What Is Cyber Insurance? Services, Policies, and Coverage

Cyber Insurance Policy Overview

A cyber insurance policy protects your business against potential lawsuits after data breaches.

This makes it essential for all firms, ranging from multinational corporations to the local corner store.

Below, we look at everything you need to know about cyber insurance cost. We'll go through what it is and what it covers while answering some frequently asked questions.

What is cyber coverage?

In a nutshell, a cyber insurance policy cover is a cyber liability insurance policy that protects your business in the event of a data breach, network failure, employee error, or cyber attacks. It emphasizes the need to protect against incidents involving breaches of data held by vendors and third parties.

For example, let’s say your financial company falls victim to a black hat hacker. Your cyber insurance carrier will notify clients about the breach, restore personal identities, recover lost data, and fix damaged computer software and systems.

This keeps your workload and stress levels to a minimum, allowing you to get up and running as soon as possible.

Why Is Cyber Insurance Important?

In today’s digital age, cyber insurance is essential for businesses of all sizes. It provides a crucial safety net against the financial fallout from cyber threats and data breaches. When a cyberattack occurs, the costs can quickly escalate, covering everything from data recovery to legal fees and customer notification. Cyber insurance steps in to shoulder these expenses, allowing businesses to focus on recovery rather than financial strain.

Moreover, cyber insurance plays a vital role in crisis management and public relations. In the event of a data breach, maintaining customer trust is paramount. Cyber insurance can help manage the situation effectively, ensuring that communication with customers is handled professionally and that the company’s reputation is protected. This comprehensive support underscores why cyber insurance is not just a luxury but a necessity in safeguarding a business’s future.

Who needs cyber liability insurance?

If your company is collecting customer data, you need cyber insurance since it protects your business if black-hat hackers manage to access this data.

It’s even more complex if you're offering B2B services. You're collecting data from companies that are also receiving data from their customers. So if anything happens to the data you've gathered, hackers can use data from your client's customers.

What does cyber liability insurance cover?

On top of any fines and penalties, cyber insurance covers:

• Forensic investigations
• Litigation expenses
• Regulatory defense expenses or fines
• Crisis management expenses
• Business interruption
• Cyber extortion
• Betterment
• Reputational harm
• Information privacy coverage
• Social engineering

First-party coverage protects businesses from losses directly incurred from cyber incidents like data theft and hacking.

Forensic investigations

Cyber policies cover forensic investigations, which aim to find data breaches and the vulnerabilities that come along with them. This allows your company to locate and remove any security weaknesses exploited during a breach. Insurers often use an approved assessment tool during forensic investigations to evaluate an organization's cyber risk.

Your insurance also covers incident response assistance. This occurs before an investigation and helps close the window of opportunity for black-hat hackers to work with.

Litigation expenses

Litigation expenses are any costs that are connected to defending your firm in court. Common types of litigation expenses include:

• Court costs
• Lawyers fees
• Witness fees
• Accountant fees

These fees can stack up quickly and require a significant amount of cash if you don't have cyber insurance.

So instead of stressing about how your business will pay for court fees, you can focus on bouncing back and regaining customer trust.

Regulatory defense expenses or fines

If courts find that your business is at fault because it didn't follow government regulations, you can expect hefty fines. 

For example, healthcare firms abide by HIPAA requirements, while financial institutions follow GLBA regulations.

Breach of data privacy laws has set firms back millions or even billions of dollars. So it's essential for your business’s survival to have the proper protection.

Crisis management expenses

In the wake of data breaches, your team is already stressed. The last thing you want to worry about is having enough money for crisis management. The cost can be surprisingly high, especially if you’re part of a high-profile company.

Insurers often require organizations to undergo a security audit to assess their risk profile, which directly influences the types of coverage and the premiums offered.

Luckily, insurance pays for crisis management expenses like dealing with the media and public relations.

Business interruption

Chances are you'll have to put all business processes on pause while investigating and strengthening data security after a breach. You'll also have to contact customers and inform them about what's happening.

This is expensive because you still have business expenses like salaries and rent, but your income dries up.

Fortunately, cyber policies reimburse you for income loss. So you're still bringing in a similar amount of revenue, allowing you to pay rent and employee salaries.

Cyber extortion

Cyber extortion coverage is an agreement within most insurance policies that protects your business and customer data against extortion or blackmail.

For example, let's say a company executive receives an email threatening that an extortionist will release a virus into the company website if they don't pay a set amount of money within 24 hours.

The company will have to dig into its cash reserves to fulfill the extortionist's request. They'll also have to hire technical professionals to help track the hacker and ensure it doesn't happen again.

However, cyber insurance policies will pay the total amount for you and cover the costs of fixing the weakness within the firewall.

Betterment

Betterment is an essential part of cyber security because it locates security issues and focuses on improving them.

