What You Need to Know About Cyber Insurance

Cyber insurance covers losses incurred as a result of cyberattacks. Here’s what you need to know about it as customers demand more privacy transparency.

Cyber insurance is insurance that covers losses incurred as a result of cyberattacks. It can reimburse businesses for the costs associated with data breaches, cybercrime, and other types of cyber emergencies.

It is an important part of doing business in a global, internet-reliant economy, and it is becoming increasingly necessary as the frequency and severity of cyberattacks grow.

Here are 24 things you should know about cyber insurance:

1. Must Have Up-to-Date Security Measures

In order to qualify for most cyber insurance policies, businesses must have up-to-date security measures in place to ensure they are mitigating vulnerabilities. This includes having things like a firewall, intrusion detection and prevention system and data encryption.

Just as with homeowners insurance, it is unlikely you are going to get a policy from a trustworthy insurer if you are at risk of attack because you don’t have the bare minimum in place to protect your data.

2. How it Functions

One of the biggest benefits of cyber insurance is that it helps to transfer the financial risk of a data breach or cyberattack from the company to the insurer. This means that if your business is hit by a cyberattack, it is the insurance company that will foot the bill, not you.

3. Cyber Insurance Is Relatively New

Cyber insurance is a type of insurance that helps protect businesses and individuals from losses caused by cyberattacks. It is a relatively new type of business insurance that helps companies of all sizes and across industries mitigate the risks and costs involved with data theft, breach and permanent loss. It is, unfortunately, a necessity in today’s increasingly tech-oriented world, where the opportunities to hack and steal are more pronounced with each passing year.

4. Different Policy Types

There are a number of different types of cyber insurance policies available, depending on the needs of the business or individual. Some common types of coverage include first-party coverage (protection for your own company’s data and assets), third-party coverage (protection from liability if you are sued by someone else), and credit monitoring and restoration services. Depending on the type of business you are in, you may need different types of coverage, so it’s important to work with an insurance broker who can help you tailor a policy that meets your specific needs.

Related Article: Cybersecurity Isn’t an IT Risk, It’s a Business Risk

5. Coverage Limits

Cyber insurance policies typically have two types of coverage limits: per incident and aggregate. Per incident limits are the maximum amount the insurer will payout for a single event, while aggregate limits are the maximum amount the insurer will payout for all events during the policy period. It’s important to understand both of these types of limits when shopping for a policy, as they can have a big impact on the overall protection offered by the policy.

6. Not Just for Large Companies

Cyber insurance is not just for large companies. In fact, small businesses are often at greater risk of cyberattacks than their larger counterparts, and they are also less likely to have the resources to recover from an attack without help. Cyber insurance can help protect small businesses from the financial ruin that can result from a data breach or other type of cyberattack.

7. Can Be Expensive

Cyber insurance policies can be expensive, depending on the size of the business and the amount of coverage desired. However, the costs of a cyber attack can be much greater than the cost of a policy, so it is important to consider cyber insurance as part of your overall risk management strategy.

8. Some Companies Offer Discounts

Some insurance companies offer discounts on cyber insurance policies for businesses that take steps to improve their cybersecurity. These can include things like implementing data encryption, training employees in cybersecurity best practices, and investing in intrusion detection and prevention systems.

Related Article: Why US Businesses Are Adopting a Zero Trust Model With Technology

9. Buy From a Reputable Insurer

When shopping for a cyber insurance policy, it is important to buy from a reputable insurer. Make sure to do your research and read reviews before buying a policy, as there are many fly-by-night companies selling subpar policies.

10. Review Policies Annually

It’s important to review your cyber insurance policy on an annual basis to make sure it still meets your needs. As your business changes and grows, your risks will change, and you may need to adjust your coverage accordingly.

11. Claims Can Take Time to Process

If you do have to make a claim on your cyber insurance policy, it is important to be patient as they can sometimes take time to process. This is due in part to the fact that cyber attacks can be complex, and an investigation into the incident may be required.

12. Costs Can and Do Vary

The costs of cyber insurance vary depending on the size and type of business, as well as the amount of coverage purchased. However, most policies start at around $500 per year for small businesses and can go up to $5 million or more for larger companies with greater risks. This makes sense, given that fraud, theft and data loss can financially cripple and potentially even bankrupt a business of any size.

13. Cost of Policy vs. Breach

While the cost of a cyber insurance policy may seem like a lot, the truth is that the average cost of a data breach is even higher. In 2018, the average cost of a data breach was $3.86 million, and it has only gotten more expensive in the interim.

Cybercriminals and the crimes they commit continue to become more sophisticated every year and the number of new programs and internet-connected devices we use gives them more opportunities to access our data.

Related Article: Privacy by Design (PbD): A Definitive Guide and Why It Matters

14. Individuals Can Buy Insurance Too

Cyber insurance is not just for businesses — individuals can also purchase policies to protect themselves. In fact, with the rise of identity theft and other personal cybercrimes, it has become increasingly important for individuals to have some form of protection.

While most homeowner’s and renter’s insurance policies do not cover cybercrime, there are a number of companies that offer standalone policies or riders that can be added to an existing policy.

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