What Is Cyber Insurance?
Like its name indicates, cyber insurance is an insurance plan that protects you from suffering the financial fallout of a cyber security breach.
Most businesses save their customers’ information when they make an account or shop with them. In other cases, places such as law firms and hospitals are privy to sensitive information which they store on computers that can cause problems if it falls into the wrong hands. You cannot imagine the scope of the potential problems that one can have in such a situation! As the company owner, you’ll need to make sure that your data isn’t being used for criminal purposes and determine the deficiency in your cyber security system.
In addition, you also have a responsibility to your customers. You’ll first need to inform them of the data breach, then assuage their fears and ensure their data is secure. You’ll also need to gather funds for potential lawsuits that a disgruntled customer might file against your company. Furthermore, in certain states, the Attorney General can get involved and file a lawsuit against your company/business.
All of these things require money, and you don’t want to bankrupt your company while saving it from a data breach, right? That’s where cyber insurance comes in. Depending on the package you purchase, your cyber insurance company will cover the costs for a lot of expenses mentioned above.
By purchasing cyber insurance, you can rest easy knowing you won’t have to lighten your pockets or risk bankrupting your company if a cybersecurity breach ever occurs.
Who Needs Cyber Insurance?
If your business or corporation runs anything on a computer and/or has access to client information, you’re going to need cyber insurance. If you’re an online retailer, make sure to invest in an excellent cyber insurance package because these kinds of businesses are frequently targeted by hackers looking to make a little money.
But hey! This service is not just valuable for mighty conglomerates. Small business owners or entrepreneurs should also invest in a cyber insurance package because hackers find it much easier to attack smaller businesses with weaker defenses than multinational companies with rigid cybersecurity.
What Will It Cover?
If your company suffers a data breach or a cyber-attack, you can make a claim to your cyber insurance company to pay the damages. There are several things that your cyber insurance policy will cover, and we’ll discuss what those are.
1. Notifying Third Parties
If your data breach includes the leaking of your customer’s sensitive data, you have a responsibility to inform them about it. Since companies deal with hundreds of people every day, it’s hard and relatively expensive to notify them all about the cyber-attack events. However, your insurance company will cover you for the costs associated with notifying third parties of the attack.
2. Running System Forensics
Since you’ll be informing the authorities about the cybercrime, you’ll need evidence that such an event occurred. Running computer forensics ensures that all the data relevant to the security breach is thoroughly investigated and compiled. Your insurance policy will cover the expenses of calling in the computer forensic experts for the job.
3. Recovering Lost Data
Suspending work for even a day can sometimes lead to massive losses for the company, and it’s hard to go about as usual if the databases are missing important information. Cyber insurance carriers will pay the expense of hiring a team of professionals to recover your lost data so you can get back on track without too much of a delay.
4. Legal Fees and Settlements
You always read about disgruntled customers and lawsuits against multimillion-dollar conglomerates in the newspaper, but it also happens to smaller companies! If a person suffers any sort of problems due to your company’s data breach and feels it’s the company’s fault, they may sue you. It’s the most crucial part of your cyber insurance package because legal fees are expensive and will drain your finances if the case stretches on for a long time. Your insurance carrier will bear the expenses for your legal team so you can make sure you have the best defense possible.
5. Replacing Damaged Computer Systems
If your system suffered a cyber-attack, the chances are that you’ll need to hire a computer forensics team to restore your company’s software to its previous form. You’ll be able to bear this expense if you file a claim with your insurance carrier.
6. Dealing With Extortion Demands
One of the most familiar forms of cybercrime is what one calls a ransomware attack. In this attack, the perpetrators will launch malware into your system to prevent you from accessing or using the system for anything. Doing so will cause your website to go down and the company’s internal systems to stop working. This situation can result in massive losses for big and small companies alike. In these cases, the hackers demand a ransom in exchange for allowing you access to your system. It is a particularly stressful situation because the ransoms are random and can cause you to go broke or bankrupt. However, your company can easily weather all of this if you have cyber insurance. If you make a claim, your insurance carrier will pay your ransom for you. Sounds like a weight off your shoulders, right? So, these are all the situations that your insurance carrier will cover. If you buy a cyber insurance package, you can rest assured that your finances will be well taken care of in the event of a cyber-attack.
What Will It Not Cover?
Like all insurance packages, there are some things that your cyber insurance package won’t cover. Here are some examples:
1. Security Betterments
A cyber insurance policy will not cover costs to upgrade your system and technology to prevent future loss. This includes both software and hardware upgrades that the business incurs.
2. Future Lost Profits
Certain cyber insurance policies will cover the loss of income that the business incurs while it is recovering from a cyber incident and getting the business back up and running. However, what a typical cyber insurance policy does not cover is “future lost profits”. For example, future lost profits can be a loss in market share or can also be the value of any data loss the business suffers.
3. Intellectual Property Theft
If your data breach results in the loss of some intellectual property, your cyber insurance policy will not be able to help, nor will it pay for financial losses due to the loss in IP.
What’s The Verdict?
Businesses/organizations, just like society, are becoming more and more reliant on technology. This increased reliance, enhances the risk that a business/organization will suffer a cyber incident that can impact their operations tremendously. Therefore, it is becoming more and more important that businesses/organization make cyber security and cyber insurance a priority in their overall risk management process. We highly recommend you talk to your insurance agent and your IT professionals as to how you can prevent a cyber incident and what coverage is available. As always, we are one phone call away to answer any further questions.