As we progress deeper into the information-technology age, data breaches have become more common place. Cybercrime has grown to the extent that it is now ranked by the U.S. Director of National Intelligence as the second biggest threat to national security. That means that it is ranked even higher than espionage, weapons of mass destruction or even terrorism.
When a data breach occurs, it can cost the business hundreds of thousands of dollars to address the issue. Penalties, fines and legal fees can result in expenses amounting to millions of dollars for a business. Cybercrime can cause you to lose all you’ve built over the past few years within the blink of an eye.
Building a business takes years of sweat, blood, tears and money. If you don’t want all this to go to waste, it’s recommended to invest in a cyber insurance policy. Here are answers to common questions regarding cyber insurance policies:
1. What is cyber insurance?
This is an insurance policy that safeguards your business in the event of a data security breach. It is necessary as a part of risk mitigation.
2. What does it cover?
Cyber liability coverage varies depending on your specific policy. Cyber insurance protects a business against the expenses that may arise as a result of a data breach. Cyber insurance policies may include coverage for:
- Issues arising from breach of data privacy
- Cyber extortion
- Misuse of website or media
- Intellectual property infringement
- Fines and penalties
- Regulatory defense
- Business interruption
- Data recovery
- Transmission of malicious software to third parties
3. Is this insurance only for large businesses?
While large businesses have made headlines for suffering data breaches, even small businesses can fall victim to these breaches. In fact, cyber crooks are now targeting small business more than before. According to a recent report by Symantec, 43 percent of reported cyberattacks worldwide in 2015 targeted small businesses.
4. Does general liability insurance cover cyber liability?
Most general liability insurance policies do not offer this coverage. Umbrella policies often provide cover only for basics such as physical damage.
5. What type of businesses should invest in this type of insurance?
All businesses are vulnerable to data breaches. If your business operates a website or stores personally identifiable information of your employees, clients or customers (e.g. social security numbers, birth dates or card numbers or conducts online transactions), you could be at risk.
6. Does a cyber insurance policy only cover hacking?
Cyber insurance covers costs related to data breaches and losses. Although hacking is the number one cause of data breaches, it isn’t the only cause. Breaches can occur as a result of physical loss of hard drives or laptops, insider access to personal information or unintended disclosure. Coverage for these will depend on your specific policy.
7. Can cyber insurance secure my business?
Cyber insurance is not a substitute for investing in good security. In fact, insurance providers will require you to meet a certain level of security before providing you with coverage.
8. Do I still need a cyber insurance policy if I’ve invested in security measures?
Yes. Nothing is 100 percent foolproof. You’ll need a fall back plan in case of a data breach.
9. Is it a requirement by law?
The decision as to whether to have cyber insurance or not is optional in all states.
10. Is cyber coverage expensive?
It is quite affordable. Businesses will spend about $150 per year on insurance. Compare different insurance quotes to get the best deals.
11. Am I responsible for the security of the information my business stores?
Yes. You have an obligation to protect confidential information provided to you by customers, employees and clients even if it stored on a cloud database.
12. Do I have to have an in-house risk management team?
No. Many insurance policies are designed to bridge this gap.
13. Is harm to my business’ reputation covered?
No.
14. Does cyber insurance cover the lost value to my intellectual property?
No.
15. Does cyber insurance cover the costs of upgrading internal technology systems to improve security?
No. However, you may be eligible for a discount for improving your security.
16. Do I have to report a breach to the authorities?
There is no law that requires this. However, reporting breaches will help in the war against cybercrime.
17. How can I tell if hackers are targeting my business?
Always assume that your business is under attack since these attacks are unexpected.
18. Are there situations where a business can be denied coverage?
Yes. Insurance providers can deny your claim if you have not paid your premiums or if you’re suspected of fraud.
19. Will my insurance be frozen if I’m late on my premiums?
No. However, your premiums may increase as a result.
20. Will my insurance provider check on the safety of my network?
Yes. The frequency will depend on your insurance provider.
Investing in cyber insurance is more affordable than having to pay out of pocket for a data breach. You pay less now to avoid paying a lot more later if a breach occurs.
