What Is Cyber Liability Insurance? Why do Businesses in CT Need it?

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What Is Cyber Liability Insurance? Why do Businesses in CT Need it?

See how we're different

In 2020, 1,001 data breaches occurred in the US that exposed 155.8 million records. With every passing year, data breaches are becoming more and more common – not only in the US but in other countries, too. 

Cyber insurance, referred to as cyber risk and cyber liability insurance, is a form of insurance coverage that covers the financial losses businesses face due to cyberattacks and other tech-related risks. From Social Security numbers to credit card numbers, driver’s license numbers, and health records, the insurance covers the business’s liability for a cyberattack breaching customer information. 

Why Do Businesses in CT Need Cyber Liability Insurance 

 

Cyber liability insurance is a must-have for businesses because it protects against the risks of cyber events and assists in the remediation of data breaches and other tech-related risks. A cyberattack is when a hacker infiltrates your business’s private network and steals your company’s, customers’, and employees’ sensitive information. 

The most common types of cyberattacks include Trojan Horse, Phishing, Unpatched Software, and Malware, which is the most common type of cyberattack amongst all. Every 39 seconds, a cyberattack occurs somewhere in the world. An estimated 2,244 cyberattacks happen on the internet each day. Any business that uses a computer and accepts credit card payments needs to have cyber liability insurance. 

Cyber liability insurance doesn’t cover the financial losses that businesses face due to a cyberattack. It also helps businesses notify customers of a data breach and pays for legal fees and other costs associated with it if the business is sued for failing to prevent the data breach. 

In times where cyberattacks are becoming more common each day, it’s important for businesses to be backed by cyber liability insurance. Cyber liability insurance gives businesses and organizations the peace of mind that they are protected against financial losses if something goes wrong. 

Recovering from a cyber breach can be really difficult. Business delays and losses can mount up following a cyberattack. Furthermore, there’s always a risk of your customers suing you for not being able to prevent the attacks. If your business depends on your website and gets hacked, you can expect your business to go out of function.

Any of these situations not only cause you a significant financial loss but can also damage the reputation of your business. Therefore, it’s important for businesses to be safeguarded with cyber liability insurance. 

The primary purpose of insurance is to give business owners the peace of mind that their business is protected against all the what-ifs. The risk of cyberattacks is always there. All hackers need to access your system and network is the business website. Therefore, having backed by insurance coverage that can protect businesses from tech-related risks is extremely important. 

 

More About Cyber Liability Insurance 

 

Cyber liability insurance protects businesses and organizations from the harmful effects of cyber breaches, including malware, ransomware, and distributed denial-of-service (DDoS) attacks. If a hacker hacks your website, system, or network, you could be liable for an array of expenses. 

When it comes to cyberattacks, both large companies and small businesses can’t come out fine if they don’t have cyber liability insurance because they damage the business’s reputation that causes long-term damages. 

Many small business owners believe that cyber hackers only attack large corporations because they can steal a good amount of money from them. However, the reality says otherwise. One out of five small businesses face cyberattacks, and 60% out of those go out of business within six months. 

One of the most common questions people have regarding cyber liability insurance is what kind of businesses need cyber liability insurance. The simple answer to the question is that deals with electronic data should be safeguarded by cyber liability insurance. If you have a business website and a social media platform, you are a target of cyberattacks. 

From hospitals to event planners and IT companies, every business should have enough cyber liability insurance coverage, especially because it’s the “go digital or go dark” era. 

 

What Does Cyber Liability Insurance Cover?

 

Cyber liability insurance covers the cost of: 

  • Data restoration
  • Expenses to restart operations 
  • Crisis management 
  • Notification cost
  • Cyber extortion 
  • Ransom payments businesses have to pay to get access to their data 
  • Liability arising from failure to protect data 
  • Expenses of regulatory investigations 

 

Cyber liability insurance protects businesses from both first-party and third-party damages. First-party damages include the damages that the organization and business directly face. On the other hand, third-party damages and settlements that the company faces due to its failure to act and not being able to prevent the attack. 

 

What Does Cyber Liability Insurance NOT Cover?

 

Similar to other types of insurance coverages, cyber liability insurance has a few exclusions, too, including: 

  • Profit loss during the shutdown
  • Bodily injuries 
  • Property damage
  • Reputational damage 

 

How Much Does Cyber Liability Insurance Cost?

 

On average, businesses and organizations pay $1,485 per year or $125 per month as their cyber liability premium payments. In 2019, the average cost that businesses pay for cyber liability insurance was around $1,500 for a $1 million coverage limit. 

There are various factors that the cost of cyber liability insurance depends on. To set the monthly premium cost, insurance companies look into several factors, including the company’s industry, the type of data collected and stored by the company, level of data risk, policy limits, privacy policies, how much sensitive data your company holds, revenue, the number of PII/PHI records, and network security. 

The cost of cyber liability insurance is on the higher side. However, the immediate costs of cyberattacks are significant, making cyber liability insurance worth every penny. To decrease the cost of cyber liability insurance, businesses have to work on the proper prevention and management of cyberattacks. 

 

5 Important Questions to Ask Before Buying Cyber Liability Insurance

 

While buying cyber liability insurance or any insurance coverage for that matter, you have to fully understand the coverage, exclusions, factors determining the cost of premiums, etc. Considering the fast development of the hacking world, it’s important to have cyber liability insurance.  

