Cyber Insurance Basics: What Is It & What Does It Cover?
U.S. data breaches have drastically increased within the last decade, from 662 data breaches in 2010 to over a thousand in 2020.
With hackers demanding higher ransom payments while holding an organization’s information hostage, it’s estimated that the cyber insurance market size will continue to grow at a compound interest of 21%.
What does this mean for your company? Well, it means that data breaches have become harder to avoid, no matter if you’re a small or large business and that more and more organizations are exploring cyber insurance options.
As a managed IT provider, LDI works closely with customers to assess their current security posture and IT network assessment. We understand how overwhelming it can be to protect your sensitive data from hackers. That’s why once we know your current security gaps, we can recommend cybersecurity solutions and help to implement them as soon as possible.
This article will cover the basics of cyber insurance, such as what it is, what it covers, why it is essential, and who it can benefit. By the end of this article, you will better understand how cyber insurance can help your business.
What Is Cyber Insurance?
Cyber Insurance is like any other insurance in that it preemptively helps you plan for a bad event. Cyber insurance protects against damages inflicted by these cyber-attacks on your computer network or data.
Cyber insurance can help your company monetarily if you do end up falling victim to a cyber-attack or IT-related event. In more depth, falling victim to a cyber-attack includes a hacker gaining access to your company’s network or sensitive information.
Data breaches can occur in various ways, such as sending a phishing email, a weak password, or another method. This breach can lead the cyber attacker to steal you and your customer’s sensitive information, lock you out of your computer system or network and even demand a ransom payment for its retrieval.
Seeing as cyber-attacks can lead to permanent damage, misuse, and theft of sensitive information such as credit card information, medical records, social security numbers, home, and work addresses, and more; cyber insurance can help put a plan into place that enables your company to rest easy should a data breach occur.
What Does Cyber Insurance Cover And Not Cover?
Cyber insurance can be broken down into two types of coverage; first-party coverage and third-party coverage. The coverage you choose depends on the business your company provides and the cybersecurity risk.
First-party coverage covers any damage that your business encounters from a data breach. This type of coverage includes data recovery, identification, investigative services, starting a public relations campaign, and reimbursement fees for revenue lost during the breach.
For example, let’s say your online skincare shop gets hacked and your customer’s credit card information is stolen. First-party cyber coverage can pay for expenses such as notifying your impacted customers, credit monitoring and launching a public relations campaign for damage control.
Third-party coverage covers any damage that your business and your customer have suffered due to a data breach. This type of coverage includes legal fees, settlement costs, negotiation services, security failure, and liabilities with the media.
For example, if you’re in the information technology field and the website you designed fell victim to a severe data breach; your company could get sued for getting breached and leaking sensitive information. Third-party cyber coverage can help pay for your business’s legal expenses.
Generally, cyber insurance policies do not include potential future lost profits and technological betterment, including software and security upgrades or any costs associated with improving technology systems.
Why Is Cyber Insurance Important?
Ensuring that your company has cybersecurity solutions, such as a cybersecurity plan, malware protection software, and an adequate firewall is imperative. However, cyber insurance considers the aftermath of a successful data breach and what it can mean for your business.
Cyber insurance provides companies with financial peace of mind. It is essential because it can help your business recover from a devastating data breach. It essentially lessens the costs associated with public relations expenses, revenue loss, equipment damage, and even forensic analysis.
Financial losses associated with data breaches and cyber events can be drastic. While cyber insurance policies vary due to the insurer, most cyber insurance policies include first-party and third-party coverage.
Once you have explained your business operations to the insurer and expressed your needs and concerns, the insurer will walk you through what they offer and recommend the best choice for you.
Who Can Benefit From Cyber Insurance?
Cyber insurance can benefit any type of business or third-party organization that processes or saves sensitive data.
For example, retailers, restaurants, consultants, nonprofits, real estate agents, law firms, and financial firms all process confidential information daily. They require a cyber insurance policy in order to protect their end-clients information and to abide by industry-specific compliances.
If one of these businesses gets attacked, their customer’s sensitive information will fall into the wrong hands. Not only can this lead to lawsuits further down the line, but it can also permanently tarnish your brand’s reputation.
Does Your Company Need Cyber Insurance?
If your business handles personal account information, processes payments online, or utilizes the cloud to house sensitive data, then your company should think about investing in cyber insurance.
Cyber insurance can be worth it as if a data breach is successful; it can lead to high latent costs. Cyber insurance helps put into place specific financial measures, which in turn limits the devastating effects a cyber attack can have on your business.
LDI specializes in helping customers implement cybersecurity solutions that fit their needs and goals. Contact an LDI representative to learn more about our cybersecurity solutions today.