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What is Cyber Insurance & Why Do You Need It?

The companies that suffer data breaches end up losing millions due to downtime, remediation, lost business, and other costs. This is exactly the reason why cyber insurance was created.

In the first half of 2019. There have been over 3,800 publicly disclosed data breaches exposing 4.1 billion records. This represents an increase of 54% over the same time the prior year.

Small businesses are often hit the hardest. Because they don’t have as much capacity as large enterprises to absorb the financial losses. That accompany a data breach.

They’re often more susceptible to them as well because their network security may not be as strong.

What is Cyber Insurance & Why Do You Need It?

Cyber insurance, also known as cyber liability insurance. Is designed to protect companies against losses that occur as a result of a data breach or other cyber-related security incident.

Just like an insurance policy on your building will pay a claim should a natural disaster damage your office. The cyber insurance policy does the same in the event of a cyber attack that results in losses.

75% of organizations globally purchase cyber liability insurance.

What’s the reason for the prevalence of this type of insurance when it wasn’t as well know just a decade ago?

It’s the rising number of cyber attacks on businesses and the costs. That come with them that have made cyber insurance a “must have” policy for companies.

Cyber attacks, including ransomware, breaches of information. And other type of hacks have become one of the major causes of financial loss for organizations.

According to IBM Security, the average data breach costs a company $3.9 million.

How Does Cyber Insurance Work?

Cyber insurance will typically cover your company’s liability in the event of a data breach. That involves the exposure of sensitive customer information. This can be credit card number, health records, or other personal data.

You’ll find that cyber insurance has become so popular. That it’s being offered by major insurance companies like Progressive and Nationwide. Companies need a separate policy for cyber losses. Because a general lability policy typically won’t cover losses due to a data breach.

What’s Covered with Cyber Insurance?

The coverages and costs can vary according to your cyber insurance carrier. But here are the types of costs that are typically covered:

  • Investigative services
  • Business interruption
  • Data recovery
  • Repair of damaged systems
  • Legal fees
  • Settlement costs
  • Media liabilities
  • Breach notification to customers
  • Restoring personal identity of those affected 

Some items that may NOT be covered in a cyber insurance policy are:

  • Losses of intellectual property
  • Damage to your brand reputation

Costs and Deductibles

Just like any other type of insurance, the cost of the policy will vary according to your risk level. And how much coverage you need. 

It’s possible that you could get a reduction in your rate if you have strong network security.

And have taken measures to protect yourself from a data breach. Such as using an enterprise-grade firewall or enacting password security policies. 

Why Does My Business Need Cyber Insurance?

You’re never too small that hackers can target you. Small businesses are often the victims of data breaches.

And even Progressive Insurance recommends that businesses. Such as contractors, restaurants, hair salons, and realtors get cyber insurance to protect their business.

58% of cyber attack victims were companies with less than 250 employees. It’s also a well-known statistic that 60% of small businesses that suffer a data breach end up having to close down within 6 months after the attack.

Without having an insurance policy to fall back on. A data breach can be just as devastating to a small company as a fire. Or other major catastrophe.

83% of small businesses don’t have the funds to deal with the costs of a cyber attack. And according to the IBM Security report.

Those costs aren’t just contained within the first months of the incident. Companies can expect those data breach-related costs to continue for years after the attack.

Ransomware, phishing attacks. And new forms of file less malware aren’t going anywhere. In fact, the attack numbers just keep going up along with the sophistication.

Hackers are constantly finding new ways to exploit vulnerabilities. In everything from the Windows PowerShell administrative tool to commonly used phone applications like WhatsApp. 

So, companies that aren’t protected with a cyber insurance safety net may end up suffering devastating losses. Just as they would if their building was hit by a tornado, and they had no insurance to cover it.

Make Sure Your Cyber Strategy is Solid

From managed IT services with security monitoring to IT consulting to guide your business continuity planning.

Schedule a free consultation today to discuss cyber insurance. And your security strategy. Call 919-263-5570 or reach us online.