Cyber liability insurance covers any sort of liability risk and potential data theft or loss that could put your customers, your employees, or even your entire business in danger. This usually includes data like addresses, Social Security numbers, credit card numbers, bank account numbers, or other sensitive information that would be devastating in the wrong hands.
Typically, cyber liability insurance coverage will take care of any financial losses your business may sustain, including those presented by third parties whose information might also have been breached through your network. Most cyber liability insurance policies thus offer both first- and third-party coverages as a result.
First Party Coverages Lost, Stolen, or Corrupted Data
With this style of coverage, any intellectual properties or data files belonging to your company and other related parties that are lost, stolen, or corrupted can be recovered. All expenses related to said recovery, including how much it will cost to restore all lost, stolen, or corrupted data, should be covered by your policy, even if this results in outside costs from hiring a tech expert to fix the problem.
Loss of Revenue and Extra Expenses
Loss of revenue due to an interrupted or corrupted computer system is also covered here. If a cyber-criminal tries to extort money from you, you will also be covered for the amount they demand, as well as any other expenses that come with this.
Since the damage is digital rather than physical, none of this would be covered in a commercial property policy.
Notifying other parties affected by the data breach is also covered. The cost of hiring an attorney to assess your company’s obligations under applicable laws and regulations, the cost of providing credit monitoring services for those affected, and even the cost of setting up and operating a call center to help your customers may also be covered, depending on your policy.
Keep in mind that many first-party coverage policies are subject to a deductible.
Third Party Coverages
This coverage applies to claims against your company made by customers or employees that have been hurt by the data breach, system corruption, or other disruption to your business. Basically, it protects against potential lawsuits you may have on your hands.
Network Privacy and Network Security Liability
These will cover lawsuits against your business due to data breaches, the interruption or corruption of subsequent computer systems, and allegations of your failure to protect sensitive data stored within your computer systems.
This covers lawsuits against you concerning libel, slander, defamation, or invasion of privacy with your clientele. Where the above types of liability also count as an invasion of privacy, the main difference lies in the fact that media liability claims are made because client information is released online.
Errors and Omissions Liability
Typically, this covers mistakes made by the software your company uses, including any issue with coding.
Do I Really Need Cyber Liability Insurance?
Cyber criminals do not just target lucrative tech companies and huge online shopping sites. In fact, around 55 percent of all small business owners experience a data breach in their lifetime, and 53 percent even experience multiple breaches.
If you keep your books organized on Excel spreadsheets, host a website with decent foot traffic, or even store client lists on your computer, chances are, hackers will do what they can to steal that information. Afterward, they either sell it or assume an identity taken from your data.
Of course, this breach of information would not be the only loss your company sustains. Having highly sensitive information about your clients and employees leaked to cyber criminals will definitely hurt your business’s reputation, and could result in major loss of revenue and the trust of your clientele.
According to cyberpolicy.com, the top five cyber liability insurance carriers are AIG, Chubb, Hiscox, Liberty Mutual, and HSB.
AIG, as of now, carries 22 percent of the total cyber liability insurance market, and has even added this essential coverage to their current insurance plans.
Chubb Limited is the largest property and casualty insurance carrier, and also carries about 12 percent of the total cyber liability market on its back. The best thing about Chubb is that, no matter the size of the business or type of industry, they are willing to work out a customizable insurance plan with your company alongside you.
This insurance company specializes in rather niche areas of coverage, which can be a blessing if your business appeals to a rather niche audience or market. They also offer some of the best cyber liability policies, with up to a $10,000,000 capacity.
Liberty Mutual offers two cyber liability policies that defend against separate first- and third-party liability claims, with Data Compromise and CyberOne respectively.
HSB has had over a decade of cyber liability insurance experience, and typically provides coverage to smaller or mid-size businesses. As such, their policies have evolved to cover a wide variety of data breaches.
Pros and Cons of Buying Cyber Liability Insurance
The amount of coverage and variety of services you are offered with this type of insurance is quite vast. It would seem that every base you need to cover regarding data breaches, data loss, or other cyber-crimes will be handled with cyber liability insurance unlike general liability insurance for small business.
Unfortunately, obtaining cyber liability insurance does not mean you are guaranteed protection against potential data breaches or similar cyber-crimes. That’s what antivirus software and tech specialists are for.
Cyber liability insurance also cannot recover any harm to your business’s reputation that such a breach (or breaches) will cause, nor will it cover the loss of potential revenue due to customer dissatisfaction with your business, or the value that any loss of intellectual property may pose.
Cyber Liability Insurance Costs
Both small and mid-sized companies will have annual premiums, averaging at around $1,000 for a $1,000,000 coverage limit. However, depending on the kind of business you run and the type and amount of customer records your business compiles, your premium may well be $7,500 a year for the same coverage limit. Basically, the more clients you host, the higher your premium will be.