There is no denying that the risk of a data breach is very real. The World Economic Forum cited cyberattacks as one of the five biggest risks to global stability in 2019.

Also, according to Statista, 4.1 billion records were exposed in the first six months of last year. Given this, it is not difficult to see why cybersecurity is something that all businesses need to consider now.

With that in mind, we will examine cyber liability insurance in depth so that you can better understand what it covers and how it can benefit your business.

What is Cyber Liability Insurance, and Who Needs it?

Cyber liability insurance helps your business to respond should you be the victim of a data breach or a cyberattack.

Cyber liability insurance can make a monumental difference if your computer systems or network has been hacked or one of your employees has accidentally opened a virus.

This is something that all businesses can benefit from, as no company is immune to the threat of a data breach.

What Does Cyber Liability Insurance Cover?

Several different issues are covered by cyber liability insurance. This includes the following:

Network Security

Most companies will require network security coverage, including those subject to privacy and information risk. This type of cyber insurance will ensure your business is covered should you experience any failure within the security of your network.

This includes data breaches, business email compromise, ransomware, cyber extortion demands, malware infections, and data breaches. By having this coverage in place, you will be covered for any expenses directly related to the network security incident.

This includes credit monitoring and identity restoration, public relations expertise, setting up a call center to deal with the issue, notifying customers of the breach, restoring data, negotiating and paying the ransomware demand, IT forensics, and legal costs.

Omissions and Errors

If a cyber event has stopped you from delivering services to your consumers and fulfilling the obligations of your contract, you could be covered if this is included in your cyber liability policy.

Errors and omissions will cover any claim that results from a failure to deliver your services or mistakes made regarding your company’s performance.

This can cover a huge scope of services. For example, there are the more conventional services, such as engineers, doctors, and lawyers. Technology services, like consulting and software, can also be impacted by a breach.

With omissions and errors, allegations of contract breaches or negligence or covered should any of these issues occur. This means your legal defense expenses will be covered, or any indemnification arising from a dispute or lawsuit with one of your business’ customers.

Media Liability

This protection area covers any infringement of intellectual property due to marketing your services. The only exception is patent infringement.

This tends to apply to both online and offline marketing. Everything from your printed advertising efforts, such as marketing brochures, to your social media posts will be covered.

Network Business Interruption

The cyber liability insurance policies of today can also include network business interruption. Determining whether or not you need to include this in your plan depends on how much your business relies on technology.

Most companies today rely heavily on technology, which is why this feature is pivotal for many. Network business interruption is an ideal solution for any business that will face operational risk as a consequence of a data breach.

If the network provider you use or your own network goes down because of an incident, you will be able to recover the extra costs, fixed expenses, and profits you have lost.

This includes any losses caused by either system failure or security failures. System failures include a human error or failed software patches, for instance, whereas a third-party hack is an example of a security failure.

Privacy Liability

Finally, we have privacy liability, another type of insurance plan that will be critical for most businesses, especially those with privacy or information risk.

Employee and customer details can be sensitive, and when such data is exposed via a breach, it can be damaging on many levels. Of course, it puts all the individuals whose data has been exposed at risk. However, it also puts your business at risk of liability.

Therefore, by incorporating privacy liability into your cyber liability insurance coverage, you can ensure that your business will be protected from any liabilities that arise from privacy law violations or a cyber breach.

Several third-party expenses can result. These include liabilities needed to fulfill your contractual obligations and any liabilities that laws and governments enforce. For example, you may need to fund legal aid to protect your business from federal penalties.

Key Takeaways

So there you have it: an insight into cyber liability insurance and the covered areas.

There is no denying that this form of insurance is essential for all businesses today, especially when you consider how real the threat of a data breach is. Nevertheless, do not allow this urgent need to rush you into a decision when choosing a policy. Simply going for the first or cheapest plan you lay your eyes on is not advisable.

You need to make sure that the policy is right for you, so please do not hesitate to get in touch with us for more information.

FAQs

1. What is cyber liability insurance?

Cyber liability insurance is a specialized type designed to protect businesses from financial losses resulting from cyber attacks, data breaches, and other cyber-related incidents. It provides coverage for a range of expenses associated with cyber incidents, including legal fees, notification costs, and regulatory fines.

2. What does cyber liability insurance typically cover?

Cyber liability insurance typically covers:

• Data Breach Costs: Expenses related to notifying affected individuals, providing credit monitoring services, and managing public relations.
• Legal Fees and Defense Costs: Costs associated with defending against lawsuits and regulatory investigations resulting from a cyber incident.
• Business Interruption: Loss of income and extra expenses incurred while restoring operations after a cyber attack.
• Cyber Extortion: Payments demanded by hackers to release data or cease an attack, as well as the costs of negotiating with cybercriminals.
• Crisis Management: Costs for hiring public relations consultants and crisis management teams to mitigate reputational damage.

3. What types of businesses need cyber liability insurance?

Any business that handles sensitive data, such as personal information, financial records, or proprietary information, should consider cyber liability insurance. This includes businesses in sectors like healthcare, finance, retail, and technology and any organization that relies on digital systems and networks.

4. How does cyber liability insurance help in the event of a data breach?

In the event of a data breach, cyber liability insurance helps cover the costs of:

• Investigating the breach to determine its cause and extent.
• Notifying affected individuals and providing credit monitoring services to mitigate potential harm.
• Defending against legal claims and paying settlements or judgments.
• Managing public relations to protect the business’s reputation.

5. Does cyber liability insurance cover regulatory fines and penalties?

Cyber liability insurance can cover regulatory fines and penalties government authorities impose for failing to adequately protect data. However, coverage for fines and penalties may vary depending on the policy and jurisdiction, so it’s essential to review the insurance policy’s terms carefully.

6. Can cyber liability insurance protect against cyber extortion?

Yes, cyber liability insurance often includes cyber extortion coverage. This involves hackers threatening to damage, steal, or release data unless a ransom is paid. The insurance can cover ransom payments and the costs of negotiating with cyber criminals and mitigating the impact of extortion.

7. How can a business determine the right cyber liability insurance coverage amount?

To determine the right amount of cyber liability insurance coverage, a business should assess its specific risks, including the volume and sensitivity of data it handles, its reliance on digital systems, and its exposure to potential cyber threats. Consulting with an insurance professional can help businesses tailor their coverage to their unique needs and risk profile.