Cyberattacks are among the top risks facing businesses today, and nearly every business, large or small, and in every industry, is vulnerable. Since the first quarter of 2019, ransomware attacks alone have spiked by 170 percent — and today, U.S. companies are paying 400 percent more in ransom to cyberattackers than two years ago. Such cyberattacks have also proven to be fatal to small companies: One statistic indicates that 60 percent of small businesses close after falling victim to a data breach.
Cybersecurity insurance, while at first viewed as a niche tool, is now considered a requirement for every company’s risk management system. And, fortunately, along with the sophistication of cyber crime, cybersecurity insurance, too, has come a long way since its early days.
Though cybersecurity insurance coverage is now essential, many businesses remain unaware that cyber risk is insurable, let alone what exactly cybersecurity insurance covers. Fortunately, cyber risk is insurable, and the coverage options available today are flexible enough to meet the needs of your company.
Though rates for cyber insurance have increased globally by 32 percent year-over-year, this coverage remains an essential part of a company’s cybersecurity strategy. Let’s learn more about this important way to protect your enterprise.
Cyber Insurance Coverage Explained
Cybersecurity insurance is also referred to as cyber insurance, cyber liability coverage and data breach insurance. This insurance covers financial losses your business incurs following a cyber event or a data breach. Cybersecurity insurance policies often include coverages automatically and others supplementally at your discretion.
First-party coverages apply to costs your company incurs directly due to a cyber event, while third-party coverages protect against claims made by companies or consumers affected by your action or inaction following the cyber event. For example, first-party coverage would cover the costs to inform your customers about a data breach. Third-party coverage would cover your expenses for a lawsuit if a customer sues your company for negligence after a hacker steals their personal data.
What Are the Types of Cyber Insurance Coverage?
Companies of every size are vulnerable to cyberattacks. Your information, privacy, and operations are all at risk, and cybersecurity insurance can protect your business from these risks through network security coverage, privacy liability coverage, network business interruption coverage, media liability coverage, and errors and omissions coverage.
1. Privacy Liability Coverage
For companies with privacy risks or information risks, privacy liability coverage is essential. Employee and customer information is highly sensitive, and data breaches that expose this data threaten the security of your customers and employees, and leave your company vulnerable to liability.
In the event of a privacy law violation or a cyber incident, your company will be protected from liabilities under privacy liability coverage. You may incur these third-party costs if you face liabilities from a contractual obligation or liabilities from regulatory investigations.
Some examples include protecting your company against consumer class action litigation, along with funding a settlement after a data breach or cyber incident. In a regulatory investigation performed by law enforcement or government, privacy liability coverage may also cover legal expenses, penalties, and fines.
Include privacy liability coverage in your cybersecurity insurance policy to protect the information and privacy of your business.
2. Network Security Coverage
Most businesses should include network security coverage in their cybersecurity insurance policy. If you want to protect your company’s privacy and information, you should have network security coverage. If your network security fails, this cyber insurance will cover your company.
Network security failures include:
- Business email compromises
- Cyber extortion demands
- Data breaches
- Malware infections
Your first-party costs will be covered by network security coverage. For network coverage, first-party costs include:
- Breach notification to customers
- Credit monitoring
- Data restoration
- Establishing a call center
- Expertise in public relations
- Identity restoration
- IT forensics
- Legal expenses
- Payment and negotiation costs from a ransomware demand
Include network security coverage in your cybersecurity insurance policy to protect your company in the event of a network security failure.
3. Errors and Omissions Coverage
Errors and omissions (E&O) coverage protects you from cyber events that keep you from delivering your services to customers and fulfilling contractual obligations. Claims about errors or performance failures in your services are covered by E&O coverage, such as software or consulting services, or traditional professional services rendered by engineers, doctors or lawyers.
This coverage also protects against breaches of contract or allegations of negligence, including legal defense costs from a lawsuit or a dispute with a customer.
Include E&O coverage in your cybersecurity insurance policy to protect your company against losses due to errors and omissions in your services.
4. Media Liability Coverage
Media liability coverage protects you from intellectual property infringement, except for patent infringement. This coverage typically applies to both printed advertising and online advertising, including your company’s social media posts.
Include media liability coverage in your cybersecurity insurance policy to protect the intellectual property of your company.
5. Network Business Interruption Coverage
If your business is dependent on technology to stay in operation, you’ll want to include network business interruption coverage in your cybersecurity insurance policy to protect your business from operational cyber risk.
When your network or your provider’s network goes down, you can use this coverage to cover fixed expenses, lost profits, and extra costs during the time that your company was impacted while the network was down. Coverage also applies to security failures from events like cyberattacks, and system failures like human errors or failed software patches.
Include network business interruption coverage in your cybersecurity insurance policy if the successful operation of your business depends on technology.
How Much Does Cybersecurity Insurance Cost?
Data breach insurance costs vary depending on the size of your company and how much coverage your business needs. If you have a smaller company, you may not need as much coverage, and thus, your premiums will be lower than a larger company with many areas that need protection.
What Does Cyber Insurance Not Cover?
As with any insurance policy, there are exclusions in cybersecurity insurance worth noting for potential policyholders. Generally, a cybersecurity insurance policy doesn’t cover the following:
- Costs for improving your internal technology systems following a cyber event
- Loss of value caused by the theft of intellectual property from your company
- Potential lost profits in the future
Though these losses or costs may not be included in the standard cyber insurance requirements, obtaining cybersecurity insurance is essential if you want to protect your business from cyberattacks.
Take Charge of Your Cybersecurity With Consolidated Technologies, Inc.
The threat of cybercrime is growing, and with it, the cost of combating cyberattacks. You need a cybersecurity strategy that protects your business from cyber threats.