In this digital age, running a business without cyber liability insurance exposes you to tremendous risk. 70% of small businesses are unprepared for cyber attacks, and the forecasted average cost of cyber attacks is $1 trillion between 2020 and 2024.
Not to mention, working from home may result in employees using less secure devices, which increases the possibility of a damaging cyber attack.
Is your business fully secured and covered from this growing threat? Learn more about cyber liability insurance and why you need it now.
Types of Cyber Security Threats for Businesses
How will a cyber hack affect your computer system and your business? These are the different types of threats that may result in serious repercussions for your company.
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Phishing Schemes
Phishing schemes are online scams that send emails from a seemingly official source (such as a bank) and asks the receiving party for personal information.
The scammer will then use this information to access the victim’s accounts and open new ones.
When this happens in a business, emails may contain malware, and once an employee opens them, your business data may get compromised.
Data Theft
Sharing sensitive data on unprotected devices, losing important files, and not organizing files into a password-protected folder can expose your firm to data theft. This is when hackers gain access to your information, which may include sensitive client data.
Ransomware
When a cyber attacker uses ransomware, this means they encrypt files and immobilize your systems. Cybercriminals do this to take your networks hostage essentially, and they will demand payment to restore your access to the files.
Cyber Liability Insurance
Cyber insurance coverages provide financial coverage for instances of data breaches, cyber-attacks, and more. This insurance policy will usually cover first-party and third-party expenses resulting from a breach.
First-party expenses refer to how much a firm will have to pay due to the cyber attack. Third-party coverage, on the other hand, will apply to damages and settlements that a business pays as a result of harm to their clients. This can be a result of lawsuits as a result of lost client information.
First-Party Costs of a Data Breach
A single cyber breach can cause severe financial consequences for a firm. These are the first-party expenses that a cyber liability insurance policy will typically cover.
1. Data Restoration
When you are the victim of a data breach, some of that information may be lost. Especially if you are dealing with sensitive client data, it’s imperative that you get that data restored. The insurance policy will cover the cost to replace or restore your electronic data, as well as any software programs that were harmed during the cyber attack or because of a virus.
2. Loss of Business Revenues
What happens when a cyber-attack cripples your systems, and your business cannot operate? The damage of a cyber hack on your business operations can cause a complete shutdown of your business, at least temporarily.
This comes with a loss of your business income as well as additional expenses. A cyber liability insurance policy will cover the amount of revenue you lost during the period of time it took to restore your programs. Simultaneously, the policy will provide financial compensation for the expenses that a business may incur because a supplier or a distributor was shut down.
3. Costs for Notifying Clients
When you face a cyber attack, you may be required by law to inform the impacted individuals. Even if no laws are guarding this in your state, not informing your clients may tarnish your reputation permanently.
The scale of a data breach may mean that even the process of notifying clients or affected parties will require money. For instance, you may have to devote more employees to answer and make calls. A cyber liability insurance plan can cover these costs.
4. Cyber Ransom Costs
Some hackers will take your data and use them as ransom. They may threaten to damage your data, release confidential information or simply not give your data back. The cost of these ransoms – as well as hiring someone to negotiate with the cybercriminals – can be covered by your insurance policy.
5. Investigations of a Data Breach
What if you would like to investigate the data breach in more detail to prevent it from happening again? You may hire professional investigators to pinpoint the weakness in your network security, as well as why you were targeted in the first place.
6. Crisis Management
Not only is a cyber-attack financially damaging, but it has the ability to cripple your firm’s reputation. Your cyber insurance policy can provide coverage for the costs of hiring an attorney, IT expert, or even a public relations expert who will be able to find ways to salvage your reputation.
Third-Party Costs of a Data Breach
The costs don’t end there. Your clients may be upset by the way you handled their information and the data breach and decide to pursue a legal claim or suit. These are some third-party expenses you may experience that a cyber liability insurance policy can cover.
1. Network Security Liability
Your cyber policy will provide coverage for claims that your business acted in negligence and that this resulted in the data breach. Claims of this kind may accuse your business of failing to protect data, failing to notify clients of the breach, or failing to prevent the breach at all.
2. Electronic Media Liability
When it comes to lawsuits based on libel, defamation, invading privacy, and more, your cyber insurance may or may not provide coverage for these costs. It will depend on whether the lawsuits resulted from a data breach and from the mishandling of data.
3. Legal Defense Costs
Going to court or negotiating a settlement can take a lot of time and will require you to hire an attorney. Your cyber liability insurance package will usually cover the costs of having to undergo regulatory proceedings.
Costs Not Covered By Cyber Liability Insurance
Some costs may arise from a data breach that will not be covered by cyber liability insurance. While every insurance policy package differs, these costs are usually excluded from your insurance policy:
- Contractual liability
- Lost revenues in the future because of the data breach
- Loss of value due to the loss or damage to your intellectual property
- Costs of improving your IT systems, such as by upgrading your network security software
- Data breach costs incurred before your insurance policy is in place
It’s important to go through your insurance policy package’s details to know what is included and what is not.
Why You Need Cyber Liability Insurance
You may be thinking that the cost of having an insurance policy surely outweighs the possible risk of a cyber attack. These are the reasons why you absolutely need cyber liability insurance.
1. Protects Your Finances
The most straightforward benefit of having a cyber liability insurance policy is that it will protect your business’s finances. It really only takes one cyber attack event to drain your revenues and threaten a shutdown of your business.
In cases of high risk such as this, it’s better to be safe than sorry. A liability insurance policy may seem costly, but it will pale in comparison to the financial shock of a damaging data breach.
2. Protects Your Reputation
A data breach, whether or not it was something you could have prevented, will damage your company’s reputation. Especially if you are a business dealing with a lot of sensitive client data (such as a financial services company), your clients will be hesitant to trust you again.
Having cyber liability insurance coverage will tell your clients that you take their privacy seriously and that you have policies in place just in case things go wrong. The coverage can also ensure you have enough to spend on legal defense costs, allowing you to defend your company in court.
The Necessity of Cyber Insurance Coverages
When everyone is working from home, and when more people are conducting their business operations online than ever before, a cyber liability insurance policy is a necessity for every business.
Data breaches threaten an entire company’s survival, especially if you are a small business and may not have enough money on the side to protect against unfortunate circumstances such as this.
It’s essential to maintain your business’s finances and reputation to keep growing in the future.
Contact us today to get a quote for our cyber liability insurance coverage.
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