As the world becomes more digitized and interconnected, businesses become more vulnerable, making cybersecurity more critical. Enter cyber liability insurance, a crucial tool for companies in this digital age.
The Cyber Risks To Businesses Today
Today’s companies face various cyber risks, ranging from ransomware attacks and phishing schemes to insider threats and data breaches. Each cyber incident can cause significant financial losses, damage to your reputation, and operational disruptions.
A famous example is the 2017 Equifax breach, where a cyber-attack exposed the personal information of 147 million people, resulting in a settlement of up to $700 million.
Therefore, recognizing and managing these risks is crucial, and cyber liability insurance can be a vital tool if the worst does occur.
What Is Cyber Liability Insurance?
Cyber liability insurance protects businesses if they experience a cyber-attack by covering the expenses involved in recovering from such an event. In our highly digitalized world, cyber liability insurance has become an essential component of risk management strategies for businesses of all sizes.
What Coverage Does Cyber Liability Insurance Provide?
Understanding cyber liability insurance coverage can be challenging, especially if you aren’t technologically inclined. However, it can be broken down into four main categories as follows:
- Network Security and Privacy Liability: This coverage protects you if you experience first-party or third-party losses from network security failures or data breaches. First-party costs are those you incur directly due to the incident, such as IT forensics and legal expenses. In contrast, third-party costs are liabilities to others arising from the event, such as lawsuits or regulatory penalties.
- Network Business Interruption: If your network goes down due to a cyber event, this coverage can help recover lost profits, fixed expenses, and extra costs you incur during downtime.
- Media Liability: This coverage addresses intellectual property infringement claims from advertising your services online or in print.
- Errors and Omissions: If you cannot keep your promises to your clients and deliver your products or services due to a cyber-attack, this coverage can help. It addresses claims that result from errors in performing or failing to perform your services.
Additional Cyber Security Coverage Options
Cyber liability insurance can also include additional coverages tailored to your specific needs:
- Social Engineering: This protects against funds transfer fraud, typically when a bad actor tricks an employee into sending them money.
- Reputational Harm: If your brand’s reputation suffers and your profits are affected, this coverage option will help.
- Hardware Replacement: If a malware attack renders your tech equipment useless, this coverage can help with replacement costs.
Understanding Exclusions in Cyber Liability Insurance
While cyber liability insurance offers extensive coverage, specific exclusions apply. Policies generally do not cover any potential future loss of profits or losses incurred due to someone stealing your intellectual property.
Another critical aspect to consider is the “silent cyber” phenomenon. It refers to traditional insurance policies, such as property or general liability, which may not explicitly state if they cover the consequences of a cyber-attack, potentially leaving significant gaps in your coverage.
Choosing the Right Cyber Liability Insurance Policy
To select a suitable cyber liability insurance policy, assess the cyber risks associated with your specific business. For instance, an e-commerce business could face a higher risk of data breaches due to the large volume of customer credit card information it processes. Conversely, a manufacturing firm may be more concerned with potential disruptions to production lines due to cyber-attacks.
Evaluate Potential Exposure
Consider your potential exposure in the event of a cyber incident. Look at direct costs, such as data recovery, legal fees, and possible ransom payments, and indirect costs, which can encompass reputational damage and loss of customer trust. In addition, industries such as healthcare or financial services may also face substantial regulatory fines if a data breach occurs.
Understand Policy Limits and Sub-Limits
When examining specific cyber liability insurance policies, consider policy limits and sub-limits. A policy limit is a maximum an insurer will pay for a covered loss, while sub-limits set caps on specific types of losses. For instance, a policy might have a total limit of $5 million but a sub-limit of $1 million for network business interruption.
Analyze Coverage Details
What does the policy cover? Does it cover first-party costs and third-party costs? Are these additional coverages included? These are essential questions to ask your insurance provider to ensure you stay within applicable regulatory compliance and are not overspending.
Leverage Your Insurance Broker’s Expertise
Your insurance broker can be invaluable throughout this process. They can help you navigate the complexities of cyber liability insurance, identify potential coverage gaps, and negotiate terms with insurance providers. They can also provide details pertaining to industry trends and regulatory changes affecting your coverage needs.
Get the Right Cyber Liability Insurance from JMG Insurance Agency
Cyber liability insurance isn’t a substitute for robust cybersecurity practices. Regular risk assessments, employee training, and strong security protocols remain your first defense against cyber threats. However, when these measures fall short, a well-chosen cyber liability insurance policy can provide a critical safety net.
You don’t have to worry if cybersecurity and cyber liability insurance are overwhelming and confusing. At JMG Insurance Agency, we’re dedicated to finding the policy that best suits your unique business needs. So don’t leave your cyber protection to chance. Contact our experts today at 1-844-304-7332 or online, and let’s secure your business against cyber threats together.