In this day and age, many small businesses control a lot of data and other online information. This can include anything from client records, work plans, tax records, and other important documents. Recovering from a breach can be long and costly if this information is ever lost, damaged, or stolen due to a security breach. Even worse, there can be legal ramifications, such as third-party claims or lawsuits, if the data contains personal identifying information such as social security numbers, health records, or payment records.
Cyber liability insurance can help businesses protect themselves against costs associated with security breaches and the restoration of your client's data and your reputation.
At its core, cyber liability helps protect businesses against the financial costs that result from data breaches or other cyber issues. Policies can look very different from one agency to the next as most that offer cyber coverage use forms they develop themselves. Still, most include both first-party and third-party coverage.
First-party protection refers to the out-of-pocket expenses your firm would have to deal with the breach.
On the other hand, third-party coverage applies to damages or settlements a business is obligated to pay arising from claims or suits for injuries that result from a business' actions or failure to act.
Here are some examples of what you might find covered in your cyber liability policy. Typically, these will be reimbursements for costs/penalties already incurred.
A recent study performed by AdvisorSmith Solution Inc. found that the average cyber insurance cost in 2019 was $1,500 per year for $1 million in coverage, with a $10,000 deductible. However, costs range depending on a number of factors, including the size and industry you're in, the amount and sensitivity of the data, annual revenue, strength of security measures, and policy terms.
The coverage for third-party claims is usually "claims–made," meaning your coverage extends to claims made during the policy period. Typically, insurance will cover damages and settlements plus defense costs, which may be included within or in addition to the policy limit.
Policies and what they cover will vary from one agency to the next. However, these are typical exclusions that you will probably find on most policies:
In today's tech-forward world, finding a business that doesn't need cyber liability insurance is hard. You should get coverage if you run a business that stores sensitive client, customer, or partner data. Especially if your business supports electronic transactions.
Most people might think that cybercriminals only target large corporations because of their wealth and the damage they can cause. However, the rate of attacks on small businesses is growing, with 43% of attacks targeting small businesses. Sadly, 60% of those businesses go out of business within six months of a breach or cyber attack. Additionally, the pandemic has moved a lot of employees and companies almost fully online, generating more risk of social engineering attacks and data breach attempts.
Cyber liability can protect your business against the very real threat of a data breach, targeted cyber attack, or the consequences of a seemingly small incident such as a lost or stolen laptop or company phone. Cyber liability insurance helps make sure your business can survive if your customer data ends up in the wrong hands.
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