Cyber Liability Insurance 101
- PCNet
- Jun 29, 2021
- 3 min read
Updated: Oct 9
The Beginner’s Guide to Cyber Liability Insurance for Business
The COVID-19 pandemic has affected everyone, but one group that benefited most is cybercriminals. Cybercrime has surged by nearly 300% since the start of the pandemic, making it more important than ever to protect your business from malicious cyber threats. One essential measure is securing Cyber Liability Insurance (CLI).
CLI helps cover financial losses resulting from cyber events such as data breaches. However, cyber liability is not usually included in general liability insurance and must be purchased separately. Each provider offers different coverage options and exclusions, so it’s important to review the details carefully.
Why Invest in Cyber Liability Insurance?
Experts estimate that global damage from cybercrime will reach about $6 trillion in 2021 higher than the GDP of the world’s third largest economy, Japan, at $5.38 trillion.
These statistics highlight why SMBs in particular need CLI:
Over 40% of cyberattacks target small businesses.
Over 60% of SMBs have experienced a cyberattack in the past 12 months.
Over 45% of SMBs say their current processes are ineffective at mitigating attacks.
Having cyber liability insurance can be the difference between your business recovering or closing after a security incident. Without CLI, expenses after a breach can seriously damage your finances, or even force your business to close permanently.
Common expenses after a severe data breach:
Cost of downtime
Cost of investigation
Cost of data recovery
Cost of legal procedures
Cost of notifying stakeholders
Cost of restoring the personal identities of those affected
A strong CLI policy typically covers these expenses. However, always confirm with your insurer exactly what is covered and what is excluded before committing to a policy.
Does Your Business Need Cyber Liability Insurance?
Any business with online exposure should consider CLI. If you store or handle sensitive data such as electronic protected health information (ePHI) or personally identifiable information (PII) cyber liability insurance should be a top priority.
What Should Your Cyber Liability Insurance Cover?
Look for these key coverages:
First-party coverage:
Network security and privacy liability: Covers breach response costs, including forensic investigations, public relations, credit monitoring, legal fees, and penalties.
Business interruption losses and extra expenses: Covers lost revenue and extra costs to keep your business running.
Digital data recovery and cyber extortion: Covers costs such as ransom payments due to ransomware.
Third-party coverage:
Cyber liability: Covers lawsuit expenses from breaches in client systems or networks.
Media liability: Covers claims of libel, copyright/trademark infringement, etc., resulting from media use.
Cybercrime coverage:
Covers losses from digital theft of money or securities and social engineering fraud.
Who Are the Top Cyber Liability Insurance Carriers?
Finding the right provider can be challenging. While many general insurers offer liability coverage, not all provide comprehensive cyber liability protection. Choose a provider rated ‘A’ or higher by a reputable insurance rating agency.
Carriers to consider:
Chubb
AIG
Travelers
AXA XL
AmTrust Financial
Co-Operators
Remember, purchasing a policy is just the start. You must also maintain compliance with the agreement to ensure your contract stays valid and will pay out if needed.
Let Us Help
Having the right partner by your side simplifies the process. Whether you need help choosing the best cyber liability insurance policy or tracking compliance with your CLI contract, we’re here to help.
Article curated and used by permission.
Sources:
Entrepreneur
Cybersecurity Ventures
Cost of Cybercrime Study
State of Cybersecurity Report
