In today’s business landscape, nearly every conceivable business type of any size is at least connected to the internet, and some companies operate entirely online. Regardless of your company’s exact relationship with the internet and information technology, cyber insurance is an increasingly popular form of coverage that protects your business from some perils that get more common by the day.
But how exactly does cyber insurance work? What does it cover, and what does it exclude? Most importantly, should you acquire a cyber policy for your business? In this article, we’ll take aim at these questions and more in an effort to determine whether you really need this type of coverage or not.
Often referred to as cyber liability insurance, cyber insurance protects your company from online data breaches and other cyber attacks. Most cyber insurance policies cover claims related to both first-party and third-party expenses, which creates a nice foundation of coverage for any company.
Cyber insurance is one of the fastest-growing forms of coverage available. Currently, gross annual cyber insurance premiums are estimated in the $2 billion–$3 billion range, but by 2020 that rate is projected to grow to $7.5 billion. As more and more businesses buy into cyber insurance, there are still quite a few companies that remain uncovered. So, who’s right? Is cyber coverage a necessity or not?
While the vast majority of companies can benefit from having cyber insurance, it is absolutely vital for any company that regularly handles sensitive information, like customer data. If you do, and a data breach occurred that resulted in the theft of private customer information, it could very easily cost your company millions of dollars. With that in mind, it probably isn’t too difficult to see how cyber insurance could help keep your company’s doors open someday.
Even for businesses that don’t handle a lot of customer information, cyber insurance can still be of great benefit if a cyber security incident could cause a business interruption. Additionally, we should address the misconception that cyber coverage is only necessary for large corporations. Small and medium-sized businesses are quite susceptible to cyber attacks, as about two-thirds of all data breaches and other tech attacks impact these smaller companies.
Cyber insurance policies provide businesses with protection from first-party expenses as well as third-party costs related to a data breach or security failure at your business. Let’s discuss the different types of coverage that fit under each part of your cyber insurance policy. Keep in mind that policies vary from provider to provider, but for the most part the following claims are covered.
Of course, there are limits to any insurance policy, and cyber coverage is no exception. First off, your policy will almost certainly have sublimits for various expenses, such as set limits on how much you can receive for data breach investigations and third-party regulatory fines.
Next, there are some claims that are excluded entirely. Depending on your insurance provider, some or all of the following items will not be covered by your policy:
Typically, when a data breach or other similar cyber attack impacts your business, your cyber liability insurance will pay out the amount necessary to restore your company’s security. If a cyber threat hits your business, you’ll need to immediately document the incident and contact your insurance provider. At that point, your provider will investigate the incident and pay your company the money you need to get back up and running again.
Cyber insurance isn’t the most complicated form of insurance as far as claiming your benefits goes, but it’s important to thoroughly document any claims. Cyber insurance does require any incident to be documented in detail, otherwise you could have issues with payment.
Of course, not all insurance policies are created equal, and that’s certainly the case with cyber insurance. While the requirements for each company vary depending on the nature of your business and the size of your organization, in general you should make sure your policy has the following characteristics:
As we’ve already suggested numerous times, the cost for cyber insurance varies dramatically depending on how large your company is, and the nature of your business. Still, we can discuss some general averages to give you a bit of an idea for what to expect. As you might think, the cost for this coverage is tied largely to how much your business relies on the internet.
For example, an urgent care clinic could see premiums as low as $1,000 for $1 million of cyber insurance coverage. On the other hand, companies that provide communications services via fiber optics could pay five times that much. Of course, the only way you’ll know for sure how much you’ll pay is to consult with your insurance provider.
As a relatively recent addition to the landscape of business insurance policies, there is still some confusion in the marketplace regarding the necessity of cyber insurance. That said, it’s coverage that any business relying on the internet to remain in operation should seriously consider acquiring. As our world continues to get more and more interconnected, the importance of cyber insurance will continue to increase.
We hope this article helped answer your tough questions about cyber insurance coverage, and we wish you the best of luck in finding a policy that fits your business!