Cyber liability insurance can help a business to diminish the financial risk associated with data breaches and cyber-attacks. Any organization which relies on storing confidential information have a responsibility to their employees, clients, and business associates to protect them.
Since commercial general liability policies don’t offer coverage for cyber threats, you’ll need a separate insurance policy to protect you fully. Whether you store employee or customer records online, you should defend yourself beyond your internal safeguards. Cyber liability insurance offers this additional layer of protection.
What Does Cyber Liability Insurance Cover?
Insurance policies for cyber liability vary from company to company. Premiums, coverages, and limits aren’t standardized. If you’re looking for a cyber liability policy, you need to understand the details. An experienced insurance broker can help you sift through the fine print and ensure that you obtain the coverage that you need.
Cyber liability insurance may cover specific events, such as:
- Hacking
- Loss of data that results from an attack, including financial theft
- Forensic investigations that are necessary to assess the existence and impact of a cyber attack
- Lost income and business interruption expenses
- Costs associated with security and data extortion
- Reputation attacks and cyber defamation
- Damage to technology-related assets
Cyber threats are continually changing. Therefore, the insurance companies that offer the most comprehensive cyber liability insurance work jointly with IT security organizations to create policies and keep up with the latest trends.
Most Common Forms of Cyber Attacks Towards A Business
- Phishing
- Malware
- Denial of Service
- Social Engineering
- Ransomware
- Identity Theft
Types of Cyber Liability Insurance
There are two primary types of cyber liability insurance. Most policies include first and third-party coverage.
First-Party Coverage
First-party cyber liability insurance pays for any financial damages or direct expenses that stem from a cyber attack. It should compensate you for legal consultation, business interruption, hardware and software restoration, and credit monitoring. It may also cover the costs associated with notifying the affected parties.
- Cyber Extortion – when businesses’ computer systems, websites, or other sensitive material held hostage until payment demands are met
- Loss of Income and Extra Expenses – additional costs above typical operating expenses which a business incurs to maintain operations, identifying the cause, and fixing the damage
- Loss of Electronic Data – Costs associated with restoring electronic information that is stolen or damaged due to a data breach.
- Reputational Damages – The cost for public relations and crisis management following a data breach
- Notification Requirements – Each state imposes its guidelines on businesses when responding to a data breach. Some obligations include: offering identity monitoring, contacting all clients and vendors with a letter sent by traditional mail, or setting up a call center to address any questions.
Third-Party Coverage
The effects of a catastrophic cyber event trickle down into every aspect of the business, and you may have to deal with ongoing investigations or legal issues. The company may face lawsuits.
Third-party coverage helps you pay for intellectual property violations and other issues that may arise as a result of the cyber event.
- Electronic Media Liability – a form of errors and omissions (E&O) liability insurance designed to provide coverage for defamation, infringement of copyright, libel, and slander
- Network Security and Privacy Liability – as a result of an act of negligence and failure to adequately protect sensitive data belonging to employees, clients, or vendors stored on your business’ computers.
- Regulatory Actions – provides coverage for penalties or fines by regulatory agencies that oversee data breach laws, including legal defense.
Who Needs Cyber Liability Insurance?
Any business that maintains sensitive information on electronic devices or in the cloud should cover itself with cyber liability insurance. Small businesses that don’t have IT staff or network security departments are especially vulnerable. However, large companies are prone to losing their good reputation if they become victims of a cyber event.
Cyber insurance not only enhances security, but it also allows the business to recover from losses related to large-scale data breaches. It provides funding that can help you maintain your cash flow while you recover from a devastating security event.
Businesses should purchase cyber liability policies to protect against losses from a variety of threats related to information technology activities.