But upgrading cyber security is expensive. You’ll have to hire a cyber security engineer to fix problems while using white-hat hackers to find areas that black-hat hackers might try to exploit.

It is also important to distinguish between first-party coverage and third-party coverage in cyber insurance policies. Third-party coverage addresses losses incurred by other entities that have a business relationship with the affected company.

This is where cyber insurance helps. Cyber insurance carriers negotiate with cyber security professionals and cover the entire cost of betterment.

Types of Cyber Insurance Coverage

Cyber insurance coverage can be broadly categorized into two types: first-party cyber coverage and third-party cyber coverage. Understanding the differences between these coverages is crucial for selecting the right policy for your business.

First-Party Cyber Coverage

First-party cyber coverage is designed to protect a business’s own data and assets in the event of a cyberattack. This type of coverage typically includes costs related to:

• Data recovery and restoration: Covering the expenses to recover and restore compromised data.
• Legal counsel and fees: Providing legal support and covering associated fees.
• Customer notification and communication: Ensuring customers are informed about the breach and any necessary steps they need to take.
• Crisis management and public relations services: Managing the public relations aspect to mitigate reputational damage.
• Lost income due to business interruption: Compensating for income lost while business operations are halted.
• Cyber extortion and fraud: Covering costs related to extortion demands and fraudulent activities.
• Forensic services to investigate the breach: Funding forensic investigations to understand the breach and prevent future incidents.
• Fees, fines, and penalties related to the cyber incident: Paying any regulatory fines or penalties incurred due to the breach.

Third-Party Cyber Coverage

Third-party cyber coverage protects a business from liability if a third party brings claims against them. This type of coverage typically includes payments to consumers affected by the breach, as well as costs related to:

• Claims and settlement expenses relating to disputes or lawsuits: Covering the costs of legal claims and settlements.
• Losses related to defamation and copyright or trademark infringement: Protecting against claims of defamation or intellectual property infringement.
• Costs for litigation and responding to regulatory inquiries: Funding legal defenses and responses to regulatory investigations.
• Other settlements, damages, and judgments: Covering various other legal settlements and judgments.
• Accounting costs: Paying for accounting services needed to address the financial impact of the breach.

Cyber insurance coverage requirements

Here's a cyber insurance coverage checklist to help you meet coverage requirements:

• All your company computers are fitted with the latest antivirus software
• Your customer data is protected by a firewall
• Company information is updated on the cloud regularly
• Rights to access secure company data follow a provisioning process

Read More: Cybersecurity Statistics

What is not covered by cyber insurance? 

Most cyber insurance policies won't cover:

• Potential future lost profits: Cyber insurance doesn't cover future losses in the event of data breaches and other criminal activities (unless you specifically take on a data breach insurance). Let's say a hacker breaches your system and leaks client data, damaging your reputation and resulting in a loss of future profits. Your insurance carrier won't settle these losses.

• Betterment: Carriers also won’t pay for upgrades to cyber security and other computer systems. If someone breaches your firewall and your insurance carrier finds the weakness, you'll have to pay for upgrades yourself.

• Theft of intellectual property: If a cybercriminal steals your intellectual property, your business insurance policy won't cover the subsequent damages and company devaluation. 

• Bodily damages: As the internet becomes more integrated with everyday life, cybercrime's potential to cause physical injury is increasing. For example, if an attack on your firm disrupts the supply chain, resulting in damaged goods, and these goods harm consumers, carriers won't cover it.

‍Property damage: Although many carriers allow you to add property damage to a policy, they usually don't cover it. This would be a problem if a hacker damaged your hardware or software to the point where it's unusable.

Key coverage spotlights

Now, let’s have a look at some standout coverage spotlights.

Reputational harm

Reputational harm coverage goes further than crisis management. Where crisis management involves dealing with the press directly after a data leak, reputational harm coverage is a long-term plan to restore your credibility among customers.

Information privacy coverage

Information privacy coverage is another must because it protects you from liability after employees' data leaks.

For example, imagine you're a restaurant owner and have been gathering employee information for years. One night, somebody steals your laptop and gains access to sensitive data. Your employees can sue for data negligence. But with information privacy coverage, your cyber insurance provider takes care of everything.

Social engineering

Social engineering coverage is also helpful because it covers you if a criminal tries to trick someone in your company into giving away information.

Choosing the Right Cyber Insurance Policy

Choosing the right cyber insurance policy can be a daunting task, but several factors can help guide your decision. Here are some tips to ensure you select the best policy for your business:

• Determine your business’s cyber risk: Assess the type of data you store, the size of your business, and the industry you operate in to understand your specific cyber risks.
• Assess your current security measures: Evaluate your existing security protocols, including firewalls, antivirus software, and employee training programs.
• Research different insurance providers: Compare policies from various providers to find one that aligns with your business needs.
• Consider the cost: While cyber insurance can be expensive, weigh this against the potential financial impact of a cyberattack without coverage.
• Read the fine print: Carefully review the policy details to ensure it covers the cyber threats and data breaches most relevant to your business.
• Consider additional services: Look for providers that offer extra services, such as security audits and incident response planning, to enhance your overall cybersecurity posture.

