Commercial Cyber Liability Insurance: Don’t Get Infected, Stay Protected!

Commercial Cyber liability insurance covers your business from financial losses that result from cybersecurity breaches. Oftentimes, businesses keep a record of Personally Identifiable Information (PII) such as client or employee addresses or credit card numbers. With the number of cyberattacks against businesses ever-increasing, clients and employees are especially vulnerable to identity theft.

According to an Accenture study, 68% of business owners claimed that their cybersecurity risks are escalating. A small error when protecting data can prove to be very dangerous to businesses and enough to severely damage their reputation. For instance, according to a Bloomberg report in 2017, Uber paid hackers at least $100,000 to delete 57 million user’s worth of data, they had stolen and to keep the breach silent. Businesses are becoming aware of and increasingly exposed to various cyber crimes and attacks. Moreover, as per World Economic Forum, data fraud and cyberattacks are seen as the top two business risks in North America.

Common Cyber Risks

Some of the cyber security risks your business is at risk for are:

Phishing

The goal of phishing is to trick users into clicking misleading links and emails. Furthermore, it exposes bank information and other sensitive data to scammers. The

Ransomware 

Ransomware prevents you from gaining access to your personal files or system. It also threatens to publish your data if you do not pay a ransom to restore your access. However, there is no guarantee that attackers will restore your access or not publish your data.

DDoS attack

A Distributed Denial of Service (DDoS) attack disrupts the normal traffic of a server or network. Moreover, it overwhelms the traffic with a flood of bots. Finally making it impossible for legitimate users to access your website.

Hackers

As people gain awareness about cyberattacks, businesses have applied stricter network security practices. Yet, hackers are still able to crack into systems and access sensitive information. Therefore, businesses require double protection and robust firewall systems to be protected against cyberattacks.

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Why Is Commercial Cyber Liability Insurance Necessary? 

The costs associated with cyber liability can be expensive. Some of the expenses your business may incur as a result of a cyberattack are as follows:

System recovery

Repairing or replacing computer systems is costly for a business. Additionally, your business might have to bear the costs of a temporary shutdown.

Lawsuits

Your clients may sue your company for losing confidential client data. Therefore, this will result in legal settlement expenses and attorney fees.

Regulatory fines

Cybersecurity laws exist at both the federal and state levels. Businesses are responsible for protecting sensitive client information. Failure to do so will result in regulatory fines.

Notification expenses

If your company stores client and employee data, you need to notify them if a data breach has occurred. However, notification expenses are costlier if you serve a larger market.

Restoration costs

Cyberattacks can lead to a loss of electronic data. As a result, your company has to cover expenses for restoring or repairing data.

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What Does Commercial Cyber Liability Insurance Cover? 

Generally, a business owners policy will cover hardware failure and damages resulting from a computer virus. However, the best way to secure your business from cybersecurity threats is a stand-alone cyber liability policy. Cyber liability insurance offers two types of coverages. Whereas first-party coverages pay for direct expenses resulting from a breach, and third-party coverages provide legal defense and settlement costs.

First-party coverages include:

Investigation

Cyber liability insurance reimburses for a forensics investigation. It includes:

  • The cost of hiring a third-party security firm to discern the cause of the incident
  • The scope and breadth of the damage
  • Requirements to prevent further damage

Notification costs

Currently, 47 states require businesses to notify those affected of a data breach. Cyber liability insurance provides coverage for notifying clients and employees. Moreover, this may include covering the costs of a call center or hiring a consultant to help your attorneys draft a response. Additionally, it also covers the costs of identifying cybercrime victims.

Business interruption

Oftentimes businesses can’t operate at all if their computer systems are damaged from a malware attack. Therefore, in such cases, cyber liability insurance will reimburse for your loss of income.

Cyber extortion

Cyber attackers can threaten to commit heinous acts such as damaging your data or releasing client information. Furthermore, you have to agree to pay a specified sum through use of ransomware.

Damage to electronic data

The policy covers the cost for restoration or replacement of lost data. Furthermore, the policy might also provide coverage for the cost of hiring a professional to reconstruct your data.

Credit monitoring

After a breach of client or employee PII, cyber liability insurance covers providing immediate credit monitoring for the affected. For one year, their credit will be observed in order to quickly detect any unauthorized charges. Therefore, if identity thieves use the stolen credit card information to make illegal purchases, credit monitoring services notify clients about the changes.

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Third-party coverages include:

Network security

Cyber liability insurance secures your business in the event of a network security failure. Additionally, it also covers the costs of handling claims against your company. Furthermore, these claims include errors or omissions, unauthorized access, or negligence that led to the security breach.

