Cyber insurance is an insurance policy that will protect companies from the adverse results of a cyber attack.
Can your company afford to spend $4.24 million? Not gradually spending it, but using 4.24 million almost all at once. Could your company do it, or would you go bankrupt?
According to IBM’s Cost of a Data Breach Report 2021, the average cost of a data breach was $4.24 million. One security slip, one employee mistake, or one unsecured network and your company could be 4.24 million dollars in the hole—paying for the fallout from a data breach.
That is a very real risk your company is facing. Even if you have a cyber security plan and a defense system, your strategy can’t defend against every single threat and cyber attack. A threat actor will break through at some point, and then you will be paying for it.
So what can you do? Let your company go bankrupt? Fortunately, there is a better solution—cyber insurance.
Cyber insurance is an insurance policy that will protect companies from the adverse results of a cyber attack. As just some of the cyber insurance benefits, it can financially cover the resources lost to a cyber attack, the fees for recovery services, and the income loss from disruption of business operations.
Cybersecurity insurance for small businesses is especially critical because it can save those businesses from bankruptcy. Instead of the small business having to pay 4.24 million or more after a data breach, cyber insurance will pay the recovery costs, and the small business can resume operations as quickly as possible.
Cyber insurance is an investment your business needs to make. But there is a lot more to know about cyber insurance before you can search cyber insurance companies and find the right cyber insurance policy. Keep reading to explore what you need to know about cyber insurance!
When beginning to learn about cyber insurance, it is fitting to start with the history of cyber insurance, so you can understand how the field has grown.
The cyber insurance field is fairly new, with the first insurance policies showing up in the 1990s. These policies generally covered online media or errors in data processing. But they excluded many things, like first-party coverage and inside attacks.
Moving into the 2000s, insurance companies expanded their coverage to include unauthorized access, network security, data loss, and virus-related claims. Some policies also started including first-party coverage, which covered things like business interruption and extortion.
Then, the cyber insurance industry made a major shift in 2003. That year, California enacted the Security Breach and Information Act, which required businesses to notify any individual whose personal information had been accessed illegally. Other states followed with similar laws, so insurance companies offered coverage for these notification services.
They began expanding their policies in other areas as well, adding more first-party coverages for IT forensics, public relations, and credit monitoring. Companies even added third-party coverage for fines and penalties.
Now, what does cyber insurance cover? Depending on the type of insurance you choose, you can get coverage for the fallout expenses from a cyberattack, costs for defending liability claims, and financial losses directly from digital theft or other criminal activity.
Obviously, the cyber insurance field has expanded greatly since its beginning. But there are still some coverage limits. What does cyber insurance not cover? Policies typically do not cover the cost of upgrading your security system, the loss of future profits after a cyberattack, or the loss of company value after your intellectual property was stolen. Different policies have specific limits to watch out for as well, but it all depends on the type of insurance policy.
The coverage you receive in the event of a cyberattack all depends on the type of insurance you choose, so you need to understand the different types of cyber insurance available to you.
One type of cyber insurance is first-party coverage. This coverage will reimburse organizations for costs they have incurred in recovering from a cyberattack. This includes public relations services and services for the affected customers, like notification and credit card monitoring. It also can cover the repairs to damaged software or hardware and the loss of business income because of a cyberattack.
Third-party coverage is another type of insurance. With third-party coverage, an organization is covered for costs to defend against lawsuits and legal claims. These claims can vary greatly, from privacy lawsuits, regulatory fines, claims of breach of contract, and other media liability claims. Some third-party policies will cover all these different claims, and some policies have more exclusions and will only cover certain claims.
The final type of cyber insurance will cover cybercrime costs. So, it financially reimburses your company for direct losses from criminal activity. It will cover any funds stolen from digital fraud, and it may cover cyber extortion or ransomware costs.
Those three types are just broad categories of more specific types of insurance. You can find policies for all types of cyber insurance, from privacy liability insurance to cyber insurance for individuals—and you may want to consider some personal cyber insurance coverage. With only 17% percent of small companies having cyber insurance, according to ChannelE2E, the companies you use may not have the funds to cover you sufficiently if your personal information was stolen.
But that is another reason you as a small business owner should invest in corporate cyber insurance. It will help you protect your customers and retain them if your company suffers from a data breach.
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Now that you see the importance of cybersecurity insurance and the possible types of insurance you could buy, you could look at a cyber insurance policy sample. This sample policy could show you some things that insurance companies will cover. If you look closely, you can see the things that insurance companies do not cover as well.
But that is just one example of a policy. All insurance policies will offer different coverages. If you want to find a policy that will cover your company well, make a list of your cyber liability insurance requirements. Be as detailed as possible, so you know exactly what type of policy you want your company to have.
A cyber insurance coverage checklist might also be helpful. It will show you the key things to look for in an insurance policy so that your business is covered for all the cyber risks it may face. Here is a checklist you can use in your insurance search:
That list can guide you as you search for cyber insurance policies, but you may be wondering how to determine cyber insurance coverage when you are looking at different policies. To determine a policy’s coverage, you can work directly with the insurance company’s agent and ask several questions. But they will be biased toward that one insurance company.
It may be better for you to work with a company like Trava, which can provide you different quotes from multiple different companies, show you their coverage options, and match you with the policy that best covers your cyber risk.
Why would you want to partner with Trava instead of finding insurance on your own? Because the cyber insurance market is difficult to navigate.
Ryan Dunn, the Director of Insurance at Trava, reported that small businesses were having more and more trouble applying for cyber insurance. Just a couple of years ago, it was easy to get cyber insurance with a short application questionnaire and a low premium. But there has been a lot of cyber insurance market growth recently. More and more businesses want cyber insurance, but the cyber insurance companies do not have enough resources to cover all those companies and their risks. So, premium rates are going up in the cyber insurance market 2022, and insurance companies are becoming more selective on what risks they will cover.
Small businesses have to complete 14-page applications and go through an intensive call with a security engineer, and they still might not qualify for coverage, according to Dunn. He also says that carriers are requiring enterprise-level security for small businesses. They have to have an EDR solution and a full MFA audit, among other things.
With these cyber insurance market trends, small businesses may think cyber insurance is a hopeless endeavor—especially as the global cyber insurance market follows similar trends, making policyholders spend more money for less coverage.
But Trava exists to make cyber insurance easier for small businesses. We can help your business prove that you have the appropriate cyber risk management measures in place so that insurance companies will insure you—with affordable premiums.
When you partner with us, we can perform a thorough risk assessment to identify your vulnerabilities. Then, we will provide actionable steps for you to fix those vulnerabilities before renewing your insurance policy. This will make your renewal processes quick and easy.
Don’t navigate the cyber insurance market alone. Partner with Trava, and let us match you with the right policy for your company.