What is cyber insurance, is it something you need, and why?
By Dennis Shelly
While technology makes our lives easier, its emergence is not without threats. As technology becomes increasingly intertwined with our lives, the probability of our personal data being compromised rises. Cyber insurance provides a safety net for businesses that are vulnerable to the increasing rise of internal and external cyber threats, including ransomware. While cyber insurance has been a trustworthy safety net for years, things are changing quickly due to increasing cybercrimes and growing ransomware attacks. Before seeking cyber insurance coverage, or negotiating your next insurance policy renewal, it’s important to understand the realities of the quickly changing market and assess how effectively your security measures can withstand an insurance company’s review.
This article will answer some frequent concerns concerning cyber insurance and ensure you have all of the information you should consider before purchasing a cyber insurance policy.
What is cyber insurance?
Cybersecurity insurance, often known as cyber liability insurance or cyber insurance, is a contract that a company can acquire in order to decrease the financial risks of conducting business online. The insurance policy transfers part of the risk to the insurer in exchange for a monthly or quarterly fee. Cybersecurity insurance is a relatively new and developing market. Early adopters are companies that obtain cybersecurity insurance now. Given the dynamic and variable nature of the linked cyber risks, cybersecurity policies can alter from month to month. Unlike well-established insurance plans, underwriters of cybersecurity insurance policies have little data to construct risk models to calculate insurance policy coverages, rates, and premiums.
Cyber insurance vs. Errors and Omissions (E&O) insurance
Cyber insurance has evolved from errors and omissions (E&O) insurance, a different type of insurance that protects against flaws and deficiencies in a company’s services. E&O insurance is similar to product liability insurance for businesses that offer physical or digital products. While some cyber insurance plans include E&O features, most providers sell them as separate policies. Customers who want such protection can acquire a cyber insurance policy that covers it. E&O insurance does not cover the loss of third-party data, such as customer credit card information.
Why is cybersecurity insurance important for you?
According to the Ponemon Institute’s Cost of a Data Breach study, the average cost of a data breach is $3.9 million. Fees, reconstruction, continuity expenses, and lost business make up the costs, and they are so high that they usually mark the end of a business. Organizations can avoid these expenses by purchasing cyber-risk insurance. Electronic data loss or theft can have a severe impact on a business, including customer and revenue losses. Businesses may be held accountable for third-party data theft-related losses. Cyber insurance is essential for protecting firms from the dangers of cyber incidents, especially those related to terrorism. Cyber-risk insurance can help with the quick restoration of attacks and incidents. Companies are beginning to recognize this fact, with an increasing number of firms purchasing cyber-risk insurance.
What is covered by cyber insurance?
Today, cyber risk insurance underwriting protects your business’s liability for a sensitive data breach.
This may include:
- Legal fees and costs
- Repairing computer systems and networks damaged in a cyberattack
- Data recovery
- Restoring affected customers’ personal identities
- Notifying customers and authorities of a data breach
First-party liability coverage and third-party coverage are the two main types of cyber insurance coverage. You have the option of purchasing either or both types of coverage
- First-party coverage protects your organization when it incurs costs as a result of a data breach or when it is hacked.
- Third-party coverage protects you if a client, vendor, partner, or other party sues you as a result of a data breach.
Cyber liability coverage, such as “ransomware insurance” or “data loss insurance” may specify the types of incidents and losses it will cover. Keep in mind that the products supplied by the insurance industry’s cyber risk space are developing. Some cyber insurance companies are changing the scope and magnitude of what they will and will not cover for organizations.
A single cyberattack can destroy an unprepared organization. Considering this, it is important that all companies develop a cyber risk management program. Because cybersecurity insurance is new, coverage will differ significantly between providers. Companies should carefully examine the policy’s specifics before selecting one to make sure it has the required protection and specifications. Furthermore, businesses should assess if their policies protect them against existing and new cyberattacks and threat profiles. Cyber risk insurance is also essential to the recovery process following a data breach. If your system or network has been breached, cyber risk insurance may help you recover losses, pay fees and damages, and keep operations running while you rebuild and restore your systems and networks.
Now we recommend contacting your insurance agent and reviewing your current policy to ensure it covers you and your business from cyber threats. You may need to research cyber insurance policies and obtain some quotes to ensure you have all of the information you should consider before purchasing a cyber insurance policy.
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