Privacy liability

Client and employee information is supposed to be confidential. But what if cyberattacks violate privacy laws and expose your business to liability? If you are held accountable for the security breach, privacy liability covers legal expenses and regulatory fines.

Media liability

Media liability insurance provides broad protection against the financial expenses of handling media related liability claims. Moreover, the policy covers insureds from common media and entertainment related liability risks. It includes: invasions of privacy, and acts like libel, defamation or slander and so on. Usually, the policy will also cover the cost of any settlements, as well as necessary defense costs and other legal fees.

Regulatory proceedings

If you are found breaching cybersecurity laws, legal authorities can charge you fines or penalties. However, any fines imposed on your business and the cost of hiring an attorney will be covered by your insurer. Each state has its own set of cybersecurity laws. It’s usual for insureds to deal with regulators, from many states during a data breach. Therefore, making this coverage especially valuable.

Endorsements for Commercial Cyber Liability Insurance 

You can always add extra coverages to your policy to meet your business’s needs. Some of the endorsements for cyber liability insurance include:

Social engineering

Social engineering attacks use psychological influence to fool users or employees to hand over valuable company information. Additionally, it also includes phishing emails and other forms of communication. It creates fear or anger in the hopes that the recipient will reveal sensitive information. Hence, if there is a data breach as a result of a social engineering attack, social engineering coverage will secure your business.

Bricking 

Certain cyberattacks and malware can make your computer hardware unworkable. Thus, this coverage will reimburse for the hardware replacement costs.

Reputation

Cyber liability insurance covers the cost of hiring a legal or public relations consultant to handle media coverage of the breach. Also, it will help to manage or restore the company’s reputation.

Exclusions for Commercial Cyber Liability Insurance 

Some of the common exclusions for cyber insurance include:

Loss of property

Cyber liability insurance will not provide coverage for loss of property. However, the loss of electronic devices can be indemnified through a commercial property insurance claim.

Bodily injury or property damage claims

Cyber liability insurance will not protect against allegations of either bodily injury or property damage. But not to worry — general liability insurance has your back for such claims!

Loss of intellectual property

Since cyber liability insurance is for client and employee data, the loss of intellectual property isn’t covered under this policy.

Risk mitigation costs

It is strongly recommended that businesses upgrade their internal technology systems. Additionally, purchase of cloud security, network security programs such as antivirus and so on helps to reduce cyber risks. Nevertheless, cyber liability insurance will not reimburse risk mitigation costs.

Loss of future revenue

Cyberattacks can negatively affect your business’s future income. However, the insurance policy does not indemnify such loss.

Criminal activity

Cyber liability insurance does not cover losses caused by employee criminal activity. However, includes activities such as fraudulent fund transfers, robbery or employee theft.

Additional Policies

Some of the insurance policies you can add cyber liability coverage to are:

Cost of Commercial Cyber Liability Insurance 

There are various factors that impact the cost of cyber liability insurance. However, the cost of the policy also depends on the coverages chosen for your business.  

Data

The size and type of stored data will affect the cost of the policy premium.

Security system

The type of security system used by your business also determines the cost of the policy. For instance, if only a few authorized employees can access the system, the premium will be low.

Industry

The cost is also determined by the type of industry your business is in. For example, if your business heavily relies on technology, premium rates will tend to be relatively higher.

Customer base

The number of customers your company has will influence the policy premium. For example, in order to serve a higher customer base, you might have to consider purchasing more coverage.

Revenue

Premium amounts can undoubtedly be influenced by your business’s revenue. Therefore, businesses with larger revenues have a higher chance of getting sued, so their premium rates are relatively higher.

Claim history

The premium for your new policy will be higher if your company has made previous insurance claims.

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Cost of Commercial Cyber Liability Insurance 

Some common examples of cyber liability claims:

  1. A part-time worker in a hospital mistakenly forwards a patient record via email to his colleagues. Also, his colleagues are not authorized to access the patient’s information. Following that, the patient learns about the incident and sues the hospital. In such cases, the privacy liability portion of your cyber liability policy will pay for the legal defense costs.
  1. A hacker releases the PII of a restaurant’s customers. The incident exposes the business owner to a $50k regulatory fine. But luckily, cyber liability insurance will cover the cost of the fine.
  1. A software development company is under attack by Locky, a type of ransomware. It tricks the employees into installing malware and it transfers company data. As a result, the hacker demands $100k before they will return the data. However, the cyber extortion portion of the company’s cyber liability coverage reimburses for the payment.

With the number of cybercrimes ever increasing, it is imperative to secure your data and business. Therefore, contact an insurance agent and learn how you can protect your data.

Are you looking for a good coverage? Find an insurance agent near you today!

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