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Return To: Cyber Insurance – The Ultimate Guide
Companies that rely on computers to conduct business need all the security they can get. With the COVID-19 pandemic prompting businesses to implement work from home policies, your data becomes more vulnerable to cyber threats.
You must understand that nobody is immune to cybercrimes. You might think that larger institutions are more at risk of becoming cyber-attack victims, which can be true. But consider that cyber-attacks on small businesses have been rising in 2021.
Your business uses information technology in one way or another. You use asset management programs to keep track of your assets. You send emails with confidential company information. All this data is valuable and at risk of compromise. When you lose this data, you become liable.
Cyber insurance can help pay for the damages that your institution may face in the event of cyber-attacks like data breaches or computer viruses. Recovering from such situations can be expensive. We have gathered some more reasons to help convince you of cyber insurance’s importance.
Does My Business Need Cyber Insurance?
Cyber insurance is different from standard property damage insurance. If your computer breaks, property insurance can cover the machine’s repairs. Cyber insurance pays for hardware repairs and the expenses you need to recover your lost data, which tend to be more valuable than the machine you stored it in.
Here are some more benefits that cyber insurance offers to protect your business from the expenses of cybercrimes:
- Data Breach Recovery: As mentioned, cybercrimes can cause expensive damage. Costs for data recovery alone can range between $100 and $700. Data breaches are dangerous when you run a business that handles sensitive personal information like credit card details. Cyber insurance covers the fees for recovering this data and enhancing your security to avoid future data breaches.
- Legal Fees: Cyber insurance may also pay the expenses for lawsuits that result when you lose valuable client data. Clients may seek legal assistance when your services fail to curb data breaches or other cybercrimes that result in their identity or information stolen. These instances tend to be expensive, making cyber insurance a necessary option for financial assistance.
- Lost Profits: Your business may lose income while it recovers from a recent cyber-attack. Besides income, you lose valuable time that can slow down your operations. Cyber insurance pays for these losses, unlike standard business interruption policies.
- Cyber Extortion Defense: When you fall victim to cyber blackmail crimes, where criminals hold your data for ransom, cyber insurance can cover the criminal’s financial demands. Cyber extortion cases involve criminals stealing your data through malware or hacks and then demanding money to avoid leaking your information.
What Are the Types of Cyber Liability Insurance For My Business?
Insurance companies may offer two types of cyber liability insurance: first-party cyber insurance or third-party cyber insurance. You must assess the type of business you run to know what kind of cyber liability policy best fits your needs.
Depending on your company’s operations, you may face different types of cyber liability risks. Here is a glimpse at both types of cyber liability insurance for an idea of what the policies protect your business from.
| First-Party Cyber Insurance | Third-Party Cyber Insurance |
| Pays for the expenses that your business directly faces after a cyber breach. Covers income losses from business interruptions that result from cybercrimes. Covers data recovery expenses in the event of data breaches. Covers extortion money that cybercriminals demand during cyber extortion cases. Pays for public relations fees (notifying clients and employees about data breaches or other cybercrimes you suffered). Covers reputation recovery fees that occur after cybercrimes. | Protects your business from cyber threats against your clients.Pays for lawsuits and legal fees that may occur when clients sue you for failing to prevent damages to their sensitive data.Covers the fees for negligence or breach of contract claims.Pays for media liability claims like defamation, slander, libel, or copyright infringement.Covers the fines that regulatory organizations issue your company in the event of cybercrime damage. |
How Do I Reduce My Cyber Liability Risks?
Insurance companies tend to reward companies that implement anti-cybercrime measures within their operations. When your business has security initiatives against cybercrimes, the cybercrime insurance company of your choice may lower the price you have to pay for a cyber insurance policy.
Security measures tell insurers that you are aware of the cyber liability risks that you might face and are taking steps to reduce them. Here are some measures that you can adopt to reduce your cyber liability risk:
- Maintain Software and Hardware: You need to install and update your security software and hardware regularly. Maintenance makes sure that your current security measures are functioning as they should. Conducting constant security maintenance measures may require a maintenance team within your company.
- Conduct Cybersecurity Awareness Programs: Be sure that you and your employees are on the same page regarding cybersecurity. If you run a business that primarily operates on computers, you should know what makes links suspicious and be wary of phishing scams. By conducting regular courses on cybersecurity, you can reduce your business’ cyber liability risk by educating your staff on the root causes of cybercrimes.
- Contract Third-Party IT Security Services: If you have limited IT knowledge and experience, consider hiring experts to manage your cybersecurity measures. Third-party IT security services specialize in curbing cyber threats to protect their client’s businesses.
- Backup Company Data: You need to have a regular data backup schedule to keep your data secure. Storing your data in offsite locations can be a good strategy. Consider using cloud computing services to store your data as well. Having your data in multiple secure locations is always a good practice to protect your data.
Conclusion
All businesses use IT services. Whether it is email or data storage, your company is not immune to cyber liability risks that come with using a computer to conduct business operations.
While preventive measures are essential to avoid falling victim to cybercrimes, you need cyber insurance to protect your institution from the expensive fees that come when you do become a victim of cybercrime.