In 2020 alone, there were at least 1,000 data breaches in the U.S., which resulted in the exposure of over 155 million records of sensitive information, as reported by Statista. If your business deals with client’s private information, such as health records, you will likely face an expensive civil lawsuit if bad actors manage to infiltrate your IT system and steal the data. Additionally, the loss of confidential business data can cripple your business, leading to failure. This is where cybersecurity insurance coverage comes in handy.
Read on for more information on this topic.
What Does Cyber Insurance Cover?
On average, cyberattacks cost U.S. businesses about $200,000. Moreover, about 60% of businesses that suffer a cyberattack fail within six months of the attack. The costs associated with a data breach include legal costs, liability claims, as well as the cost of rebuilding the IT infrastructure after an attack. Thankfully, cyber liability insurance covers the legal costs, liability claims, and even first-party expenses resulting from a cyberattack. First-party expenses covered include crisis management, notification costs, cyber ransoms, and loss of income, among others. The amount of coverage provided for each inclusion depends on your cyber insurance coverage limits.
Cyber Insurance Exclusions
As with any other insurance coverage, cyber liability insurance features the following exclusions, among others:
- Intentional dishonest acts by the insured business
- Property damage and bodily injury
- Utility failure
Do You Need Cyber Liability Insurance?
While any business that uses a computer to send, receive, and store data requires cyber insurance, those who directly deal with clients’ sensitive information need more protection. For instance, in case of a data breach, a hospital is bound to lose more sensitive information than a grocery store. Thus, it helps to purchase the right cyber insurance if your business involves the following operations, among others:
- Processing transactions online
- Storing company data in cloud systems
- Storing clients’ private data
Take note that both small and large businesses are at risk of cyberattacks, and hence, you should bolster your cybersecurity regardless of the size of your business.
Categories of Cyber and Privacy Insurance
There are several categories of cyber insurance coverages, with each covering specific aspects of your business as follows:
- First-party cyber insurance – This is the cyber insurance policy that provides coverage to your business. Specifically, it pays for costs that your business incurs in a data breach, including data restoration costs, legal, forensics, crisis management, and notification costs, among others.
- Third-party liability insurance – This policy provides coverage to third parties such as customers and suppliers, who may be directly affected by the data breach. For instance, if bad actors hack into your hospital health records, steal a patient’s information and sell it to the highest bidder, you will most likely face a lawsuit for negligence. However, your third-party cyber insurance policy would cover the resulting legal expenses and liability claims.
- Business interruption insurance – This policy covers the losses incurred when a cyberattack interrupts your business activities, causing loss of income.
- Cyber extortion – According to the Federal Bureau of Investigation (FBI), cyber extortion is a common way that cybercriminals use to make money. Luckily, your cyber insurance coverage may pay for any ransoms demanded during cyber blackmail.
The right cybersecurity insurance will shield your business from the costs associated with an unfortunate cyber incident. Take note that these costs are typically hefty, and therefore, most businesses that suffer a cyber incident eventually shut down permanently. For a cyber liability insurance policy to suit your business and property at the right price, contact the experts at Humble & Davenport Insurance today. Our dedicated team serves Renton and the surrounding areas in Washington. We’re ready to ensure your business!