Yahoo’s 2013 data breach is the largest known hack of user data in history. Though the hackers were later unveiled, the breach affected 3 billion accounts.
If your business suffers a cyber attack, you’re required to notify your clients right away. The average cost of delivering such notifications is $130 per individual. Imagine how much you’d spend on notifications alone. Let’s not even start on the cost of the data recovery if you had 2,000 clients.
Cyber liability insurance isn’t only for large corporations. Businesses of all shapes and sizes are investing in cyber liability insurance. In this post, we’ll look at what cyber liability insurance is and 5 reasons why you need it.
What is Cyber Liability Insurance?
Cyber liability insurance is a form of specialty insurance for situations that aren’t typically covered under other traditional policies. Put simply, Cyber liability insurance helps your business overcome the cost of recovering from data breaches or cyber attacks. These expenses could include:
- Customer notification
- Credit monitoring
- Legal expenses
- Fines because you’re liable for any data loss even if you had stored it in third party systems
The cost of an attack can be detrimental to your business, with Kaspersky saying that the average cost of a data breach to a small business is $86,550. Cyber criminals are more likely to target your small business because:
- You’re less likely to have a strong defense against breaches
- How or where you store customer information
- How you conduct business online
- You may accept credit cards online
What Does Cyber Liability Insurance Cover?
Many policies usually include two major types of cyber liability coverages:
- 1st party: Coverages that apply to losses sustained by your company directly.
- 3rd party: Coverages that apply to claims against your firm by people who have been impacted as a result of your actions or failure to act.
5 Reasons Why Cyber Liability Insurance is a Must Have
1. Data is not covered by standard insurance policies
Most businesses agree that data is one of their most important assets. Often, it’s worth more than the physical equipment where it’s stored. A standard insurance policy can’t respond if lose data or it’s damaged or hacked. Most cyber policies will cover data restoration and even rectification. Often these policies cover your data regardless of the manner it was lost as long as it’s within term limits.
2. Standard insurance does not cover business downtimes
Here’s an example: an employee of a doctor’s office left on bad terms. The office’s manager failed to change the assigned passwords that the employee used. Shortly after, the system began to behave erratically. Large amounts of data began to disappear and certain programs disappeared. Data, systems restoration, and business restoration took a couple days.
Imagine how much business you would lose in such a case. In most situations, while your system’s restoring often you can’t collect payments, take orders, or enter any new customer data. Cyber insurance covers this loss of business and profits due to non-physical reasons.
3. Your reputation is your #1 asset
Your business definitely lives and dies by its reputation. In the event of a data security threat, you can be sure your reputation isn’t affected with a cyber liability insurance policy. When you run the risk of losing your customer’s trust it can have more than financial ramifications for your business. Cyber insurance could meet the cost of hiring a PR firm to start and rebuild your reputation, as well as cover loss of future sales due to current customer loss.
4. It won’t break the bank
You can usually get a cyber liability policy for a very reasonable cost. Though cyber liability is new, you can most times tailor it to your business needs. Sometimes there is room to negotiate to yield you high coverage with low premiums and low deductibles.
5. Cyber liability insurance is your data security team
Big corporations are usually the ones that have data security teams. They analyze the risks to their organization’s data (both physical and electronic) and take steps to protect it. These steps include things such as redundant digital security measures, staff training, and consulting/testing by outside experts. Most small to mid-sized businesses don’t have that luxury, however, a strong cyber liability policy being in place can make sure you are protected.
Protect Your Company
Cyber crime is the fastest growing crime in the world. Cyber liability insurance has become a must for small, medium, and large businesses.
Finding specialized coverage can be hard. Finding a broker who understands your business and its specific needs can be even harder. At Allied, we can help your business assess the risk in covering a business of any size against data breaches.
Legal Disclaimer regarding content: This document/communication/message and its content is to be used only for general reference purposes. It summarizes certain publicly available information about the subject, but it is not legal advice, and Allied disclaims any representation or warranty that the materials contained herein are complete and/or accurate. Allied is not a law firm or accounting firm, and does not provide legal or accounting advice; you should engage your own lawyer or accountant if you have questions about these materials. Allied does not deem this information and any attached or linked documents as a complete and thorough listing or overview of the topic, and does not recommend it be primarily relied upon. It only highlights some common issues and resolutions.
