Cybersecurity insurance coverage is a type of insurance policy businesses can purchase to protect themselves from potential losses caused by a cyberattack. The policy can provide coverage for data breaches, business interruption, and extortion. Cybersecurity insurance has become increasingly important as businesses have become more vulnerable to cyberattacks. According to a recent 2021 cyber security report by Check Point Research, attacks peaked at 925 weekly per organization.
(Image source: Check Point Research)
This blog post will discuss what cybersecurity insurance is, how it works, and who should buy it.
What is Cybersecurity Insurance?
Cybersecurity insurance coverage, also known as cyber liability insurance, is a type of insurance policy businesses can purchase to protect themselves from potential losses caused by a cyberattack. Cybersecurity insurance policies typically provide coverage for expenses such as data breaches, business interruption, and extortion. Some companies also offer policy extensions such as workplace theft, crime, and device coverage.
Policies also differ depending on the size of the organization and the type of underwriting risk they pose. For example, organizations that deal with a lot of sensitive customer data or store valuable intellectual property may have to pay higher premiums than businesses that do not pose as much of a risk.
How Does Cybersecurity Insurance Work?
When businesses purchase cybersecurity insurance, they are typically assigned a risk rating. This rating is based on the company’s risk of being hacked and its preparedness in the event of a breach. Cybersecurity insurance policies are then created based on this rating.
For example, a company deemed to be at a high risk of being hacked may have to pay higher premiums than a company considered to be at a lower risk. In addition, the policy may also include higher deductibles and limits.
Which Businesses Need Cybersecurity Insurance?
Any business that stores sensitive customer data or valuable intellectual property should consider purchasing cybersecurity insurance. This is because these businesses are at a higher risk of being hacked. Cybersecurity insurance provides peace of mind if a breach does occur.
However, in today’s highly connected world, just about every business stores sensitive data in some form or another. As a result, all businesses should at least consider purchasing cybersecurity insurance.
Some businesses operate in highly regulated industries and are subject to laws requiring specific cyber insurance coverage.
What does Cybersecurity Insurance Cover?
Cybersecurity insurance policies typically provide coverage for the following:
- Defense costs: Cybersecurity insurance can help cover the costs of hiring a law firm to defend your company in the event of a data breach.
- Data breach notification: Cybersecurity insurance can help cover the costs of notifying customers in the event of a data breach.
- Third-party indemnification: Cybersecurity insurance can help cover the costs of indemnifying third parties in the event of a data breach.
- Network security audit coverage: Cybersecurity insurance can help cover the costs of hiring an outside firm to audit your network security in the event of a data breach.
- Breach containment: Cybersecurity insurance can help cover the costs of containing a data breach, such as quarantining affected systems.
- Remediation assistance: Cybersecurity insurance can help cover the costs of hiring a third-party firm to assist with the remediation efforts in the event of a data breach and deal with any reputational damage.
- Credit monitoring: Cybersecurity insurance can help cover the costs of credit monitoring for customers in the event of a data breach that leads to data falling into the hands of criminals.
Benefits of Cybersecurity Insurance.
Cybersecurity insurance can provide businesses with several benefits, including:
- Peace of mind: Cybersecurity insurance can help businesses feel more secure in the event of a data breach. It isn’t easy to place a monetary value of peace of mind.
- Indemnity for data breaches: Cybersecurity insurance can help businesses save money in the event of a data breach by covering some or all of the costs associated with it.
- Insurance for risks other business policies do not cover: Cybersecurity insurance can help businesses cover some of the risks not covered by their general liability or property insurance policies.
- Great for crisis management: Cybersecurity insurance can be a valuable tool for businesses in crisis mode. In a data breach, having cybersecurity insurance coverage can help reduce the stress and chaos that often comes with it.
- Covers your legal expenses: Cybersecurity insurance can help businesses cover the costs of their legal expenses in the event of a data breach. Legal fees can be hefty and can often include the costs of hiring a law firm, notifying customers, and indemnifying third parties.
Disadvantages of Cyber Liability Insurance.
There are a few potential disadvantages to consider before purchasing cybersecurity insurance, including:
- Expensive Premiums: Cybersecurity insurance premiums can be costly, especially for businesses deemed to be at a high risk of being hacked.
- High Deductibles: Cybersecurity insurance deductibles can be high, meaning businesses will have to pay a large sum of money out-of-pocket before their insurance policy kicks in.
- Coverage Limitations: Cybersecurity insurance policies often have limitations on the amount of coverage they provide. This can leave businesses with significant expenses not covered by their policy in the event of a data breach.
How to Buy Cyber Insurance.
When it comes to purchasing cybersecurity insurance, there are a few things businesses should keep in mind, including:
- Assess your risks: The first step is to assess your risks. This will help you determine the type and amount of coverage you need.
- Shop around: There is a wide range of cybersecurity insurance policies available, so it is vital to shop around and compare policies before deciding.
- Read the fine print: Make sure you read the fine print of any policy before signing up. This will help you understand the coverages and exclusions of the policy.
- Get expert advice: If you are unsure about what type of policy is right for your business, it is a good idea to seek out the advice of an insurance broker or other expert.
Getting Started with Cybersecurity Insurance
Cybersecurity insurance can be a valuable tool for businesses of all sizes. It can provide peace of mind, indemnify businesses in the event of a data breach, and cover some of the risks that are not covered by general liability or property insurance policies. When purchasing cybersecurity insurance, it is essential to assess your risks, shop around for the best policy, and read the fine print. If you have any questions, be sure to seek out the advice of an expert.