By considering these factors, you can choose a cyber insurance policy that not only fits your budget but also provides comprehensive protection against the financial losses caused by cyberattacks, helping you maintain customer trust and business continuity.

Top cyber insurance carriers

Here’s at look at three of the best cyber insurance carriers in 2022.

Worth Insurance

Worth Insurance is a great choice of cyber insurance carrier because we work alongside cyber insurance companies like:

• CNA
• Honeycomb
• Liberty mutual 
• Attune

With Worth Insurance, you're partnering with a reliable carrier that you can contact any time of the day. If something unexpected happens like a data breach, our team will guide you through the entire process. 

Also, you won't have to worry about reputational damage or business interruption since Worth Insurance covers your insurance needs.

AXA XL

AXA XL is another suitable cyber insurance carrier for businesses because they offer a full suite of solutions to protect you during breaches. The best part is that they also provide E&O insurance, which bulletproofs your business against client losses.

Chubb

Chubb is a worldwide insurance carrier well-known for its business interruption loss coverage. You won’t have to worry about paying bills while recovering from data hacks. The 24-hour customer support also ensures that investigators are scrambled immediately to locate hackers and close the window of opportunity.

How much does cyber insurance cost?

Cyber insurance premiums cost between $300 to $5,000 per year. But this depends on your industry, company size, and type of clients you cater to.

For example, if you're a large advertising firm that works with Fortune 500 companies, you can expect to pay a higher price. However, if you run a small corner store that collects email addresses, you'll pay around $300 or even less.

Cyberattack and data breach examples

Wonga Loans: In 2017, a Wonga Loans data breach leaked the bank account details of over 250,000 customers. Reports say that the breach happened because Wonga Loans wasn’t staying up to date on new privacy regulations.

Morrison's Supermarkets: The Morrison chain fell victim to a data breach when an employee intentionally leaked the private information of everyone working at the company. This included bank information and physical addresses. Fortunately, the forensic investigation found the culprit, and he was sentenced to eight years in prison.

Brighton and Sussex University Hospital: The government fined Brighton and Sussex University Hospital £325,000 after someone accessed sensitive employee data and put it on eBay for sale.

Cyber insurance vs tech E&O

Although cyber and tech E&O insurance seem similar, a few key differences exist.

The main difference is that cyber insurance is first-party liability insurance. This means it helps your company address the financial aftermath of data breaches.

E&O insurance protects you if you make a mistake that harms your client financially. This could be settlement costs, court fees, and lawyer fees.

Recovering from a cyber attack

Recovering from a cyber attack is stressful since you'll have to regain customer trust so they have peace of mind knowing breaches won't happen again.

• The first step is to follow the data and find where the weakness in your firewall lies. 
• Next, hire cyber security professionals to strengthen these areas and use white-hat hackers to find additional problems.
• Finally, build backups of business and customer information and store them in multiple locations, like in the cloud and in physical off-premises locations. This protects your access to data if it falls into the wrong hands.

‍

Frequently asked questions

What industries purchase cyber liability insurance?

Any business collecting data from customers must have cyber insurance, regardless of their industry.

But cyber security is crucial for businesses in the technology and finance fields because they usually cater to high-net-worth individuals. This means data breaches can potentially cost more money.

Is cyber insurance worth the cost?

Cyber insurance is necessary because if data leaks into the wrong hands, your company can be held accountable for millions. Cyber insurance costs a few hundred or thousand dollars per month, depending on your business size. So it’s worth it if you compare that to potential millions in losses.

Why do companies need cyber insurance?

Companies need cyber insurance because it protects them against liability when data breaches occur. The insurance carrier takes care of everything instead of using company cash reserves.

This greatly reduces the stress of data breaches. It gives you peace of mind knowing if black-hat hackers get their hands on client data, your company isn’t responsible.

What is not covered by cybersecurity insurance?

Cyber insurance won't cover costs for improving internal technology systems and the loss of value caused by hackers accessing intellectual property. 

Although insurance covers short-term betterment, you'll have to invest your time and resources into developing your long-term security systems.
‍

Cyber insurance made easy with Worth Insurance

Cyber insurance is a must for every business, especially those collecting terabytes of customer data. This is because clients can hold your company liable for any data breaches.

Fortunately, cyber insurance is an effective tool that protects your firm against data breaches.

So if you're looking for peace of mind knowing you aren't responsible for data breaches, request a Worth Insurance quote. Worth Insurance protects your business from customer losses, so data breaches aren't that stressful.