Data breaches and other types of cyber attacks remain extremely common in the United States today. According to the Identity Theft Resource Center, companies sustained 571 breaches in 2018 and more than 415 million records became exposed as a result. The ITRC’s study also found that 46% of such incidents were business breaches. As evidenced, it is important for businesses to protect themselves from these attacks. Fortunately, an effective form of protection against breaches exists: cyber liability insurance. So, what exactly does cyber liability insurance cover?
What Is Cyber Liability Insurance?
Cyber liability insurance is a type of insurance designed to help organizations respond to a variety of cyber attacks, including data breaches. If your company frequently handles large amounts of personal, or otherwise sensitive information, (e.g. addresses, credit card numbers, and social security numbers) then cyber liability insurance may be extremely beneficial.
For several years, cyber liability coverage was included in many general professional liability insurance policies. Now, as cyber threats have become increasingly more common, policies have been created to exclusively provide businesses with this specific form of coverage.
Areas Of Coverage
A cyber liability insurance policy may cover a wide range of incidents and losses. Here is a close look at four such areas of coverage.
First Party Coverages
This type of coverage pays for all expenses that a business incurs immediately following a cyberattack, including:
- Cost of alerting all employees and clients
- Cost of saving the organization’s reputation through large-scale marketing and public relations campaigns
- Cost of repairing any damaged hardware or software
- Business interruption costs
- Ransom money (in the case of ransomware or extortionware attacks),
- Other important operational costs
Financial Loss Due To Data Breach
Cyber liability insurance can also shield your company from any financial losses it suffers as a result of a data breach. According to a recent report from IBM and the Ponemon Institute, the average cost of a data breach in 2020 is $3.86 million. Although this figure marks a 1.5% drop from 2019, it represents a 10% increase over the past five years. This figure represents a mix of direct and indirect costs associated with resolving a breach and addressing the fallout of such an attack.
Third Party Coverages
This type of coverage is designed to help protect your organization against lawsuits, including:
- Privacy suits that claim you violated your employees’ or customers’ privacy
- Fines from regulatory agencies such as the Federal Trade Commission and the Consumer Financial Protection Bureau (CFPB)
- Media liability claims, including copyright infringement and defamation
- Negligence or breach of contract claims (the latter typically result in several different types of damages, including compensatory and liquidated damages, being awarded)
Claims By Individuals
Sometimes, a breach results in just one individual’s information being exposed. When this occurs, a cyber liability insurance policy can cover all costs related to the claim filed by this person, whether it is an employee or a customer. Certain insurance firms also offer risk mitigation services, which assist organizations with the detection and prevention of cyber attacks before they occur.
It’s important to note that cyber liability insurance policies generally do not cover:
- Property damage or bodily injury claims
- Claims related to loss of commercial property, including equipment
- Claims of robbery, fraud or other types of commercial crimes
- Employment practices liability claims (discrimination, harassment, wrongful termination, etc.)
For protection against these types of claims, you will likely need to purchase a separate business liability policy. The cost of your cyber liability insurance policy will likely depend on multiple factors, including:
- The total number of customers or patients your company serves
- The type of information your business stores
- Your company’s revenue
- Your organization’s claims history
According to business insurance resource AdvisorSmith, the average cost of cyber insurance in the United States is approximately $1,501 per year (around $125 per month).
Contact The Cyber Liability Insurance Pros
Reach out to the cyber liability insurance professionals at Pro Insurance Group in Elgin, Illinois for more information on this form of insurance and how it can protect your business. Our agents are dedicated to serving as one-on-one advocates for each of our clients, regardless of their unique insurance needs and budget.
In the event of a data breach or other type of cyber attack, our cyber liability insurance policies will protect you by providing both first and third-party coverages. Depending on the policy, you may be required to pay a deductible. First party coverages include restoring or replacing stolen or damaged electronic data, extortion-related expenses and costs related to alerting all parties impacted by the attack. Third party coverages include network security liabilities, media liabilities and regulatory agency proceedings.