According to the Washington Post, estimated global losses from cybercrimes reached almost $1 trillion in 2020. Many companies are wisely gearing up for more secure digital platforms. But if they haven’t already, they should also consider investing in cyber insurance, also known as cyber liability insurance.
What is Cyber Liability Insurance?
Cyberattacks are dangerous for businesses. They threaten the business’s livelihood and dramatically increase expenses. Cyber insurance financially covers businesses in cases of cybercrimes such as data breaches or ransomware. The coverage is especially important for businesses that record their client’s and employees’ personally identifiable information (PII).
According to research conducted by Accenture, many organizations have cyber security, but it’s insufficient. The study, conducted on 254 companies from seven different countries found that 50 days was the average time span required to resolve a malicious cyberattack. Under the circumstances, it’s safe to say that cyber insurance for small businesses (or large ones) has become a necessity.
Including the policy within your business owners policy (BOP) or even purchasing the coverage as a standalone policy is a smart choice for business owners.
Cyber Liability Insurance Protects You From These Common Risks
There’s a common misconception that cyber attacks tend to be targeted at larger businesses and therefore smaller companies don’t need to worry about it so much. But according to Infosecurity, 23% of small businesses suffered at least one cybercrime in the last year alone. Small businesses are slowly starting to fall into a high-risk category for cybercrimes.
Here are some of the most common cyber risks which can be covered by cyber insurance:
Phishing is an attempt to gain sensitive information from the victim by email while posing as a genuine or trustworthy contact, such as a bank, an online service, or even someone you work with.
Hacking is one of the most common cybercrimes. The perpetrator attempts to gain access to your computers or server in order to steal sensitive information which is later sold to competitors or used to access the financial assets of the victims.
Ransomware is digital extortion by way of malware (malicious software). It encrypts (locks) your computer data and then asks for a ransom to allow you to access it. Most ransomware attacks are pulled off via emails, fake software installations, and malicious ads on popular websites.
This is perpetrated by scammers who set up fake stores online that look genuine. You make a “purchase” but never receive anything in return.
This is when a company employee accidentally or intentionally leaks sensitive information. The potential damage shouldn’t be underestimated. The bigger the company, the greater the risk of insider threats.
According to the FBI, the top three cybercrimes reported in 2020 were phishing scams, non-payment/non-delivery scams, and extortion.
What Does Commercial Cyber Liability Insurance Cover?
There are two types of coverage within cyber insurance: first-party coverage and third-party coverage. If an online company is attacked, first-party coverage takes care of direct losses from the breach. Third-party coverage helps the company with legal defense and settlement costs.
A cyber insurance policy will pay for:
In the aftermath of a cyberattack, a company bears the burden of identifying the extent of the damage and notifying everyone who may have been affected. The process requires a formal internal investigation as well. A cyber liability insurance policy will cover the expenses of the notification process.
Cyber insurance will help your business financially cover the data they lose because of cybercrime. Typically, the policy covers data loss, recovery, and recreation. Check with your insurance provider to understand the full extent of your policy.
If your company is completely digital, a cyberattack can be devastating. While standard business interruption insurance covers such instances, it seldom covers digital issues. A cyber liability insurance policy will help you recover some percentage of revenue which was lost due to a breach.
If your business is attacked via ransomware, a cyber liability policy will help you pay the ransom. But the policy may have a limit. Check with your insurance provider to see how much.
Cyberattacks can cost hundreds of thousands of dollars due to lawsuits. A comprehensive cyber insurance policy can help you pay for lawsuits in such situations.
Cyberattacks tend to target financial resources such as credit/debit cards and bank accounts. Cyber liability insurance covers credit monitoring if a business faces security breaches in a client or employee’s PII. This practice is most common in tracking stolen cards and hacked accounts. Credit monitoring will continue for up to a year after the cyberattack.
After a big security breach, a business is likely to struggle on all fronts. While a lot of money is spent on countering the effects of a cyberattack, even more time and resources are spent on regaining clients’ trust. To clarify, cyber liability insurance can help you handle potential loss of business by covering the financial damage caused for a certain amount of time. Some insurance companies also include a PR payment clause in the policy.
Note: Your business may already have an errors and omissions insurance policy that covers some technological issues. While this protection is essential for businesses, it won’t provide comprehensive coverage in case of cyber liability.
Personal Vs. Commercial Cyber Liability Insurance
Most cyber liability insurance policies are intended for businesses. But what about your personal digital life? While cyber insurance many not be appropriate for your personal needs, you could use standard a cyber security insurance coverage.
What’s The Difference Between Personal & Commercial Cyber Liability Insurance
Cyber security insurance is designed to protect individuals from cyberattacks. In the policy, the insurer agrees to compensate the insured for financial losses.
While a cyber liability insurance policy is great for businesses, it’s likely a bit too much for an individual. Investing in a cyber security insurance policy would be the better option.
