Cybersecurity is a major ongoing concern for most businesses. With the rapid digitization of various business processes and organizations collecting and storing large amounts of employee and customer data, protecting yourself from the consequences of a cyber breach is crucial.
Installing antivirus software is not enough. According to data, 90% of cyber security attacks result from human error, such as employees opening an infected email attachment. Therefore, while you can put mitigating measures in place to prevent catastrophic attacks, these measures are not 100% foolproof.
You need to acquire cyber liability insurance to protect your organization from the business and legal costs of a data breach.
Here’s a look into cybersecurity insurance and the benefits of having one for your business.
What is Cyber Security Insurance?
Cyber security insurance, also called cyber liability insurance, is a contract between a business and an insurance provider that the business purchases to help reduce the financial costs and risks of doing business online.
This contract is serviced at a monthly or quarterly fee, transferring some of the cyber security risks to the insurer.
Cyber security risks are dynamic and volatile. Therefore, cyber security insurance policies typically change monthly, allowing businesses and insurers to reassess risks and adjust the policies accordingly.
The need for cyber security insurance emerged in the late 1990s, with more businesses moving to the internet and relying on technology for everyday operations.
Initially, cyber liability insurance focused on computer attacks and data breaches. However, the scope has widened to accommodate a broader range of cyberattacks such as ransomware, social engineering attacks, cyber extortions, and system failures resulting from cyber security incidents.
Which Businesses Need Cyber Liability Insurance?
With most businesses operating online and maintaining digital records, cyber security insurance is crucial for every enterprise. However, some players need this policy the most.
Businesses that sell online are the most likely to be affected by cyberattacks. That’s because they store risky and sensitive information such as credit card numbers, personally identifiable information, and contact information.
Therefore, they face several risks, such as the potential leak of confidential information, malware, identity theft, email phishing scams, compromised data security caused by employee errors, and breaches of social media accounts.
Cyber attacks can have devastating consequences for a business, including significant financial losses. Cyber security insurance provides additional protection, giving small to medium-sized businesses a lifeline in case confidential and sensitive information is stolen online.
Therefore, as long as you store confidential and sensitive employee or customer information, you should consider getting a cyber security liability policy, which will also boost confidence with clients or corporate partners considering the safety of their data.
What’s Covered by Cyber Liability Insurance?
Cyber liability insurance primarily covers the losses arising from computer or computer-related exposure and crime. This includes data corruption or theft, cyberattacks, hacking, online libel or slander, and stolen electronic devices such as mobile phones, tablets, and laptops.
However, your cyber security insurance policy will not provide an absolute canopy. You can fail to get protection from your cyber liability insurance policy in the scenario that:
The cyberattack resulted from an avoidable error such as digital assets mishandling or poor configuration management
Infrastructure failures unassociated with a purposeful cyberattack
Acts initiated or caused by the insured
Loss of or damage to physical business assets
Expenses exceed the coverage limits
Other costs were incurred to improve cybersecurity after the breach or attack
The cyber incident occurred before the policy kicked in
Depending on your business needs, you can get various forms of cyber security insurance with varying premiums and coverage limits.
For instance, you can get first-party cyber security insurance that covers direct costs incurred from a cyberattack. This includes notification costs, customer credit monitoring, and loss of income incurred by your business due to operational downtimes caused by the cyberattack.
The Benefits of Cyber Security Insurance
There are several benefits to getting a proper cyber security insurance policy for your business. Here are the top ones.
Better Risk Mitigation
Cybersecurity threats continue to grow exponentially over the years, heightening the risks for business owners. According to data, the average global data breach cost totals $4.35 million.
Cyber liability insurance mitigates these risks by providing a financial cushion for your business in case it gets attacked. This is even more important as more workplaces embrace the cloud and onboard remote workers who offer a significant entry point for cybercriminals.
With growing cyber security threats, there’s increasing regulation on companies and businesses, with governments enforcing heavy penalties for data breaches and cybersecurity attacks. Therefore, legislation and compliance incentivize cyber security insurance, helping companies stay on the right side of the law and avoid the direct cost of hefty penalties.
For instance, the U.S. implements various policies, such as the Health Insurance Portability and Accountability Act (HIPAA). There’s also the European General Data Protection Regulation (GDPR) that imposes strict data handling standards with severe penalties for non-compliance.
Help with Recovery
Your cyber security insurance policy will help pay for data recovery costs in the case of a cyberattack, speeding up the recovery process and reducing downtime. Moreover, accessing professional recovery services can prevent further damage and avert a legal and financial crisis.
Part of the recovery will include crisis communication and notification, allowing your team to keep customers updated while a professional team swiftly handles the situation.
With the legal, compliance, and risk benefits of getting cyber liability insurance, more businesses are making cyber security insurance a contractual mandate for winning jobs. Therefore, having a robust cybersecurity insurance policy will make your business competitive and signify your commitment to protecting customer data and proactively preparing for cyberattacks.
How Much Does Cyber Security Insurance Cost?
The cost of cyber security insurance depends on several factors. These include the size of your business, number of employees, revenue, and the industry.
Other important factors include the type of data stored, potential downtime from an attack, reliance on automation, the likelihood of human error, and the type of systems used.
These factors will affect your cyber security insurance premiums and the benefits you get from the policy.
Choose the Right Policy
Cybersecurity insurance is crucial for all businesses operating in the digital landscape. Having the right policy will give you peace of mind and enough financial cushioning to withstand the costs of a data breach or cyberattack.
Contact an expert and learn the best policy for your business.