It is unfortunate, but data breaches have become far too common these days. It seems as if criminals are breaking into major systems across the country, and gaining access to sensitive information at a record pace. Although we typically hear about the worst-case scenarios that occur at large corporations and the federal government, it happens to small business owners on a daily basis. In fact, 55% of small to mid-size businesses have experienced a data breach, and 54% have had multiple breaches.
A data breach can damage more that just your computer system. It can also ruin your reputation, and put both your customers and employees at risk. That is why more organizations are recognizing the need for cyber liability insurance as part of their overall security strategy. The following information will provide you with a few things that every business owner should know about cyber liability insurance.
What Exactly is Cyber Liability Insurance?
Cyber liability insurance was created to cover financial losses that result from cyber related crimes. Most policies include both first-party and third party coverage. The first-party coverage includes losses that are sustained directly by your organization. For example, if the cyber criminals cause damage to your data files, that damage is covered under the first-party coverage. Third-party coverage applies to claims against your business by people that have been negatively affected by the data breach. For example, if your customer’s personal, private, and or financial information was stolen as a result of the hack, and that customer sues you, it would fall under the third-party coverage.
Cyber Liability Insurance Is Affordable
If your business does not already have cyber liability insurance it should. Companies are increasingly investing in it due to the fact that they have no choice. Clients are now beginning to insist that their partners have insurance in place for both regulatory requirements, and compliance purposes. In essence, having cyber liability insurance is becoming a part of contractual requirements. Not every small business deals with partners or third parties that require cyber liability insurance, however it has become necessary to have in place.
For example, if you operate a business that accepts credit and debit card payments your customer’s private, personal, and financial information is exposed if and when a data breach occurs. That means you will end up paying hefty fines and legal fees that will negative impact your bottom line. Why take the risk? The good news is that cyber liability insurance is affordable, and can be easily added to your overall business insurance policy. Most policies cost as little as $1,000 annually for up to $1 million, depending on the incident.
Cyber Liability Insurance Is Not A Substitute For A Cyber Security Program
A top-notch cyber security program and the cyber liability insurance policy work in conjunction with each other. In essence, the security program is the foundation and body of the building while the insurance is the roof. That means the security program must be constructed first. Cyber liability insurance is just like any other type of insurance in the regard that you hope to never need to use it. If it is doing its job properly, it will prevent cyber criminals from breaking into the system.
In a perfect world, the system will work every time. Since we do not live in a perfect world, the insurance should be in place just in case you need to file a claim. The bottom line is that while the cyber insurance may reimburse costs, it cannot diminish the damage to your reputation. In addition, insurance does not repair the trust that you will lose from your customer base after the breach occurs.
In conclusion, cyber liability insurance is a necessary tool that protects organizations in case of a cyber security breach. If you have any questions, please call (508) 831-0133 to contact an associate at Zawada Insurance. We are happy to walk you through the details of your cyber liability insurance policy and explain your coverage options. We look forward to helping you with all of your personal and or business related insurance needs.