Cyber Insurance: Why You Need It Now More Than Ever

Cyber Insurance: Why You Need It Now More Than Ever

Cyberattacks are on the rise and can have devastating consequences for businesses of all sizes and industries. According to IBM, the average cost of a data breach in 2022 was USD 4.35 million, and 83% of organizations had more than one data breach. Cyberattacks can damage your reputation, disrupt your operations, expose your sensitive data, and expose you to legal liabilities.

That’s why cyber insurance is becoming an essential part of risk management for businesses today. Cyber insurance, also known as cyber liability insurance or cybersecurity insurance, is a type of insurance that covers the financial losses caused by cyber incidents, such as ransomware attacks, data breaches, and distributed denial-of-service (DDoS) attacks.

This article discusses everything you need to know about cyber security; from what cyber insurance covers to why you need it and how you can obtain it to avoid cyberattacks. 

What Does Cyber Insurance Cover?

Cyber insurance policies can vary depending on your business needs, the types of data you store, and your industry. However, most cyber insurance policies offer two types of coverage: first-party and third-party.

First-party coverage pays for your direct losses, such as:

  • Business interruption: If you lose revenue because a cyberattack takes your systems offline, cyber insurance may cover some or all of those losses.
  • Data recovery: Cyber insurance may cover the costs of restoring your data and systems after a cyberattack, such as hiring forensic experts, malware removal, and system repairs.
  • Ransom payments: Cyber insurance may cover the costs of paying a ransom to unlock your data or systems in case of a ransomware attack, as well as the costs of negotiating with the attackers.
  • Notification and credit monitoring: Cyber insurance may cover the costs of notifying your customers and regulators about a data breach, as well as providing services like credit monitoring and identity theft protection to the affected individuals.

Third-party coverage pays for the losses suffered by parties outside your business, such as:

  • Legal expenses: Cyber insurance may cover the costs of defending yourself against lawsuits filed by your customers, partners, or regulators as a result of a data breach, as well as the costs of settling or paying damages.
  • Regulatory fines and penalties: Cyber insurance may cover the costs of paying fines or penalties imposed by regulators for violating data protection laws or regulations, such as the General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA).
  • Media liability: Cyber insurance may cover the costs of dealing with claims arising from the infringement of intellectual property rights, defamation, or privacy violations related to your online content or communications.
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Why Do You Need Cyber Insurance?

Cyber insurance can help you mitigate the financial impact of cyberattacks, which can be catastrophic for your business. Here are some of the benefits of having cyber insurance:

  • It can reduce your out-of-pocket expenses: Cyberattacks can be very expensive to deal with, and your standard business insurance may not cover them for you. But with cyber insurance, they can help you cover the costs of responding to and recovering from a cyber incident, as well as the costs of compensating the affected parties.
  • It can improve your cyber resilience: Cyber insurance can help you access the expertise and resources you need to deal with a cyber incident, such as incident response teams, legal counsel, public relations, and crisis management. Cyber insurance can also help you implement best practices and standards to prevent or reduce the likelihood of future cyber incidents.
  • It can enhance your reputation: Cyberattacks can damage your reputation and trust with your customers, partners, and regulators. Cyber insurance can help you demonstrate your commitment to cybersecurity and data protection, as well as your ability to respond quickly and effectively to a cyber incident.

Cost of Cyber Insurance

The cost of cyber insurance can vary widely based on several factors, including the size of your business, the industry you’re in, the amount of sensitive data you handle, and the coverage limits and deductibles you choose. Here are some general figures to give you an idea:

  • Small Businesses: On average, small businesses might pay around $145 per month or about $1,740 annually.
  • Policy Limits: Typical cyber liability insurance policies have limits that range from $1 million to $5 million.
  • Deductibles: The average deductible for a cyber liability policy is about $2,500.

Note: These costs can increase if your business is in an industry that handles a lot of sensitive customer information or if you have a history of cyber incidents. It’s always best to get a personalized quote from an insurance provider to understand the exact cost for your specific needs. Remember, the cheapest option may not always provide the most comprehensive coverage, so it’s important to balance cost with the level of protection you require.

