What is cyber insurance and why do I need it?
Cyber insurance, better known as cybersecurity insurance protects small and vulnerable businesses from expensive data breaches and uninvited cyberattacks. Protecting small businesses from fragile cybersecurity setups and deep vulnerabilities requires cyber security insurance.
A cyber attack or data leakage is not just an inconvenience but can put you out of business. Small businesses are more of an attractive target for cyberpunks. Whether you are a settled organization or a startup in the business world, this article helps you explore all aspects of cyber insurance policies. Gain insights from a leading cybersecurity support company to make an informed decision.
What is cyber liability insurance?
If you want to protect your business data or recover from financial losses caused by cyberattacks and data pilferage, cyber liability insurance is available at your service. It is a form of cyber extortion coverage providing data and financial loss recovery without compromising privacy. Small businesses fall more prey to cyber intrusions. IBM reveals that approximate cost of a data breach in 2023 was estimated at $4.45 million, while 43% of those cyberattacks were against small-scale businesses.
Cyber security insurance covers all the costs including;
- Incident response team
- Breached data recovery
- Hiring legal representation
Get to know the two major types of cyber liability insurance listed below.
First-party coverage
Businesses facing first-party losses due to their cyber risks, and handling of personally identifiable information (PII) for dedicated customers need business interruption coverage. First-party cyber insurance liability is also pronounced as data breach coverage. Customers can include this coverage in their general liability insurance plan. It helps to cover;
- Data breach recovery costs
- Business interruption coverage
- Ransomware, phishing and social engineering fraud coverage
Third-party coverage
Companies that are responsible for the privacy liability of their clients against cyberattacks would need third-party liability coverage. It helps pay for legal costs in regulatory response coverage when a client sues your organization for failing to stop a cyber intrusion or data breach activity. Most technology companies come under this category and this type of insurance helps cover;
- Legal coverage costs
- Out-of-court settlements
- Court-ordered verdicts
Who needs cyber insurance coverage?
Cyber security insurance is sometimes also called cyber liability insurance. It is indispensable for organizations that operate in a cybersecurity environment, cloud-based setup or manage sensitive customer data, such as credit card numbers and more. Before you jump to cyber insurance, it is essential to know the vulnerable industries that are more prone to data leakage or cyberattacks.
- Retail businesses
- Technology Professionals
- Financial service providers
- Medical care organizations
- Real estate experts
Why is cyber insurance essential?
Given the rising frequency of cyberattacks, cyber insurance for small businesses has become an essential component of cyber risk assessment and risk management. Let’s look into a case study before jumping to the reasons for having cyber insurance coverage.
Cyber hackers breached Sony’s Playstation Network back in 2011 and ended up exposing the data of almost 77 million users. Adding more to it, the users remained unable to access the service for almost 23 days. The attack incurred a cost of over $171 million. However, it could have been recovered by claiming cyber insurance, but having no policy left it helpless. Sony had to bear the total costs of cyber damage. Below are leading reasons why cyber security insurance is mandatory:
To control data breaches
Criminals access sensitive data and cause heavy financial losses by intruding on network protocols. The network security liability coverage saves companies from millions of dollars worth of data leakage. Cyber insurance helps recover the costs of data and reputational damage recovery.
For operational continuity
Cyber insurance protects organizations from operational disruptions leading to severe downtime and productivity loss. Insurance helps to claim the quick recovery of lost income, and sensitive data during disruption.
For reputation management
Cyber damage can severely affect business reputation, resulting in loss of customer confidence and potential revenue. Cyber liability insurance policies often cover public relations management to restore public confidence and business reputation.
For legal compliance
Many state-enacted cyber regulations demand organizations to protect sensitive information and report data breaches. If a company fails to show compliance with these legal terms can lead to legal fines. Cyber insurance covers regulatory penalties and fines including the costs associated with legal investigations.
Final thought
In an age where cyberattacks are an evolving challenge, cyber insurance comes to shield organizations from the financial impact of data breaches. If your company encounters cyber risks, investing in cyber security insurance is not merely a precautionary step. It’s a strategic step to safeguard your financial stability, operational continuity, and organizational reputation. Without taking decisive actions, it is difficult to manage cyber risks. Let’s not overlook that choosing a professional cyber insurance company can provide affordable and effective cyber protection services.