In today's digital environment, businesses of all sizes increasingly rely on technology. Whether it’s storing customer data or important financial information, this data makes organizations vulnerable to cyberattacks. Cyber liability insurance is a crucial tool to protect your business and customers from the consequences of a data breach or other cyber incident.
What is Cyber Liability Insurance?
Cyber liability insurance is a type of commercial insurance policy that covers the costs associated with a data breach or other cyber incident. This can include legal fees, public relations expenses, extortion settlements, and regulatory fines. It can also provide coverage for losses incurred due to system downtime, business interruption, and identity theft.
Why is Cyber Liability Insurance Important?
Data breaches can be very costly to your business. The average cost of a data breach for a business is $300,000, according to IBM. Additionally, cyber liability insurance can help you meet the strict data privacy and security regulations many industries face.
What Does Cyber Liability Insurance Cover?
- Liability - Covers the costs (e.g., legal fees, court judgments) incurred after a cyberattack, such as data theft, or the unintentional transmission of a computer virus to another party, causing them financial harm.
- Crisis Management - Covers the cost of notifying consumers about a data breach that resulted in the release of private information, along with providing them credit monitoring services, as well as the cost of retaining a public relations firm, or launching an advertising campaign to rebuild a company’s reputation.
- Directors & Officers (D&O)/Management Liability - Covers the cyber liability risks faced individually by a company’s key decision-makers while acting on behalf of the company.
- Business Interruption - Covers loss of income due to an attack on a company’s network that limits its ability to conduct business.
- Cyber Extortion - Covers the “settlement” of an extortion threat against a company’s network, as well as the cost of hiring a security firm to track down the blackmailers.
- Loss/Corruption of Data - Covers damage to, or destruction of, valuable information assets as a result of viruses, malicious code, and Trojan horses.
How to Choose a Cyber Liability Insurance Policy
When selecting a cyber liability insurance policy, consider the following factors:
- Coverage limits - Ensure the policy provides adequate coverage for your business. A qualified independent insurance agency, like Lewis Mohr, can help you determine the appropriate amounts.
- Exclusions - Be aware of any exclusions that may limit your coverage. Some policies have open-ended exclusions that won’t cover data breaches that result form the inability to install timely security patches or failure to follow a company’s security policy. Another exclusion in some policies is for war or terrorism. This will also not cover attacks from foreign countries with political, religious, or social motivations.
- Reputation - Choose a reputable insurance company with a strong track record of work in the cyber liability space.
By understanding the importance of cyber liability insurance, you can protect your business and minimize the risks associated with operating in today's digital world. In a future post, we’ll dive into the best ways to protect your business from cyber threats. If you have questions about cyber liability insurance for your business, please reach out, we’re happy to help!
