What is cyber insurance?

December 10th, 2021 | IT Security

Cyber insurance is a necessary policy that will help protect your organization from losses during cyberattacks. While cyber insurance cannot protect you from falling victim to these threats, it can help minimize business disruption and cover the financial costs of dealing with and recovering from an incident.

It’s not a matter of “if” your business gets hit, but “when.” Cyber liability insurance won’t solve all your IT security problems, but it will help you overcome the issues you face when your business inevitably falls victim to an attack. It’s essential to choose a cyber insurance policy that can minimize the impact of an attack and cover your major business risks. In this article, we’ll explain what cyber insurance can do for your business and what you need to know about your coverage options to choose the best-fit policy for your needs.

What is cyber insurance?

Cyber insurance protects your businesses from financial losses caused by cyberattacks, including:

  • Data breaches and theft
  • System hacking
  • Phishing scams
  • Ransomware extortion payments
  • Denial of service

Cyber insurance helps reduce the devastating effects of a claim and covers any cost related to IT forensics investigation, data restoration, legal liability, and customer notification.

What does cyber insurance cover?

Most business insurance policies do not cover data breaches and IT security incidents. Cyber insurance helps fill this gap by taking on the immediate costs your business incurs following an attack, including:

  • Investigative services
  • Business interruption coverage
  • Data recovery

It can also cover damages your customers or partners face from cyberattacks on your business, such as:

  • Legal fees
  • Settlement costs
  • Security failure
  • Media liabilities

In addition to helping with legal fees and expenses, cyber insurance providers can assume responsibility for:

  • Notifying customers about a data breach
  • Restoring any customer-sensitive information
  • Recovering compromised data
  • Repairing damaged computer systems

It’s essential to understand what your company’s specific cyber insurance policy covers and how. Financial losses from damages to intellectual property and your business’s reputation are often not covered, and some incidents require you to purchase additional insurance policies for protection. For example, Business Email Compromise (BEC) is a rising attack trend in the SMB community. These attacks are often not covered without subscribing to an additional BEC-specific policy.

It’s important to note that while cyber insurance mitigates costs from various cyber incidents, it doesn’t cover losses related to damaged customer trust and industry standing.

Why do you need cyber insurance?

Most midsize and growing businesses are still behind the curve in IT security awareness and protection, and even more, they are struggling to keep up with the evolving threats their staff face daily. Cyber insurance covers risks that are real and happening every day. Midsize and growing businesses are prone to thinking they’re not “big enough” to be an appealing target for hackers. In reality, many of these companies are easy prey for criminals looking to exploit lucrative data and administrative credentials they can use for financial gain. Cyberattacks are not a once-in-a-lifetime situation—you are always at risk.

You want the right coverage to protect against damages caused by these electronic threats to your computer systems and data. These threats lead to theft, damage, or misuse of sensitive information or other vital technologies, often resulting in downtime and recovery costs that include specialized repairs and legal fees.

How or where do I get cyber insurance?

Cyber insurance is a product that is growing in scope and size as risks continue to evolve and exploit the growing reliance of businesses on technology and online services. You can purchase a plan through reputable business insurance providers as an individual policy. It’s often not included in traditional business insurance policies, like general liability or business owner insurance. They now get updated risk insights generated out of the continuous assessment process. This allows the insured to work with security partners to address additional risks. The cycle continues as the insured can contribute to an improved loss ratio for insurers.

Cyber insurance is essential for minimizing business risk if you rely on technology. Cyberattacks occur daily, so source a cyber insurance vendor with the right security measures to protect your business. How well you defend against a potential attack defines your IT security reputation among customers and cyber insurance providers.

The greater the number of successful attacks on your business, the greater the cost of cyber insurance, and the greater the risk of losing customer trust and loyalty. You need cyber insurance to make sure you are doing your part to follow ITS best practices to minimize insurance costs and receive maximum coverage.

Find out more about how our team can help you understand your cybersecurity needs and goals and schedule time to speak with an Aldridge team member today.