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Cyber crime against a business can lead to the damage and misuse of sensitive information. If this happens, recovery costs can mount and include specialized repairs and legal fees.
Cyber liability insurance protects a business from the cost of threats to computer systems and data. It’s also known as cyber security insurance or cyber risk insurance.
“Cyber liability exposures represent an emerging threat to business today,” says Bryan Smith, vice president of product management at The Hartford. “Threat actors continue to develop increasingly sophisticated ways to access business systems and networks leading to the potential loss or destruction of confidential business and customer information.”
During a cyber attack, damage could spread to other people’s computer networks and devices such as phones or laptops.
“If a cyber criminal gains access to your device, they could use that access to damage other people’s networks or devices that you do business with,” says Dave Hynek, general manager of commercial lines marketing at Acuity. “When this happens, you could be pulled into a lawsuit. Cyber liability will help you respond to such a suit.”
Types of Potential Cyber Attacks
A cyber attack on your business could mean:
Data breaches. Breaches occur when critical information is stolen such as personal financial information.
Computer attacks. In this kind of cyber attack, your computer system is hacked and compromised.
Cyber extortion. Thieves may demand ransom payments during an extortion threat to your company’s computer system.
What Cyber Liability Insurance Covers
Cyber liability insurance covers the damage that your business suffers because of a cyber security breach.
These costs include things like investigative services, data recovery and identity recovery. Data recovery covers the costs of recovering your data following a breach. Identity recovery pays for costs and services needed to get control of your identity information following an identity theft.
Cyber liability insurance also covers damage impacting your customers or business partners because of the cyber attack. These damages include things like legal fees, customer notifications and settlement costs.
“Cyber liability insurance can provide coverage for costs and expenses related to a number of cyber threat scenarios including, for example, suspected network intrusions and cyber extortion threats, data breach, network or security wrongful acts, denial of service and network outage situations,” says Smith at The Hartford.
Cyber liability insurance can also pay for:
- Ransom payments you have to make to get back your data access
- Customer and employee lawsuits due to privacy breaches
- Lost income because of network outages
- Regulatory fines
Who Needs Cyber Liability Insurance?
Any business that stores or processes sensitive information should consider protecting their business with cyber liability insurance. Consider coverage if you store data such as customer names and addresses, Social Security numbers, medical records, and financial information such as credit card information.
Here are examples roundup of businesses that could benefit from a cyber liability insurance policy:
- Hair salons and barbers
- IT services
- Marketing companies
- Real estate agents
“Cyber liability has a number of coverages that help you respond to a cyber attack. These coverages include ways to restore your system or customer data,” says Hynek at Acuity. “Additionally, there is coverage to help with public relations should the need arise. It also protects you from lawsuits that may arise should your damaged system cause damage to third-party systems.”
How Much Does Cyber Liability Insurance Cost?
The price of cyber liability insurance depends on your company’s exposure to cyber risk and the amount of insurance coverage your company needs. Other factors impacting the cost of cyber liability insurance are your network security, the types of people who have access to your systems and data, and your claims history.
Both small and large amounts of cyber liability coverage are available. A small cyber liability insurance policy could be added to a business owners policy. A larger cyber liability policy with higher limits would merit its own standalone policy.
What’s the Difference Between Data Breach Coverage and Cyber Liability Insurance?
Data breach insurance will assist your business if sensitive financial data gets exposed in a data breach. Additional coverage can be added to data breach insurance such as business income insurance, which helps to replace lost income if you are unable to run your business because of the data breach.
Cyber liability coverage is aimed at bigger businesses that need more cyber protection. This insurance helps larger companies respond to cyber attacks and, most importantly, recover from cyber damages as a business.
Cyber Liability Insurance vs. Technology Errors and Omissions Insurance
Technology errors and omissions insurance is a type of professional liability coverage that will cover damages caused by errors in your company’s technology products and services.
Cyber liability insurance, on the other hand, covers costs from cyber attacks from outside your company.