It can also be an appropriate policy for start-ups and small businesses opting for cyber security insurance.
Start-ups and small businesses generally have a smaller client base. A cyber security insurance policy may provide adequate coverage for them.
Note: It’s recommended that you opt for cyber security insurance only if you have a handful of employees and are within the first five years of starting your business.
What Is the Cost of Cyber Liability Insurance?
The average premium cost of cyber insurance for $1 million of coverage falls between $1,400 and $1,500 per year. However, the rates may vary depending on how much your deductible is and which insurance company you choose.
Here are some factors which determine the cost of cyber liability insurance:
By and large, your premium cost depends on your coverage limits. If you want $6 million in coverage for your business, your premium cost will be around $50,000. But, if you decide to lower your coverage limit to $3 million, your premium cost will be $25,000.
Cyber insurance policy costs are heavily influenced by the kind of data your company has access to. So, the more PII you have, the higher your premium rates are going to be.
Additionally, the number of people who have access to sensitive information also changes the cost of premiums.
The insurance company may check the quality of your security system before offering a quote for cyber insurance. Storing sensitive information on a poorly secured network will obviously increase your risk for cyber threats.
Some professions are more likely to face cyber threats than others and can therefore expect higher premium costs. According to CDNetworks, these industries are most vulnerable to cyberattacks:
Institutes of Higher Education
If you have made claims on cyber insurance in the past you can expect your premium rates to rise when purchasing cyber liability insurance. A business with past claims is considered a high-risk client.
If your business has insurance policies such as BOP, Errors &Omissions, or even commercial general liability, then your cyber liability insurance cost may be reduced. Some companies even let you bundle insurance policies at a cheaper rate.
Companies To Purchase Cyber Liability Insurance From
Obviously, there are hundreds of insurance companies that can provide cyber liability insurance. Some of the better companies are:
|Insurance Company||Best Feature|
|Chubb||Wide range of comprehensive policies which you can pick from.|
|Liberty Mutual||It offers the option to include cyber liability insurance in BOP for small businesses.|
|CNA||One of the largest commercial property and casualty insurers in the country.|
|Travelers||Offers cyber liability policy to owners along with pre-breach services. It also includes specialized coverage based on the business’s needs.|
|AIG||The company includes preventable coverage in their policies.|
Note: Most insurance companies don’t provide their quotes online. So, you are going to have to get in touch with them to learn the prices of policies you want to purchase.
According to Allianz, cyberattack claims worth over $650 million were filed between 2015 and 2020. Imagine if the insureds who filed these claims had been uninsured. With the rate of cybercrimes increasing, many businesses have come to see cyber liability insurance as a necessity.
If you want to get an insurance agent for cyber liability insurance, find an agent from the Agency Height Insurance Directory.
Frequently Asked Questions
Is Cyber Liability Insurance Mandatory?
No, cyber insurance is not legally required in most areas. If you live in New York, it’s mandatory under the cyber insurance risk framework to file a complaint to local authorities when you fall victim to a cybercrime.
What is Multimedia Liability Coverage (MLC)?
MLC is different than cyber liability insurance. It includes:
- Emotional Distress
- Invasion of the Right to Privacy
- Copyright And Other Forms of Intellectual Property Infringement
What does Cyber Extortion Coverage cover?
Cyber extortion coverage generally helps the victim pay a ransom. Basically, most cyber liability insurance policies have cyber extortion covered.
Is It Possible to Self-Insure Against Cyber Attacks?
Yes, but it’s certainly not advisable. Self-insurance requires you to have a liquid pool of money. If your business falls prey to a large-scale attack it may be almost impossible for you to pull through.
If you have more questions regarding cyber liability insurance, just leave us a comment below!
January 26th, 2023 · 8 mins read
- What is Cyber Liability Insurance?
- Cyber Liability Insurance Protects You From These Common Risks
- What Does Commercial Cyber Liability Insurance Cover?
- Personal Vs. Commercial Cyber Liability Insurance
- What’s The Difference Between Personal & Commercial Cyber Liability Insurance
- What Is the Cost of Cyber Liability Insurance?
- Companies To Purchase Cyber Liability Insurance From
- In Conclusion
- Frequently Asked Questions
Find a Local Insurance Agent Near You
Get quotes from verified agents easily.
What to read next
Guide To Getting the Best Aircraft Liability Insurance
Learn how Aircraft Liability Insurance protects you, your aircraft, and passengers from accidents and unexpected events in this comprehensive guide.
9 Simple Reasons Why You Need Small Business Insurance
Your business is open to lots of potential risks on a daily basis. Learn how you can protect your assets with small business insurance.
Stay Updated with Latest Updates in Insurance in Your Area
Subscribe to our Newsletter!
Thank you for subscribing to Agency Height.