In an increasingly digital world, cyber-attacks have become an existential and costly threat for many businesses across the country. Companies in the US spend an average of about $8.19 million on data breaches, not to mention malware and hardware failure.
You can lose valuable data like tax information, client records, and sales projections to a single data breach. What’s more, some data breaches can lead to law-suits and third-party claims that may cost your company a fortune. However, you can sidestep the financial repercussions of data breaches and other IT mishaps with cyber liability insurance.
In today’s post, we’ll be looking at why cyber liability insurance is so important for your company and why you should get it ASAP.
What Is Cyber Liability Insurance?
Cyber liability insurance is an insurance policy covering cyber threats and other computer-related events that may lead to financial losses. They include both first-party and third-party coverages with diverse policies that depend on the insurer.
Insurers offer a wide range of coverages that they develop themselves. Some coverages are automatically included in the policy, while some are optional. Coverages may have separate limits or one limit that applies across the board.
Why Is Cyber Liability Insurance So Important for Businesses?
Cyber liability insurance offers protection from financial losses arising from data breaches, malware, and hardware failure. Apart from business liability insurance, here are a couple of reasons why your business should also get cyber liability insurance:
Covers for Business Losses Because of Interruption
Data breaches and malware attacks can lead to IT failure, which could put a stop to all business activities. It could also lead to extended downtime and subsequent losses that could cripple your entire business. In fact, 60% of companies fail within six months of a cyber-attack?
For some businesses, the losses they incur are just too much to recover. If you don’t want your business to crumble because of a data breach, consider taking out cyber liability insurance.
For Legal Support
As mentioned above, some cyber-attacks could result in legal action and third-party claims. This mostly happens when hackers gain access to private information about your clients that you should’ve kept confidential. If private client information leaks, clients have the legal right to sue your business.
The same can happen if the cyber or malware attack leads to a breach of contract on your part. Cyber liability insurance can help you cover legal costs if you ever have to battle it out in court. This coverage includes everything from lawyer fees, advisement, and counsel after legal proceedings.
To Cover Cost of Data Breaches
Companies have to pay through the nose even for minor data breaches. First, the law requires that companies report any data breaches to any entities or individuals that the breach affects. Companies must then address the consequences of the breaches, including security repairs, identity theft, and of course, legal action.
This can be a real financial burden, especially for startups and small businesses. Cyber liability insurance covers the cost of data breaches. This can save your business a bundle so that you can use the money for more profitable business activities.
To Help With Forensic Support
Behind every cyber-attack is a malicious individual or group looking to gain unauthorized access to your company’s information. It’s up to you to determine the source and extent of the breach and how it affects your company. That way, you can take legal action against the perpetrators and get the justice you deserve.
To do so, you’ll need a competent team of IT professionals and help from the authorities. Hiring an IT firm could be costly, especially when it comes to matters concerning cybersecurity. Cyber liability insurance can cover the cost of paying forensic experts to investigate the attack.
What’s more, some insurers can throw in 24/7 support from cyber specialists to keep hackers and ransomware at bay. That way, you can keep it business as usual without having to worry about subsequent cyber-attacks.
Protects From Cyber Extortion
Have you ever heard of ransomware? Ransomware is a type of malware designed to restrict IT infrastructure access or leak private information unless you pay a fee. Criminals use ransomware to extort large amounts of cash from businesses.
Twelve major ransomware attacks occurred in 2020, with the largest one, the ISS world attack, costing a whopping $75 million. You never know; maybe this year could you could experience a ransomware attack. So it’s best to take precautionary steps before it’s too late.
Should you fall victim to ransomware, your cyber liability insurance provider will step in to pay the ransom to free your data or keep your private information safe. This can help businesses get back what they lost from ransomware attacks.
It’s a Step Above General Liability Insurance
For most businesses, insurance stops at general liability insurance or workers’ compensation insurance. Both are essential insurance policies, but unfortunately, none of them cover cyber-attacks and other related events.
If you want a foolproof insurance strategy, make sure to include cyber liability protection in it. That way, you can take your insurance strategy a notch higher and protect both your physical and digital assets. In doing so, you can have peace of mind knowing that your entire business is fully protected from unexpected tragic events.
Common Cyber Liability Insurance Coverages
Getting cyber liability insurance is a great way to protect your digital assets and your business in general. If you’re in the market for cyber liability insurance, here are a few coverages you should expect.
Income Loss and Extra Expenses
This covers all the income lost due to the downtime caused by the cyber-attack or hardware failure. It also covers the expenses that a business incurs to restore operations and get things back to normal. The policy will cover income loss from malware, data breaches, and hardware failure.
Some insurers even cover losses that a partner company incurs because of the data event. For instance, a supplier may suffer heavy losses because your company’s activities have ground to a halt due to a cyber-attack. The insurer will also cover the supplier’s losses.
A cyber-attack or malware may wipe all or most of a company’s crucial data. This data includes everything from software, documents, and programs. The cyber liability insurance can help pay for the data recovery process.
Crisis Management and Damage Control
Most cyber liability insurance policies contain comprehensive crisis management programs that insurers cover. These programs help reduce the severity of the cyber-attack and prevent the situation from worsening. Examples of crisis management measures include hiring IT experts, a public accountant, and a private investigator to uncover the people behind the attack.
As mentioned earlier, the cyber liability insurer will pay the ransom should you fall victim to ransomware. The insurer also pays any related expense, for instance, the cost to physically transport cash, if need be. The insurer may also pay the negotiator should you decide to hire one.
Remember we mentioned that you have to notify all concerned parties about the cyber-attack. The insurer takes care of all costs for notifying the relevant parties. Some insurers also take care of credit monitoring and even putting up a call center.
The insurer will cover fines and penalties imposed on the company by regulatory agencies because of breaching certain requirements. This also includes the cost of hiring a lawyer to represent your company in a court of law.
Sometimes, data breaches occur because of your employees’ negligence to protect sensitive data. Sometimes minor omissions or errors may expose private data to a myriad of data threats. If this is the cause of the data breach, you should brace yourself for a few legal claims.
The insurer will cover all court proceedings and cover the expense should things go wayward.
With that in mind, keep in mind that cyber insurance doesn’t cover the following:
- Utility failure
- Upgrading computer systems
- Deliberate acts of dishonesty by your business
- Any events that occurred before you got the insurance
- Acts of terrorism
This should put you up to speed on everything you need to know about cyber liability insurance coverage. Ensure you check with your insurer to know what they cover and what they don’t.
Get Cyber Liability Insurance Today
The best time to get cyber liability insurance is right now. That way, you can protect your business from cyber-attacks and other events that may send your business crumbling. Take time to review different insurers and policies and find one best suited for your needs.
The most comprehensive cyber liability insurance is a phone call away. Contact us today, and we’ll give you the cyber liability protection you deserve.