What Is Cyber Insurance?
In the era of advanced cyberspace, cybercriminals are just as sophisticated as the efforts to keep them out. Hackers cause data breaches that cost companies about $1.5 million annually, according to a survey by Kaspersky. The average company spends close to $19 million on Information Technology (IT) data security, yet still falls prey to high-level cybersecurity attacks. Leave room in your budget for cyber insurance if this is a risk at your company.
Explaining Cyber Insurance
Cyberattacks are a serious threat to companies. In the first six months of 2019 alone, data breaches by hackers exposed 4.1 billion virtual records. Cyber hacks, malware attacks and phishing scams affected victims an average of 2,244 times per day in 2019. Security breaches increased by 11% from 2018 to 2019. The average cost of a single data breach for a company in 2019 was $3.92 million. The global spend on cybersecurity efforts will reach a predicted $133.7 billion by 2022.
Cyber insurance does not guarantee safety from cyberattacks. It is not a form of cybersecurity, but rather a type of insurance companies can use in the event of a serious breach or data disaster. Purchasing cyber insurance can help a company get back on its feet financially after experiencing losses due to stolen or compromised data. Cyber insurance covers a business’s liability in the event of a sensitive customer information leak. If affected customers try to sue for a leak of information such as credit card or Social Security numbers, for example, cyber insurance will cover the costs associated with the lawsuit.
A business’s general liability insurance will not cover losses related to cyberattacks, internet fraud or data breaches. It will cover property damage and bodily injuries related to a company’s services, products or business, but generally will not reimburse a company for cyber-related losses. Instead, a business must purchase a separate form of insurance. Cyber insurance plans cover legal fees and recovery associated with cybersecurity breaches or similar events. If something happens, the company can rely on its cyber insurance to pay lawsuit-related bills.
Do You Need Cyber Insurance?
If you run a business of any kind, cyber insurance could be a wise investment. Cyberattacks are only growing in number and sophistication. While your cybersecurity efforts may work to lock hackers and scammers out, they might not be airtight. If a cybercriminal finds a way to work around your firewalls, your company could lose millions of dollars in a lawsuit by affected customers. Purchasing cyber insurance gives you peace of mind that your company will not pay out of pocket for losses associated with cybercrime. You may need cyber insurance if certain circumstances apply to your business.
- You only have general liability insurance, which
excludes cyber insurance.
- You do not have a system in place to notify
customers about a data breach, restore compromised data or repair your damaged
- You do not have data compromise protection or a
public relations firm to help you.
- You are a high-dollar company with no way to
mitigate risk exposure related to recovering from a cyberattack.
- You wish to protect your company from the costs
of an investigation, business losses, notifications, lawsuits and cyber
- You want peace of mind about the expenses of defending your enterprise from consumer class action litigation and potential settlements.
If you believe you could benefit from purchasing cyber insurance, choose your policy and provider wisely. A one-size-fits-all plan probably is not right for your unique business. Find a customizable cyber policy with nuanced additions that will provide better coverage for your specific needs. Find a company with fair deductibles, ample coverage and a timeframe that works for your business. The right cyber insurance policy could save your company a sizable sum after a cyberattack.