What is Cyber Insurance, and Why Does Your Business Need It

March 13, 2023

Cyber insurance is essential to any modern business' risk management strategy. It protects businesses from the financial losses of cyber-attacks and other data breaches. With the ever-growing threat of online crime, it's more important than ever that businesses protect themselves with cyber insurance.

Cyber insurance can cover many risks associated with data loss and cybercrime, such as ransom threats, malicious software, stolen devices, and identity theft. It can also help to cover the costs associated with notifying customers of a data breach and responding to any requests for compensation. This article will look at cyber insurance, how it works, and why your business needs it in today's digital world. We will also explore finding the right policy to suit your business's needs and budget.

What Does Cyber Insurance Cover?

Cyber insurance helps protect your business against the financial losses that result from data breaches, hacking, and other cyber threats. Specifically, cyber insurance typically covers the following:

Liability costs associated with customer data breaches or customer lawsuits due to unsuccessful efforts to protect data.

Notification and credit monitoring costs of affected customers are required by law.

Costs to respond to breaches such as forensic investigations and public relations management.

Expenses associated with lost income due to an attack, such as business interruption insurance.

Ransomware payments for data recovery if you pay for regained access.

No matter the size of your business, it's essential to consider the risks posed by cyber-attacks and put measures in place to protect your and your customer's data. Cyber insurance is a critical way to help reduce risk and protect your business from a cyber attack.

How Much Does Cyber Insurance Cost?

The costs for cyber insurance vary greatly, depending on factors such as the size of your business, the type of data you handle, and the types of risks your business faces. Small businesses may pay anywhere from a few hundred to several thousand dollars a year for a policy. In contrast, larger organizations may spend tens of thousands for more comprehensive coverage.

Ultimately, the cost of cyber insurance is a small price compared to what could happen if your business falls victim to an attack or data breach, which can result in lost revenue, reputational damage, legal fees, and more. That's why it's essential to weigh the risks against the costs when considering cyber insurance.

Cyber Insurance vs. General Liability Insurance: What's the Difference?

So what is the difference between cyber insurance and general liability insurance? While general liability insurance can protect from property damage, bodily injury, and other physical losses, cyber insurance offers coverage for losses that are not tangible or physical. The core coverage areas of cyber insurance include:

Data Breach Response:

Data breaches can occur through malicious attacks or human mistakes, such as an employee misplacing a laptop containing confidential information. Cyber insurance will cover the cost of notifying affected individuals, appointing a forensic investigator to determine the cause of the breach, and restoring lost data.

Network Liability Coverage:

Network liability coverage protects businesses from claims from data transferred over the internet, such as copyright infringement or intellectual property theft. This coverage helps to minimize the legal and financial risks associated with sharing data online.

Cyber Extortion Coverage:

Cyber extortion involves criminals using ransomware or other methods to cripple an organization's computer systems until a ransom is paid. Cyber extortion coverage reimburses businesses for related expenses incurred when responding to threats such as legal fees or ransom payments.

Are There Any Regulatory Requirements for Cyber Insurance?

It is easy to presume that cyber insurance is something only businesses with an online presence need, but the reality may surprise you. As data becomes increasingly important for companies of all shapes and sizes, there are growing regulatory requirements for cyber insurance.

Businesses that handle customer or employee data must comply with various laws and standards depending on the type of information. These rules require businesses to have cyber insurance if they take online and offline sensitive information. Compliance with these regulations can be complex, and failing to do so can lead to hefty fines, making it essential for businesses to have adequate protection.

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