Cyber Insurance & Why You Need It
Since 2019, at least 16 billion records have been exposed
…through data breaches, including credit card numbers, home addresses, phone numbers and other highly sensitive information. A data breach can damage more than just your computer system –as a business, it also can damage your reputation and put your customers and employees at risk. That’s why cyber insurance is becoming a necessary precaution for modern-day businesses.
What is Cyber Insurance?
Cyber insurance is an insurance policy that provides businesses with a combination of coverage options to help protect the company from data breaches and other cyber security issues. It generally covers business' liability for a data breach involving sensitive customer information, such as Social Security numbers, credit card numbers, account numbers, driver's license numbers and health records.
Who Needs Cyber Insurance?
While people used to believe that only large-scale industries, such as banks and credit card companies, needed cyber security insurance, this is no longer the reality. With the rise of technology, most businesses today deal with customer data, and almost all rely on technology to conduct everyday operations. This makes data breaches and cyber attacks a huge risk, and makes cyber insurance an essential consideration for all businesses. In particular, for businesses that create, store and manage electronic data online, such as customer contacts, customer sales, PII and credit card numbers, cyber insurance is crucial. In addition, e-commerce businesses and any business that stores customer information on a website can benefit from the liability coverage that cyber insurance policies provide.
Dangers of Not Having Cyber Insurance?
If you or your business's computer systems are hacked or customer, employee or partner data is otherwise lost, stolen or compromised, the costs of response and remediation can be significant. In this event, you may be exposed to the following costs:
Liability: You may be liable for costs incurred by customers and other third parties as a result of a cyber attack or other IT-related incident.
System recovery: Repairing or replacing computer systems or lost data can result in significant costs. In addition, your company may not be able to remain operational while your system is down, resulting in further losses.
Notification expenses: In several states, if your business stores customer data, you’re required to notify customers if a data breach has occurred or is even just suspected. This can be quite costly, especially if you have a large number of customers.
Regulatory fines: Several federal and state regulations require businesses and organizations to protect consumer data. If a data breach results from your business’s failure to meet compliance requirements, you may incur substantial fines.
Class action lawsuits: Large-scale data breaches have led to class action lawsuits filed on behalf of customers whose data and privacy were compromised.
Simply put, without cyber insurance, recovering from a data breach can be extremely expensive and complex.
Why You Need It
Cyber insurance is the only way to ensure protection in the face of cyber attacks. It provides a smooth funding mechanism for recovery from major losses, helping businesses to return to normal and reducing the need for government assistance. Though coverage varies depending on your policy, cyber insurance can cover:
Legal services to help you meet state and federal regulations
Notification expenses to alert affected customers that their personal information was compromised
Extortion paid to recover locked files in a ransomware attack
Lost income from a network outage
Lawsuits related to customer or employee privacy and security
Regulatory fines from state and federal agencies
While cyber insurance is not a replacement for cybersecurity, this coverage is your fail-safe in the event of a breach or cyber attack As cybersecurity incidents continue to increase in frequency and severity across the web, cyber insurance is a crucial way to ensure business safety and protection.