Before we dwell on what cyber liability insurance is and how it can help you, imagine this: a hacker gets into your company and steals confidential information: your customer’s database, patents, any type of passwords, payment records and bank details.
This criminal could demand a ransom for these data, sell them to other people or steal money directly from your bank accounts. In any of these cases, the legal and economic consequences for your business would be disastrous. Pretty scary, huh?
Cyberattacks Are More Frequent Than You Can Imagine
What could be the script of a movie about corporate espionage has become a common occurrence, a reality that affects large and small businesses alike.
Small companies are easy prey. According to a study carried out by Grupo SMB, 70% of the cyberattacks committed in 2017 were aimed at small businesses.
How can cyber insurance protect you against these threats? Find out below. We will tell you what these policies are, why it is important to have one for your business, and how you could get funding to take out one.
What Is Cyber Liability Insurance?
Digital transformation and the advance of the Internet have caused cyberattacks to increase and happen more often. Nobody is safe, not even small businesses.
A recent study revealed that nearly two-thirds of American retail businesses have been a victim of any type of data breach, and 37% of them took place last year.
A cyberattack means that the online security of your company has been hacked and any type of information has been stolen or modified.
Cyber liability insurance can provide you with a policy specifically designed to protect companies like yours from hackers and mitigate the damage caused by data breaches and other cyberattacks.
Does General Liability Insurance Cover Cyberattacks?
General liability insurance covers injuries and damage to property caused by your products or operations. Damage to electronic data is not covered by this type of insurance because this information is not considered tangible assets. Therefore, your digital property would not be affected.
Although these policies usually exclude cyber threats, some of them could guarantee basic coverage.
Thus, if your company stores confidential data from your customers and your business, whether in the cloud or in electronic devices, you should take out cyber liability insurance.
What Does Cyber Liability Insurance Cover?
Coverage varies depending on the insurance company. These policies have been in the market for just a few decades. Therefore, there is no standard cyber liability insurance.
Generally speaking, insurance companies offer two types of coverage: first-party and third-party. On the one hand, first-party coverage applies to damage caused to your business.
On the other hand, third-party coverage covers the claims that people like your customers or suppliers can make against your company in case they are affected by your actions or omissions. Find below what cyber insurance often covers in both cases.
- Electronic data loss or damage. This type of cyber liability insurance covers losses caused by electronic data damage, interruption or corruption as well as theft of third-party information stored on your company’s computers, provided that data loss is due to a cyberattack. Coverage includes the costs of both repairing or retrieving information and hiring external advisors to help you in the process.
- Lost revenue and additional expenses. Most of these policies cover the revenue that your company stops receiving during a crisis created by a cyberattack. It also covers additional expenses you may have to minimize losses and to avoid closure.
- Crisis management. Information leaks and cyberattacks tarnish a company’s reputation. Cyber insurance covers the costs of hiring legal advisors, public relations agencies and other types of advisors who can help improve the image of a business.
First-party coverage extends to other areas. In most cases, it includes notification to customers in the event of an information leak.
In addition, if a hacker threatens to leak data, introduces a virus into your system or turns it off if you do not pay a certain amount of money, the policy may cover the money extorted.
- Network security risk. Cyber insurance protects you from claims due to data leaks or to failure to have access to information stored on your computer system, provided that this is provoked by a denial-of-service attack, a virus, malware or by the action of a hacker.
- Privacy violation risk. These policies can also protect you from claims when you are unable to safeguard sensitive information stored on your computer system.
Furthermore, in the case of third parties, cyber insurance covers claims against you for slander, defamation, privacy invasion, and copyright infringement. Lawyer’s fees, agreements or trials against your business and government’s fines are covered too.
As a rule of thumb, small companies only need first-party coverage if they save vital information for the operation of the business or if they store, send or receive electronic data, especially from their customers.
Third-party coverage is normally purchased only by IT companies responsible for storing data to protect employees, such as systems developers and database managers. However, ideally, small companies should also extend their protection to third-party coverage in case they are sued by their customers.
What Is Not Covered by Cyber Liability Insurance?
