Cyber liability insurance provides a guarantee of compensation in the event that a business experiences a data breach due to careless or unintentional actions of an employee or by a hacker looking to cause harm or personally benefit. This data breach can include information such as social insurance numbers, personal information, and bank or credit card numbers.
For this reason, it is crucial that a business is covered by this type of insurance as it could be the difference between recovering and staying in business or closing your doors due devastating losses or perceived unreliability in the eyes of a customer or client. Below are five benefits to being covered by cyber liability insurance.
1. Adds to general liability insurance
Your company probably has a good general liability insurance policy but these usually state that you are only covered for tangible property such as the physical database itself or you are not covered for losses garnered through the internet. Therefore, cyber liability insurance fills this void and can provide reimbursement if your company suffers a data breach.
First party cyber liability insurance will cover your company for any costs and financial damages incurred and can include legal fees, client notification costs, and loss of business income. Third party coverage provides for damages to clients or customers and can include defense costs, damages, settlement costs, and money to cover fines.
2. It covers a lot
Cyber liability insurance is a popular option with companies because it can provide a significant amount of compensation and covers a lot of damages as a result of a data breach. In addition to areas mentioned previously, some of the basic coverage stipulations of a cyber insurance policy include privacy liability, data loss and restoration, theft and fraud coverage, and crisis management.
Cyber liability insurance is especially helpful because it also covers business interruptions which is essential for small businesses or for companies with only one revenue stream and this is damaged or disturbed.
3. You are on the hook
Whether a data breach is the result of actions by an employee or a hacker, your company was responsible for safe-guarding the information and you will be blamed for it. Some larger companies have entire departments dedicated specifically to analyzing the risks a company faces and developing protections against them, but most do not.
If you do not have a risk management team like this, you need a cyber liability insurance policy to provide compensation to your company and parties affected. You cannot control how your data is handled all the time but you can have a plan in place if it is accessed without consent or shared unintentionally. An insurance broker will be able to help you prepare this plan and provide you with more information on the relevant policies.
4. Tailored to your needs
A cyber liability insurance policy can be tailored exactly to your needs, adding riders to address things you require and removing what does not apply to you. In an effort to prevent losses as a result of a data breach, an insurance broker will complete tests and assessments to evaluate a company’s needs.
An effective policy will then be composed based on these needs. In the event of losses and damages after a data breach, the company will assign all support required to assist the company through the crisis and work to minimize the harm caused.
5. Peace of mind
As mentioned, you may not have foolproof guards or a risk management team to prevent data breaches but you can have a plan to minimize damage caused. A cyber liability insurance policy will provide your company as well as your clients with the assurance that everyone affected will be well compensated in the event of a data breach.
The total cost for a company to recover from a cybercrime is approximately $5.9 million. Purchasing a cyber liability insurance policy will provide coverage to address all areas required at a fraction of this amount.