Whether you’re a business owner or an employee, you probably know from personal experience how important insurance is. Medical, auto, renter’s, homeowner’s, travel, business – today you can insure virtually anything to protect yourself from significant financial loss. Even though cybersecurity insurance is a relatively new phenomenon, it is absolutely crucial for any business that conducts operations online or stores information on computers and servers – it’s hard to find a modern business that doesn’t fall into this category.
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Cybersecurity insurance – what is it?
Just like with any other type of insurance, with cybersecurity insurance, you pay a set premium every month, quarter or year and in return, the insurance company compensates your financial losses in case of a data breach or hack. Cybersecurity insurance is also sometimes called cyber liability insurance. In addition to the protection your business receives from cybersecurity insurance, the widespread use of cyber liability insurance encourages businesses to adopt the best cybersecurity practices in order to lower their premium.
Why is it necessary to have cyber liability insurance?
When it comes to the cost of cybersecurity breaches for businesses, the numbers are quite terrifying – the average cost of a data breach for companies around the world is just shy of $4 million. Of course, this is just the average sum and the actual numbers vary wildly depending on the size of the company and the nature of the breach, but no matter how large your business is, the financial implications of a cybersecurity breach can be devastating. For instance, the average cost of each stolen record that contained sensitive information is over $150. The total cost of a data breach is made up of many things, including loss of clients, damage to your reputation, downtime, cost of investigation and resolution, fees, penalties and more. Having cyber liability insurance can protect you from all these expenses.
What does a typical cybersecurity insurance policy cover?
The exact coverage a given cybersecurity policy provides is typically negotiated on a case-by-case basis with the insurance company depending on your company’s needs. However, you can generally divide most cyber liability insurance plans into two categories/ the first category are first-party policies, which protect your company from financial losses in case of extortion by cybercriminals, reimburses your business for lost clients, damage to your digital assets and more. The second type of cyber insurance is third-party cyber insurance and it’s usually used by IT companies that manage networks, software and systems and store data for other companies. Consequently, these insurance plans cover loss of information and the cost of notifying clients about these losses.