Cyber Liability Insurance
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What is Cyber Liability Insurance?
The goal of these policies is to address the risk exposure created by various electronic activities, the most common of which being the collecting or storing some kind of Personably Identifiable Information (PII). This is a relatively new type of policy and the coverage available seems to grow every year. In the past, a policy might have only protected you against lawsuits from victims and fines from government agencies. Now policies are expanding to capture some of the other expenses.
While big firms incur the highest costs in the aggregate, the financial impact of cyber-attacks is disproportionately greater for small businesses. Cyber insurance provides small businesses the coverage they need to protect one of their most valuable assets – data.
Do I need Cyber Liability Insurance?
With hackers becoming bolder and cyber attacks getting bigger and more frequent every year, business owners must take control of their computer security and protect themselves. If you’re not sure if it’s necessary for your business, we’ve created a checklist:
- You accept credit cards or other digital payment types.
- You operate an online store for your business
- Uses computers and mobile devices for business
- You store confidential customer information
- You keep medical or financial data
- You are located in one of the 46 U.S. states with mandatory data breach notification laws
What does Cyber Liability Insurance cover?
A cyber insurance policy is designed to cover privacy, data, and network exposures, to offer a computer security solution and give you peace of mind. Here are some typical claims that would be covered, subject to the terms of the policy:
Claim Type |
Definition |
Example |
|---|---|---|
| Loss or damage to data | Many policies cover losses caused by damage, theft, disruption or corruption of your electronic data. They also cover damage or theft of data stored on your computer system that belongs to someone else. | A burglar stole two laptops from an E-commerce business containing the data of over 10,000 customers. Under applicable notification laws, the company – was required to notify affected individuals. Total expenses incurred for notification and crisis management to customers was nearly $200,000. |
| Data breach response | This covers your cost of computer forensics, and all associated notification and crisis management costs. | Hackers manage to break through an accounting firm's firewall and steal their entire client database with sensitive financial information. The cyber insurance policy kicks in to provide identity protection services, and crisis management and public relations support. |
| Cyber Extortion | This covers the cost of expert assistance and ransom payment. | You or one of your employees clicks on a link from an email that came from what appeared to be a trusted source. The message was from an experienced hacker and contains malware. Your company’s data is locked and held for ransom. |
| Loss of income or extra expenses | Losses sustained due to the total or partial interruption of your business as a result of a data breach, security failure or extortion threat. | Many policies cover income you lose and extra expenses you incur to avoid or minimize a shutdown of your business after your computer system fails. |
Loss or damage to data
What It Covers
Why you need it
Data breach response
What It Covers
Why you need it
Cyber Extortion
What It Covers
Why you need it
Loss of income or extra expenses
What It Covers
Why you need it
How much does Cyber Liability cost?
Here are some of the main points that insurance carriers will take into account when calculating your premium:
- Data: what type of data is being collected and how much is being collected?
- Controls: what type of security measures and incident response plans do you have in place already?
- Industry: a payment processor is more likely to be attacked than a cookie store with an online presence.
- Customer base: the more customers, the higher the potential severity of a data breach.
- Revenue: this is the primary factor for determining rate change on renewal.
- Claim history: a history of litigation raises red flags
General Liability Insurance FAQ's?
What is Personally Identifiable Information (PII)?
Any information that reveals the identity of a specific individual falls under this umbrella. This could include a name, social security number, address, password, or account number. This information is subjected to a number of regulations, including the Family Education Right and Privacy Act (FERPA).
What does cyber liability insurance NOT cover?
Bodily injury or property damage, professional liability (Errors & Omissions) claims, loss of first-party intellectual property, loss of future revenue. Costs to improve security and strengthen systems to mitigate the risk of future threats.
How do data breaches happen?
Data breaches can occur in many ways, including:
Hacking
Employee theft
Theft or loss of equipment (such as laptops and hard drives)
Unintentional exposure of data on the internet
Improper disposal of data and more
Does my Professional Liability policy include cyber coverage?
While your policy may provide some coverage for cyber liability risks, there are often huge gaps or grey areas. For example, most Professional Liability policies will cover the computers themselves, but not any data stored within them. If your business does fall victim to a cyber-attack, your Professional Liability policy will not cover the legal costs and interruption of business expenses.