What is Cyber Insurance?
Cyber insurance protects businesses from risks related to information technology. It provides a safety net against financial losses caused by cyber threats like hacking, data theft, and software damage. As cyber attacks become more sophisticated and common, getting cyber insurance becomes more important.
|“Many smaller businesses worry about affording the costs of cyber insurance. Then, once they see it compared to the potential costs of an incident, that worry quickly fades.” – Karen Novotny, CEO, California Computer Options
Applying for cyber insurance coverage also comes with a secondary benefit. Businesses must assess their digital vulnerabilities as part of the insurance qualification process. This assessment can reveal previously unknown insights into how you can upgrade your cybersecurity measures.
In this article, we’ll explore more. Read on to learn more about who needs cybersecurity insurance, what it covers, the different types of insurance, and how to slash costs if you choose to get it.
Who Needs Cyber Insurance?
Anyone who uses digital technology can benefit from cyber insurance. Cyber threats are a constant concern for businesses that engage in online activities. Cyber insurance provides essential protection against such threats.
It is most critical for businesses that handle sensitive customer information, conduct the majority of their operations online, or those who rely heavily on their IT infrastructure. Industries like healthcare, finance, and retail, where security breaches can have severe impacts, should also make cyber insurance a priority.
Is Cyber Insurance Required for Compliance?
Cyber insurance is not a compliance requirement, but compliance is a cyber insurance requirement. For instance, healthcare organizations must demonstrate HIPAA compliance to qualify for cyber insurance.
While no broad compliance standards mandate cyber insurance, specific contracts or business partnerships might require it. This is particularly true if you work with government agencies or large corporations. Discuss this with your potential partners, but it may be wise to preemptively get cyber insurance if you plan to work with such agencies.
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What Does Cyber Insurance Cover?
While different types of insurance cover different needs, most types of cyber insurance broadly cover the following. Please note that this will also vary based on your provider.
Privacy Management & Liability
Insurance handles costs related to unauthorized access or use of sensitive information. This includes expenses for notifying affected parties, public relations efforts, recovering compromised data, and legal penalties. All of which is crucial for maintaining customer trust and managing the fallout from an incident.
Losses from business interruptions are the biggest financial burden of a cyber incident. As such, most providers compensate for income lost during a shutdown caused by a cyber attack, including ongoing expenses and lost profits. This is vital for maintaining financial stability during recovery periods.
Cyber extortion coverage assists in handling a ransomware attack. It covers negotiation costs and the ransom payment if deemed necessary. This coverage is important for resolving cyber extortion incidents swiftly and to minimize damage.
Coverage supports businesses facing legal action or regulatory penalties due to cyber incidents. It covers legal defense costs and potential fines. While not every incident has legal ramifications, the ones that do get very expensive. For instance, legal consultation fees for cyber liability cases cost an average of $8,600.
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Types of Cyber Insurance
First-Party Cyber Insurance
First-party cyber insurance covers the insured entity’s direct damages from a cyber attack. This includes costs for recovering compromised information, income loss due to business interruption, and expenses related to cyber extortion. It is ideal for businesses heavily reliant on digital data and operations, such as online retailers.
Third-Party Cyber Insurance
Third-party coverage assists with liabilities to others stemming from a cyber incident. This includes legal defense costs and expenses related to privacy violations or loss of third-party information. It’s suitable for businesses that handle personal information.
Cyber Liability Insurance
Cyber liability insurance focuses on legal liabilities from cyber incidents. It covers issues related to privacy violations, unauthorized information access, and media liability. This type is best for businesses that deal with intellectual property or face media-related risks.
Cybercrime insurance protects against losses from cybercrimes like fraud, phishing, or social engineering attacks. It’s suitable for all business sizes, especially those conducting online transactions.
Network Security Insurance
Network security insurance covers losses from network security issues, including system hacks, malware, and unauthorized access. This type is excellent for tech companies or large corporations with extensive digital networks.
Most types of cyber insurance cover the previously mentioned costs. However, with exceptions based on provider, not all of them do. Here is an overview of what covers which costs on average.
Slash Your Cyber Insurance Costs With Our Help
As important as it is to have insurance against cyber attacks, annual premiums can still get expensive. This is especially an issue if you’re a smaller business that needs to keep budget front of mind. You can take proactive steps to lower premiums, but there is also more help available.
California Computer Options offers specialized service packages that are built to help clients reduce their cybersecurity insurance costs. We can also help you enhance your security posture and watch your network 24/7 to help you demonstrate a lower risk profile.
So, if you want cyber insurance, but are unsure about the costs, contact us.