If you want to buy cyber liability insurance, but don’t know which insurance company to choose, here are the questions to ask before buying cyber liability insurance:

 

What Does Cyber Liability Insurance Cover?

Every type of insurance has its own set of inclusions and exclusions. It’s important to find out what exactly will the insurance cover. The best way of setting things straight for you and going through the details is to involve your legal team. 

As discussed earlier, cyber liability insurance usually pays for recovering the data, legal settlements and the cost of preparing the defense if the company is sued, hiring experts to repair the damage, notifying customers about the breach, and the financial loss caused due to business interruption and lost employee productivity. 

The insurance covers first-party and third-party damages. However, it’s important to review the inclusions to make sure that the cyber liability insurance policy meets your business needs.  

 

Are There Any Incidents that are Specifically Excluded from the Coverage?

Along with inclusions, cyber liability insurance also carries a few exclusions. The exclusions can vary by the insurance company. Therefore, it’s important to review different policies thoroughly before buying cyber liability insurance coverage. 

Some insurance companies exclude certain events from the coverage. Usually, insurance companies do not cover lost profit in the event of a business interruption due to a cyberattack. The insurance doesn’t protect the companies against reputation damage as well. 

 

How Long Does the Insurance Company Take to Respond After a Cyberattack Has Been Reported?

Insurance companies are obliged to act quickly. Make sure to inquire about the insurance company’s downtown period. If the downtown time is over 24 hours, we recommend you settle on a different cyber liability insurance provider.  

 

Does the Insurance Company has Relevant Experience in Your Industry?

It’s important for many organizations and businesses to work with insurance companies that have relevant knowledge and experience in their industry. Some industries and businesses have specific data compliance regulations. Therefore, it’s important to go with an insurance company that understands the data handling rules of your industry. 

For businesses and organizations, it’s of no use choosing an insurance company that doesn’t have knowledge and experience to cater to your business needs, regardless of how affordable or cheap they might be. 

 

What are the Factors the Provider Considers to Determine the Cost of Cyber Liability Insurance?

It’s important to ask the insurance provider about the factors determining the cost of cyber liability insurance.

As discussed earlier, the common factors that insurance companies look into include the type of data collected and stored by the company, how much sensitive data your company holds, revenue, the number of PII/PHI records, level of data risk, policy limits, privacy policies, and network security.

 

The primary factors include the level of risk the company is exposed to because the more the risk, the higher is the cost of cyber liability insurance. Cyberattacks are too sudden and too fast. There are a few preventative measures companies can take to prevent cyberattacks, including training your staff to ignore fraudulent emails impersonating someone in your organization, keeping your software up to date, installing a firewall, backing up your data, etc. 

However, buying cyber liability insurance coverage is equally important because prevention doesn’t work 100%. 

 

Most Commonly Asked Questions About Cyber Liability Insurance

 

Does Your Cyber Liability Insurance Freeze if You Are Late on a Payment?

Usually, your cyber liability insurance policy doesn’t freeze if you are late on a payment. However, it may experience an increase. To know for sure, it’s important that you ask the insurance company about the effects of late payments on your cyber liability insurance premiums before buying the policy. 

 

Why Do Small and Mid-Sized Businesses Need Cyber Liability Insurance?

Small and mid-sized businesses need cyber liability insurance as much as large-sized businesses need. Many small and mid-sized business owners have a misconception that their organizations are safe from cyberattacks because hackers usually target large-sized corporations. 

The stats show that 43% of the cyberattacks target small businesses, and 60% get permanently shut down within the first 6 months. In 2020, cyberattacks on small businesses increased by 424%. Still, 54% of the small businesses in the US believe that they are too small for a cyberattack. 

 

Are There Any Other Types of Insurance Coverages that Protect Companies Against the Risk of Cyberattacks?

Insurance like general liability, directors and officers, property, and crime insurance, may provide limited cyber liability insurance coverage. In some cases, these insurance policies did not or provided very limited coverage, while in others, they offered necessary coverage to the companies. 

Even if the common institutional insurance policies provide coverage, it wouldn’t be enough to cover the third-party damages. The best option here is to purchase cyber liability insurance. 

 

Takeaway – Is Cyber Liability Insurance Worth it? 

 

Cyber liability insurance is one of the most important types of insurance coverages for businesses and organizations, regardless of their size. If your network or system gets hacked into by a virus, cyber liability insurance can be of great help. 

The insurance covers businesses against financial losses, pays for legal expenses and settlement costs, and includes the cost of notifying customers about the data breach. 

With the increase of cyberattacks, the need for cyber liability insurance coverage has increased too. In 2019, 1,473 data breaches occurred in the US, which accounted for 164.68 million records exposed, and the number increased to 155.8 in 2020. 

Cyber liability insurance gives business owners the peace of mind that if anything goes wrong in the future, they have insurance to cover the loss and prepare for a legal defense if their customers sue them for not preventing the attack. 

Before buying cyber liability insurance coverage, it’s important to inquire the insurance company about the exclusions, inclusion, cost, and other important details. Many businesses rely on prevention than purchasing cyber liability insurance. However, it’s important to understand that preventive measures don’t completely wipe away the possibility of cyberattacks. 

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