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How to Get Cyber Insurance?

If you are interested in getting cyber insurance, here are some steps you can take:

  1. Identify Your Risks: Assess the specific cyber risks associated with your personal life or business. This could include risks to data privacy, data breaches, cyberattacks, and any other online threats you might face.
  2. Research Policies: Look into different policy options available in the market. Personal cyber insurance can be obtained as an add-on to homeowners, renters, or condo policies. For businesses, cyber liability insurance might be more appropriate.
  3. Choose an Insurance Provider: Select an insurance company that offers coverage that matches your needs. Some companies may offer standalone personal cyber policies, while others might provide them as part of a package.
  4. Undergo an Audit (if required): Some insurers may require an information security (infosec) audit by an accredited organization. This audit will assess your current cybersecurity measures and risks.
  5. Apply for Coverage: Fill out an application with the chosen insurance provider. You may need to provide details about your IT infrastructure, data handling practices, and any previous cyber incidents.
  6. Review the Policy: Before finalizing, carefully review the policy details to understand what is covered, such as cyberattacks, cyberextortion, online fraud, identity theft, and data breaches. Make sure it aligns with the risks you’ve identified.
  7. Purchase the Policy: Once satisfied with the coverage, you can proceed to purchase the policy. Ensure you understand the premiums, deductibles, and policy limits.
  8. Implement Recommendations: If the audit provided recommendations for improving your cybersecurity posture, implement these to help mitigate risks.

Companies Offering Cyber Insurance

Cyber Insurance: Why You Need It Now More Than Ever

AmTrust Financial

AmTrust Financial offers cyber liability insurance that is designed to help small to mid-sized businesses maintain their daily operations and protect them from cyberattacks. They provide a range of services including complimentary consultations with cybersecurity experts, cyber vulnerability scans, employee training to avoid phishing attacks, and specialized legal advice for healthcare practices to ensure HIPAA compliance

Chubb

Chubb has a long history in cyber insurance, providing tailored products and resources to help protect against the ever-changing risk landscape of today’s data-based world. They offer services to assist with incident response preparation, software vulnerability exploits, and improving front-line defenses. Chubb’s cyber insurance solutions are designed to be customizable to fit the needs of businesses of all sizes and industries.

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AIG

AIG’s CyberEdge program was one of the industry’s first cybersecurity insurance protection programs, launched in 1999. They offer end-to-end risk management expertise, detailed analytics to help clients understand and improve their cyber risk, and proven claims expertise with a 24/7 incident hotline. AIG’s CyberEdge covers physical and non-physical losses resulting from a cyber event.

Beazley

Beazley is known for its market-leading cyber insurance offerings that protect businesses by building resilience and minimizing risk. They offer solutions for a wide range of industries and have new risk management offerings to keep up with the evolving technological landscape. Beazley’s policies are designed to respond to various cyber risk exposures not covered under conventional insurance policies.

Hiscox

Hiscox provides cyber insurance that can help protect businesses against a data breach, security failure, illegal threat, or cyber attack. Their coverage is designed to react quickly to such events by funding investigations and reimbursing losses. Hiscox offers a range of coverage options, including first-party, third-party, and optional coverage, and they focus on helping small businesses boost their resilience to cyber risks.

These companies are among the leaders in the cyber insurance industry; each has its own unique strengths and offerings. You should consider your specific needs and risks when choosing a cyber insurance provider. Apart from that, consulting with an insurance broker can also provide personalized advice and help you navigate the various options available.

Conclusion

Cyber insurance is not a substitute for cybersecurity, but a complement to it. You still need to invest in the proper cybersecurity measures to protect your business from cyberattacks. However, cyber insurance can provide you with an additional layer of protection and peace of mind in case of a cyber incident. Cyber insurance can help you reduce your financial losses, recover faster, and maintain your reputation. Cyber insurance is not a luxury, but a necessity for businesses in the digital age.

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