Cyber Insurance: How It Works and What You Should Consider
Keeping your business properly insured is an essential practice. Otherwise, you might find yourself experiencing significant financial loss or even legal complications.
Businesses that operate online or make use of digital tools can benefit from cyber insurance, but not everybody understands what they should.
Let’s explore what you need to know.
What Is Cyber Insurance?
As the name suggests, cyber insurance aims to help protect businesses from the consequences of cyberattacks. Researchers estimate that the cybercrime industry will be worth over $10 trillion by the year 2025.
So, it’s more important than ever before to prioritize the security of your organization. When cyber insurance comes into play, you’ll find that you are able to manage cyberattacks far more efficiently.
You will also receive compensation for various elements involved in your recovery.
It's impossible to fully protect yourself against a potential cyberattack. But, having cyber insurance coverage can often prevent the associated complications from being financially crippling.
What Type of Business Needs It?
Not every type of business can benefit fully from having a cybersecurity insurance policy. But, those that operate online or make use of digital tools should have this level of protection.
In practice, however, this means that nearly all companies can benefit in some way from having cyber insurance coverage. This is particularly true given that e-commerce has experienced explosive growth in recent years.
As more and more businesses begin to take advantage of the Internet, their risk of experiencing a harmful attack increases. This is especially true with distributed denial-of-service, also known as a DDoS attack.
The types of organizations that can benefit the most, however, are those that deal with highly sensitive data. This can include personal information, financial data, or intellectual property.
You may even face legal consequences if you don’t take the necessary steps to protect your company’s information. Of course, you can also erode the relationship you have with your customers and clients.
What Does This Type of Insurance Cover?
It’s essential to understand what this type of insurance covers. Otherwise, you run the risk of having a false sense of security when running your company.
Under the right circumstances, this could cause you to unknowingly put your business at risk.
Let’s explore two of the most notable incidents that cyber insurance covers.
It should come as no surprise that even a minor data breach could be potentially catastrophic. In fact, smaller companies may find it impossible to recover.
In general, there are also numerous costs associated with experiencing a data breach. One of the most significant is data restoration, which is the process of restoring or replacing electronic data that has been lost in an attack.
For example, a hacker may infect a key computer at your organization with ransomware. After you refuse to pay the proposed amount, the hacker then deletes 90% of essential data from this device.
Other costs include loss of income, crisis management, and expenses associated with notifying another party about a data breach.
To elaborate on the latter point, it can cost a significant amount of money to notify hundreds or even thousands of affected individuals. Without proper coverage, it’s not uncommon for a business to be unable to handle this obligation.
As we’ve seen through the 2017 Equifax breach, a cyberattack could result in another party taking legal action against your company. Comprehensive cyber insurance coverage will typically cover defense costs in addition to damages.
So, it can often mean the difference between managing your situation or dealing with significant financial loss.
If your company works with sensitive data, it has a duty to protect this data. But, the lines can sometimes become blurred if a hacker is able to obtain this information even after you have made an attempt to safeguard it.
The affected individuals will often argue that you did not do everything in your power to prevent this type of scenario. So, keep this in mind when deciding whether or not this type of coverage is right for your business.
What Incidents Require Additional Protection?
Unfortunately, cyber insurance does not cover every type of incident. This means that you need to implement other precautionary measures.
As you might guess, cyber insurance will not cover any form of bodily injury. The same can be said about property damage.
Although rare, devices that have been affected by a cyberattack could malfunction and result in either of the above scenarios.
Cyber insurance policies also do not cover certain levels of restoration. For example, your policy won’t allow you to restore a computer system to a higher level of functionality than it had.
In context, let’s assume your affected devices were running Windows 7. Let’s also assume that they only made use of a few basic premium applications.
Your insurance policy will only provide you with enough money to restore this level of functionality. So you can’t expect to receive enough funding to upgrade to Windows 10, purchase additional programs, etc.
Finally, cyber insurance will not cover utility failure. If the complications you experience aren't the result of a cyberattack, then your insurance coverage will never come into effect.
Be sure to reach out to your potential provider and obtain a summary of coverage before moving forward.
Cyber Insurance Can Be Game-Changing
So, it’s essential that you keep the above information in mind. Our guide will help ensure that you choose the cyber insurance that is ideal for your situation.
Want to learn more about what we at Econosurance have to offer? Feel free to reach out to us today and see how we can help.