overview of cybersecurity insurance, the importance of understanding what cybersecurity insurance excludes, and the benefits of carrying insurance coverage.
Types of Cybersecurity Coverage
First-party cybersecurity insurance covers the costs associated with investigating cyber incidents. It covers assessing the risks of future cyber incidents, lost revenue due to business interruption, ransomware attack payments, notifying customers about the incident, and providing them with anti-fraud services such as credit monitoring.
The most common type of first-party cybersecurity coverage is data breach insurance, which covers the costs associated with data breaches, such as investigation costs, notification costs, and credit monitoring for affected customers.
Third-party or cyber liability coverage
Cyber liability coverage can protect businesses if a third party sues them for damages resulting from a cybersecurity incident. This coverage typically pays for attorney and court fees associated with legal proceedings, settlements and court judgments, and regulatory fines for noncompliance.
General liability insurance does not cover data-breach-related liability claims, so if your business stores customer data, you will want to consider a separate cyber liability insurance policy.
Technology errors and omissions (E&O)
Technology errors & omissions (E&O) insurance is for businesses that manufacture a technology product or provide technology services. This coverage kicks in if a cybersecurity incident occurs in a customer’s business because of an error on the insured party’s part.
Technology E&O insurance pays for items similar to those covered by cybersecurity liability insurance, such as legal fees, court costs, and judgments or settlements, but only in covered circumstances relating to products or services.
Understanding What Cybersecurity Insurance Excludes
Cybersecurity insurance policies usually do not cover the following:
- Damage to property: This includes any physical damage caused by a data breach or cyberattack, such as hardware that was destroyed during the incident. Such claims are usually covered by commercial property insurance policies.
- Intellectual property losses: Any loss of intellectual property during a cyber incident, as well as any lost income related to it, are often excluded from cybersecurity insurance coverage.
- Crimes or self-inflicted cyber incidents: A business charged with committing a crime related to or causing a cyber incident would typically not be covered by cybersecurity insurance policies. Commercial crime insurance generally covers employee theft, however.
- Costs for preventive measures: Cyber insurance policies typically do not cover the costs associated with proactive preventive measures, such as training employees on cybersecurity and setting up a virtual private network to avoid future cyberattacks.
Businesses That Need Cybersecurity Insurance
In today’s digital world, businesses of all sizes are at risk of cyber incidents that can result in financial losses. Cybersecurity insurance is particularly important for businesses that store important data online or on computers, have a large customer base, or have high revenue or valuable digital assets. Here is some insight into why these areas are important.
A. Businesses that store important data online or on computers
Businesses that store sensitive information online or on a computer are particularly vulnerable to cyberattacks. If your business stores important data, such as phone numbers, credit card numbers, or Social Security numbers, either online or on a computer, you are at risk of a cyberattack.
This is because of the value of this data. Cyber attackers will continue looking for company targets to gain access to the personal data they store for as long as stealing that data remains lucrative. This is what makes companies that store data the main target of attackers. Having insurance can help mitigate the impact of a data breach and protect a company from the financial backlash of such an incident.
B. Businesses with large customer bases
Businesses with a large customer base are at a very high risk of being impacted by significant costs associated with cyber incidents. Notifying customers of data breaches is often required by state law, and first-party policies can cover this cost, which can be significant for companies with large consumer bases. Cyber liability insurance can also help cover certain regulatory fines these businesses might be subject to following a data breach.
C. Businesses with high revenue or valuable digital assets
The costs associated with cyber incidents can be difficult to predict, and larger companies are likely to have more valuable data, which could come with a more expensive ransom. Cybersecurity insurance can help protect against these costs and ensure that businesses can recover from a cyberattack. Ransomware attack payments are covered under first-party cybersecurity insurance.
Any business that stores sensitive data online or on a computer has a large customer base, or has high revenue or valuable digital assets should strongly consider carrying cybersecurity insurance coverage. By carrying this insurance, businesses can help protect against the financial impact of cyber incidents and ensure that they are prepared for potential cybersecurity threats.
Purchasing Cybersecurity Insurance
Purchasing insurance is an important step for any business to protect itself against cyber threats. To buy cybersecurity insurance, you can contact an insurance provider directly or work with an insurance agent who can provide you with multiple quotes and help you choose the best policy for your business.
It’s important to note that not all insurance providers offer cybersecurity or data breach insurance as a standalone policy, so it’s important to look for insurance providers that do. Some insurance providers that offer cybersecurity insurance include Travelers, Chubb, AIG, and Hiscox.
When shopping for cybersecurity insurance, comparing quotes from multiple insurance providers is essential to ensure that you are getting the best coverage at the best price. By comparing quotes, you can find the policy that meets your business’s needs and budget.
Working with a business insurance agent can also be beneficial when shopping for cybersecurity insurance. An insurance agent can provide you with multiple quotes from different insurance providers, help you compare coverage options, and assist you in choosing the policy that best fits your business’s needs. Additionally, an insurance agent can help you understand the terms and conditions of your policy and answer any questions you may have about cybersecurity insurance.
Protect Your Organization
Cybersecurity insurance is a component that should be considered in the cybersecurity strategy for businesses of all sizes. First-party coverage, third-party or cyber liability coverage, and technology errors and omissions (E&O) coverage are the most common types of cybersecurity insurance available. It is important to understand these coverage options and what cybersecurity insurance excludes to ensure that you have the appropriate coverage for your business. By carrying cybersecurity insurance coverage, businesses can protect against the financial impact of cyber incidents and ensure that they are prepared for potential cybersecurity threats.
At EVERNET Consulting, we are dedicated to helping organizations with their operational needs. We work diligently to find the solutions that best fit the needs of your business. Whether you’re looking for IT support, software recommendations, or guidance on how to get the most out of your cybersecurity platform, we are here to help. Let’s schedule a discovery call and see how we can help you work smarter, not harder.
Eric is a Business IT cybersecurity advisor, consultant, manager, integrator, and protector who founded EVERNET in 2007. Eric co-hosts a podcast called “Finance and Technology Insights by Brian & Eric” on YouTube. Eric is a regular contributor to the EVERNET blog, writing about the latest technology news and providing his expertise in cyber security prevention and management. Meet with our CEO and say goodbye to one-size-fits-all IT support and cybersecurity.