As with all insurance policies, there are exclusions. Cyber liability insurance does not cover the following:
- Physical loss of data. These policies do not cover if your computer system is affected by a fire or natural disaster. They don’t cover the loss of flash memories or notebooks by employees either.
- Intellectual property. Insurance companies offer policies against cyberattacks that are centered around data loss by companies and their users. When it comes to intellectual property or business secret information, the consequences if they fell into the hands of a hacker. are unknown. How could this impact the value of a business? That is why insurance companies limit coverage in this sense.
- Cyberattacks from other countries. Most policies do not cover either cyber-attacks considered to be acts of terrorism or any cyberattack from another country.
Why Do I Need Cyber Liability Insurance?
Cyber insurance policies can benefit any company that uses electronic data. If you communicate by email or SMS and use social media, if you receive and send documents online, or if you store crucial information of your business or data from your customers on electronic devices, you definitely need cyber liability insurance.
Since most small companies are familiar with these processes, they think they don’t need insurance to protect them. However, they expose themselves to common crimes such as extortion, data leaks, viruses, and malware.
There are statistics that prove this. A study by the Ponemon Institute revealed that in 2016, 55% of small businesses in the US went through a cyberattack. Moreover, only 14% of the companies surveyed said that they were fully prepared to deal with these types of attacks effectively.
The report also stated that, as a result of the attacks, these companies spent $879,582 on average due to the damage to their computer systems. Moreover, they were obliged to interrupt their operations, which cost them $955,429.
The risks to small businesses are evident, but not all owners are aware of this or have enough information. And the cost of these policies is a cause of concern for them.
How Much Does Cyber Insurance Cost?
Cyber insurance costs vary depending mainly on to what extent a company is exposed to these types of threats.
A small business that stores data and has a relatively small number of customers would pay between $800 and $2,000 per year. The price of the policies could reach $7,500 annually, depending on factors such as the company revenue and the number of personal records stored.
Small businesses in charge of managing data from larger companies would have to pay higher costs, ranging from $40,000 to $50,000 per year.
Unfortunately, small businesses usually cannot afford to buy cyber insurance or hire an IT expert to help them reinforce the security of their systems in the event of potential threats.
Not having money to invest in your business security should not be an excuse for not buying cyber insurance. At Camino Financial we can offer you a loan to protect your company from cyber threats.
The application process is very simple. Fill in a simple online form and we will revise your business profile to offer you the funding solution that best suits your needs. Once your loan is approved, you’ll receive the funds you need directly in your bank account in just a few days. Ask for a quote for a business loan now!
And Now What?
All you have to do now is choosing the most suitable cyber liability insurance policy for your business. However, it is not that simple.
As we said, there are no standard cyber threat policies and many insurance companies offer a wide range of products that can be tailored to the needs of each business. For this reason, making a decision may be harder.
Small business owners should identify the risk profile of their companies in order to choose the policy that is more convenient and enables them to minimize every possible threat.
Here are some questions that will help you determine the risk profile of your business and to choose the best alternative:
- What type of company do you have? Companies that store personal information from their employees, such as financial data and that must guarantee the information security of their customers, run greater risks of being victims of a cyberattack.
- What kind of information and how much information do you store? You are going to need more protection if you save data from third parties. The more personal records you store, the more risks you will take and the more coverage you will need.
- What is your annual revenue? Businesses with higher revenue have more possibilities of a cyberattack. In general, these businesses need more protection.
One last recommendation: consult an information security expert. They will help you choose an alternative that will prevent you from paying additional fees and costs if you are a victim of a cyberattack.
Remember: Your Small Business is Vulnerable to Cyberattacks
Cyber insurance is a policy that keeps your company away from malicious hackers. These policies can cover the damage caused to your business and third parties.
Nevertheless, their coverage does not include negligent loss of electronic data, damage done during natural disasters or intellectual property crimes.
Any business that manages electronic data as part of their operations, whether a one-person company or a large corporation, needs cyber insurance. Annual costs derived from cyber crimes are convincing enough to persuade you to buy a cyber insurance policy as soon as possible.
Last but not least, assess the risk profile of your business and get advice on the best cyber insurance.
Learn more about this fascinating topic: read how to protect your small business against hackers.