The contents of your home are precious. As a result, you wouldn’t dream of leaving it unprotected. Likewise, the business you have built is equally valuable and needs protection. Businesses operating without cyber insurance coverage are leaving themselves vulnerable to cyber criminals. Much like leaving the key to your home under the doormat, leaving your business’s data – perhaps your business’ most valuable asset – vulnerable to theft should be as unconscionable. Like your personal assets, you should do everything you can to protect your business while preparing for the worst-case scenario. Let’s examine the benefits of cyber insurance coverage to ensure your business and your reputation remain safe and intact.
What is Cyber Insurance?
Cyber insurance is coverage used to protect businesses from internet-based risks. Essentially, it protects your business from risks relating to Information Technology (IT) infrastructure and activities. Whether you’re using desktop computers, mobile devices, and/or cloud computing, you need to have security in place. There is no one-size-fits-all security system. Businesses utilizing the internet need to consider cyber insurance coverage to protect themselves against potential threats.
The benefits of cyber insurance
Cybersecurity insurance protects businesses against financial losses caused by incidents like data breaches and theft, system hacking, ransomware extortion payments and more. If your small business stores sensitive information online or on a computer, you should carry at least some cyber insurance coverage. Some insurers offer cyber insurance as an add-on to a business owner’s policy, but you can also purchase this coverage separately.
What does cyber coverage include?
According to the Insurance Bureau of Canada (IBC), cyber insurance can cover a range of cyber events:
- Data confidentiality breaches: The loss of and/or unauthorized access to or disclosure of confidential or personal information.
- Cyber extortion: A demand for payment under threat of causing harm to your data; for example, disabling your operations or compromising your confidential data.
- Technology disruptions: A technology failure or denial-of-service attack.
Cyber insurance can help businesses cover a number of costs resulting from these events, including:
- Legal and civil damages: Paying for legal representation and possible damages related to a privacy or network security breach.
- Security breach remediation and notification expenses: Notifying affected parties and mitigating potential harm from a privacy breach, such as providing free credit monitoring.
- Forensic investigations expenses: Hiring a firm to investigate the root cause and scope of the data breach.
- Computer program and electronic data restoration expenses: Restoring or recovering damaged or corrupted data caused by a breach, denial-of-service attack or ransomware.
General Liability Insurance excludes coverage for data-breach-related liability claims, so if your business stores customer data, you’ll want to consider a separate cyber liability insurance policy.
Types of Cyber Insurance products
In 2021, 36% of organizations say the volume of cyber attacks increased during the pandemic. That’s an increase from 29% that said the same thing one year ago. About half of the organizations feel that the volume of attacks has stayed the same, and only three percent say the volume has decreased.
Cyber insurance products are available in three distinct options:
- Stand-alone cyber insurance policies are the most common cyber policies in Canada, the United States and Europe.
- A traditional property and liability insurance policy may include coverage for cyber events. These policies typically have very low limits that will not cover the full cost of a breach or cyber attack.
- Endorsements (also known as riders) can add, remove or exclude certain cyber coverages, altering a cyber or traditional insurance policy to meet specific needs.
Unlike stand-alone cyber insurance, which clearly defines the parameters of cyber coverage, many traditional policies do not specifically refer to cyber risks. If your business is vulnerable to cyber risks, you shouldn’t rely on a traditional commercial policy to protect your data.
If a customer’s financial data is stolen from your computer, first-party or liability insurance will provide coverage.
Technology Errors & Omissions coverage
A technology Errors & Omissions, or E&O, policy kicks in if a cybersecurity incident occurs in a customer’s business because of an error on your part. If your company writes an accounting software program that has an error in the code and the customer’s data is stolen directly from their computer as a result, you’re now in tech E&O territory. Technology E&O pays for legal fees, court costs, and judgments or settlements, but only in covered circumstances relating to products or services.
What does Cyber Insurance exclude?
While there are many benefits of cyber insurance protection for your business, there are some scenarios where you may not have coverage.
Cyber insurance does not pay for the following:
- Property damage. Cybersecurity insurance generally doesn’t pay for any property damage stemming from a data breach or cyberattack, such as hardware that was fried during the cyber incident. These sorts of claims are usually covered by commercial property insurance.
- Loss of intellectual property. During a cyber incident, intellectual property losses, and any lost income associated with it, are commonly excluded from cybersecurity insurance coverage.
- Crimes or self-inflicted cyber incidents. Virtually no cybersecurity policy is going to cover a business that is charged with committing a crime related to or causing a cyber incident. Commercial crime insurance generally covers theft by employees, though.
- Costs for proactive preventive measures. Training employees on cybersecurity and setting up a virtual private network probably won’t be covered by a cyber insurance policy.
- Attacks due to a failure to meet regulatory standards or due to poor security protocols will not be covered.
How do I get Cyber Insurance?
You can purchase cybersecurity insurance through most business insurance providers. Many offer cybersecurity or data breach insurance as an add-on to business owners policies, though this may not be enough coverage if your business has more complex needs. You can do this by working with an isure broker who can help you compare quotes and find adequate coverage at the best price.
How much cyber liability coverage do I need?
According to nerdwallet.com, most small businesses carry around $1 million in cybersecurity coverage limits. Each business has different risks and needs, though. To get a sense of how much cybersecurity insurance will likely cost your business, it’s best to get multiple business insurance quotes. Your isure representative can help you determine what level of coverage is right for your business.
How much does cyber insurance cost?
The premiums on these policies can be significant. Cyber insurance starts at about $550 per year. The median cost of a policy is $140 per month ($1,675 annually). Companies holding financial data or healthcare information can expect to spend $1,000 per year or more. An average cyber liability claim is $295,000, so paying the premiums may be cheaper than to rebuild a business from scratch.
Among small businesses with fewer than 250 employees, the average reported cyberattack cost was about $25,600. That amount can be enough to close some small firms!
Is cyber insurance worth it for my small business?
Yes. The number of cyber attacks is on the rise. All businesses are at risk! The potential for loss can mean whether or not you can keep your doors open. Cyber insurance can help your company get back on its feet after an attack or hacking. Coverage has gotten more expensive as the cost of cyber attacks increases, however, policies have become more affordable overall. You may be able to add some cyber security insurance coverage onto your existing business policy, which may be more affordable than buying a policy outright.
Speciality insurance coverage for cyber risks is relatively new and continually evolving. Considering the growing number of cyber threats and the ballooning costs of being hit with an attack, the benefits of cyber insurance coverage for your business cannot be overstated. Speak to one of our isure brokers to find out what coverage might work best for you to reduce your cyber risk.