In the wake of a series of high-profile cyber-attacks, companies are scrambling to find ways to protect themselves from liability. Unfortunately, this protection is hard to come by and often expensive. To help you better understand why this is such a problem and what can be done about it, we will take an in-depth look at cyber liability insurance.
A few things can keep CEOs of small businesses at risk, and potential cyber-attacks or malicious data breaches are one of them. One thing Is sure; there has to be a way to quell any anxiety and make business owners sleep well.
This post discusses what you need to consider before purchasing this type of coverage and how it will protect your business in the event of an attack.
What is Cyber Liability Insurance
Cyber Liability Insurance is a type of insurance that protects individuals and companies from the potential financial harm caused by cyber-attacks. It can be used to cover damages, such as stolen data or property damage, as well as legal costs resulting from these attacks.
Though every company doesn’t have to have cyber liability insurance, those who do will find themselves much more protected than those who don’t. It shields business owners from the expensive nature of a potential data breach or malicious attack.
It is designed to cover all costs, from customer notification to credit monitoring and even fees and fines. Many businesses, especially startups that are yet to get their foot wet, are seemingly easy targets as they are assumed to have weak cyber security.
While it is not on the news a lot, the trend shows that 60 percent of small startups were brought down because of the action of hackers and cyber attackers. They are actively putting businesses out.
Reasons for Cyber Liability Insurance
Like every other insurance out there, cyber insurances would help your business recover from the financial liabilities incurred by cyber attackers. They’re paid to monitor credits and legal assistance, as they cover the costs of fines and other factors that might otherwise be expensive.
There are a few reasons why your company might need cyber liability insurance. Here are a few:
- It might be necessary for a company to get a cyber-policy if they are to handle sensitive information.
- This is one of the most important steps businesses that handle sensitive information like credit card numbers or operate cyber security do.
- While it is common knowledge that hackers target specific organizations like retailers, healthcare organizations, and banks, no trend suggests that these guys stick exclusively to this institution as they would pretty much attack any vulnerable organization.
How Cyber Insurance can help you
In the previous paragraph, we highlighted some of the sensitive institutions that are most vulnerable to cyber-attacks. This should evoke in you the feeling that the outcomes are super expensive and the ripples continue to spread for an extended period. Hence, being expensive and not easy to resolve, the cyber insurance coverage will help pay and lighten your burden. They pay for:
- Notifying the affected people
- Investigating and clogging the holes that result in the breaches.
- They perform credit monitoring.
- They hire a public relations firm to help businesses and companies boost their reputation.
There are two types of cyber liabilities, these are:
- The first party liability and
- The third-party liability
What is First Party Liability?
First-party liability coverage is an insurance policy that protects against further risks within your company, like those incurred after your network was hacked. These costs may be high, but luckily with this type of coverage, you will secure the cost to notify customers and pay a credit monitoring service for all those affected!
If your company’s network is hacked, it can cost you a fortune. Protect yourself by purchasing first-party liability coverage before the attack to avoid paying even more afterward.
Many companies set up an IT team to handle any security breaches without the funds to cover what happens after that. With first-party liability coverage, there’s no worry for your company – since take care of all those extra expenses associated with a major data breach.
First Party Liability Coverage is also known as the Data Breach Insurance, which can also be added to general liability insurance; this insurance is recommended for businesses that deal with the credit card information of their customers. They cover:
- Cyber fraud
- Hiring IT experts to investigate any data breach and make sure that there is compliance with the regulations
- Notification expenses (notifying customers)
- They offer a fraud monitoring service.
- They help the company with crisis management, public relations.
- From the expense attributed to hiring more staff and renting equipment, this coverage helps with the payment of business interruption.
Third-party Cyber Liability Insurance
The first-party cyber liability deals with the financial impacts of cyber-attacks. On the flip side, the third-party coverage comes into play anytime a client holds you responsible for allowing the data breaches to happen. They include the expenses of legal attorneys and settlements.
While the other is for regular businesses, this is for IT or tech professionals that provide software recommendation and consultancy services to specific clients. For example, if the software is responsible for a data breach, the third-party coverage covers the cost of the lawsuit. They cover the following:
- Attorney fees
- Settlement fees if you choose to settle outside court.
- Legally obliged fees
- Other court fees
The third-party cyber liability insurance can be added to your error and omission policy. When combined, it’s known as the technology errors and omissions insurance.
How Much Does it Cost?
For a business to thrive, then affordability has to be one of the elements to consider when it comes to prices. Cyber liability insurances are generally affordable, irrespective of the size or type of business. Below are some of the factors that will determine the cost of insurance.
- The quantity of sensitive information that is handled
- The type and size of the industry
- The amount of coverage
- The number of employees
How do Cyber-attacks Play Out?
According to a report by data breach investigation, 28 percent of data breaches involved small businesses and were caused by the following factors.
- Caused by outsiders
- Web applications
- Most breaches are related to ransomware.
Furthermore, while 28 percent of all data breaches are targeted at small businesses, only 43 percent of these startups have a semblance of security.
“A Stitch in Time Save Nine!”
With such a high level of risk in the digital world, you need to protect your business. Cyber liability insurance can help safeguard your company from expensive lawsuits and litigation due to data breaches or other cyber-attacks. We also offer tips on managing computer risks like malware, viruses, denial of service attacks, and more. Don’t wait until it’s too late; contact us today for all of your cybersecurity needs!