Data breaches and cyber-attacks happen more often than we would like them to, and since most of today’s businesses and companies handle online transactions, or store sensitive electronic information from vendors, suppliers, and employees, preventing a data breach should be one of the top priorities for any business out there.
Making sure we follow appropriate procedures to protect our company and customers’ information should always be of great importance for a business, and purchasing antivirus software and keeping updated might not be enough; password managers, ransomware protection, and malware blocks are a must have for any person or company that might store sensitive data and personally identifiable information on their computers and databases.
Since Cybersecurity Insurance will not protect us from being targeted and becoming victims of a hack or cyber attack, we will discuss what exactly is cyber liability insurance coverage (CLIC), what kind of situations are covered by it, and how to know if cyber insurance would the right move for us.
What is Cyber Insurance?
As Technopedia defines it, Cyber Insurance or CLIC is a type of insurance offered to businesses and individuals, so they can recover from losses after being victims of a cyber-attack, including indemnification against lawsuits, customer notification, and public relations handling, if required. With CLIC plans having been around since 2005, and a growing popularity due to the rise of hackers targeting small businesses primarily, the market of cyber insurance is expected to be worth around $8 million dollars by the year 2020.
What Does It Cover?
As a result of an increasing interest of businesses and individuals in liability coverage in case they were victims of a cyber-attack, exploring exactly what these insurance plans cover, and what they do not is crucial to understanding how we could benefit from this type of coverage.
There are two different types of cyber insurance coverage that we need to consider before deciding on purchasing a CLIC plan, First Party coverage and Third-Party coverage, which includes coverage and mitigation for a wide variety of events.
First party coverage plans mainly deal with compensation of expenses caused by loss or damage of data, including the costs of recovering or reconstructing data, repairing or replacing equipment, professional consultations, as well as income that might have been lost, even extra expenses required to maintain business operations after a cyber-attack. If we were victims of cyber extortions, First Party coverage should also help us mitigate such costs, along with costs regarding notify our clients or customers about the cyber-attack and repairing our reputation too, through different marketing strategies.
Third Party coverage, on the other hand, compensate the expenses required to deal with lawsuits and litigation that we might face due to network security breaches and network privacy trials, as we might be accused of failing to protect sensitive data stored on our database. Errors and Omissions, and Electronic Media Liability are also part of what a Third-Party coverage would include.
Why Do I Need It?
Despite the increasing demand for Cyber Liability Insurance Coverage plans during the last five years, CLICs are not an absolute must for businesses nor individuals either. One important aspect to consider before purchasing cyber insurance is having a cyber security risk assessment with a professional in order to determine how exposed you really are. Another aspect to consider is to analyze the actions you or your business are taking to prevent being the victim of a hacker, and prioritizing on software that will protect your network from a virus, malware, ransomware, and any other type of cyber threat.
If you have come to the conclusion that cyber insurance is an absolute need for your company, and there are no budget limitations that would jeopardize profitability, the best action to take is to look for an insurance broker and advisor that is specialized in cyber-attacks. Since this is a relatively new product, and the specific details of what a security breach or loss of data are not really clear to some insurance companies, the support of a specialist in the matter will be of great help when purchasing your cyber security coverage plan.