As businesses continue to meet new cyber threats, and countless technologies and services are being deployed to help you overcome them, you may find yourself asking: “What is cyber liability insurance?” and “what does cyber insurance cover?”
The best cyber liability insurance will help safeguard your business from the increasingly complex threats that you’re facing while giving you peace of mind.
In truth, cyber liability insurance is crucial to a modern cybersecurity plan. While cyber insurance cannot prevent things like data loss or leaks, it can help protect your business from the financial risks they present. Here’s what you need to know.
What Is Cyber Insurance?
Like other insurance policies that your business takes out, cyber liability insurance is intended to mitigate financial risks.
A cyber insurance policy offers coverage tools and resources to help manage risks, both before and after a data breach, while covering many of the costs associated with investigation, recovery, and repair.
A cyber insurance policy should be customized to meet your business’s unique needs. For instance, if you’re in a particularly high-risk sector, like a financial institution, you would need greater coverage than a small eCommerce store.
What Does Cyber Insurance Cover?
When you choose your cyber insurance policy, you’ll need to read the fine print to make sure you receive the coverage you expect.
These policies are not yet standardized and, unlike many other types of insurance, there are not currently state minimum requirements. It’s up to you and the insurer to determine what is reasonable.
In general, you should look for a cyber insurance policy that covers the costs of:
- Investigating a data breach;
- Litigating with affected parties;
- Expenses and fines imposed by regulatory organizations;
- Crisis management during and post-breach;
- Interruptions to your staff and business;
- Repair and betterment initiatives.
Why Is This Insurance Important?
No business today would even think about functioning without some form of cybersecurity protection, but as threats continue to grow more sophisticated and costly, things like cyber insurance are proving equally as important.
Within six months of a data breach, about 60 percent of small companies will close their doors for good. Aside from the damage to their reputations, the financial burden associated with investigations, fines, and trying to appease users is simply unmanageable for a lot of SMBs.
Even large companies struggle, with some being targeted by ransomware demanding amounts in excess of $5 million. In cases like these, the lack of a cyber insurance policy can put you over the tipping point and wreak irrefutable havoc on your company.
How Much Cyber Insurance Do I Need?
There is no set standard for cyber insurance policies, and it’s up to your business to determine how much coverage you need. Generally, the most sensitive information you process and store, the more coverage you should purchase.
Ultimately, any industry can be the target of a cyber attack, so you should not assume that you aren’t at risk. Any business that has a digital presence needs to protect itself from data breaches and other risks.
To save money on premiums, you may opt for a policy that strictly covers liability. For instance, you might opt-out of coverage for investigation costs and betterment.
On the other hand, if you know that a data breach would require you to almost completely shut down (i.e., a SaaS business) for some time, you may want to increase coverage for the cost of interruptions to your business and staff.
Some policies will go as far as to cover lost revenue and/or employee pay during the time you were not generating revenue due to the data breach. However, when looking at these policies, you must read the fine print.
Choosing a Cyber Insurance Policy
Since cyber insurance policies are not yet standardized, and your business will really need to look at the numbers to determine what type of coverage you need, you should consult a few specialists.
Aside from a financial and legal advisor, you should discuss your needs with your team of IT and cybersecurity professionals. They can help you understand how protected you are and what risks you might face, along with the business impact if something were to go wrong.
Given that cyber threats can evolve practically overnight, it’s also essential that you regularly reassess your policy to make sure it’s offering adequate protection.
As time goes on, you’ll find that cyber insurance is a mainstay in your cybersecurity plan, and if you maintain the right policy, it could potentially save your business thousands in unexpected expenses if a problem ever occurs.