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There’s no doubt that we live in a society dominated by the use of electronic devices. While this can be great for convenience and productivity, it is becoming increasingly more difficult to keep personal and sensitive information from falling into the wrong hands. Data breaches are not only detrimental to a company’s reputation, the costs associated with the fallout of one can be incredibly harmful to the bottom line.
While it is more common to hear about malware and cyber attacks affecting large corporations, small businesses are also at risk. In fact, studies have shown that companies with fewer than 500 employees are generally more likely to experience a data breach than larger companies, as they do not have as many tech resources. This is why it is so vital for organizations to carry a special type of policy called cyber risk insurance.
What does this type of coverage entail? Essentially, it is a type of policy that helps cover costs associated with a data breach involving personal and confidential customer information. Examples include names, social security numbers, financial or banking information, driver’s license numbers, and more.
If this information is leaked as part of a data breach, hacking incident, or other malicious or accidental act, cyber risk insurance helps pay for fees associated with the fallout. This can be repair of computer equipment, forensics to figure out what happened, identity restoration services, notification of breach costs, and much more. Each cyber risk insurance policy is a little different, but the main idea of protection against data breaches and malicious cyber attacks is the same.
And who needs this type of coverage? To be frank, everybody. Businesses of all sizes need some form of cyber risk insurance, and individuals should consider a modified form for personal use.
Once you understand what this type of coverage includes, it is time to look at your options within the cyber insurance market. Due to the amount of technology we all use each day, the number of cyber security insurance companies out there is growing, with more joining the industry all the time.
When looking for a cyber insurance company, the first step is to check with the agency you already use for commercial liability or other business insurance. Most major insurance carriers offer cyber insurance coverage, but that isn’t the only place you can look. There are many independent brokers and agencies that also offer this type of coverage. Finding the right carrier for your needs in the current cyber insurance industry is actually a whole lot easier than you might assume.
Another option is to look at supplemental software to help you determine your ideal cyber insurance carrier. There are many different programs on the market designed to help you not only rate your existing risk, but also to find holes in your current systems and expose where there might be a potential data breach. This is a really helpful avenue if this is the first time you’re purchasing cyber risk insurance or you’re not exactly sure where to start.
So, you want to buy cyber insurance but you aren’t sure where to start? No problem! The process is nearly identical to obtaining car or home insurance. All you have to do is contact an agent for a cyber insurance quote. They will ask you a few questions to determine your overall risk level and calculate a premium. It’s really that simple.
It is important to realize, however, that cyber insurance premiums depend on your level of risk. This means that the insurance company is trying to figure out how likely you are to actually experience a significant data breach. The higher the level of risk, the more you pay in annual rates.
Examples of factors that work for and against you include:
Of course, this is only the start of what an agent looks for when giving you a cyber risk insurance quote. The more honest you can be during this process, the better the policy will suit your needs.
If you’re considering a policy, you might wonder what cyber insurance covers. After a data breach, this type of insurance can actually help you in numerous ways.
Examples of what policies typically pay for include:
Keeping that in mind, what does cyber insurance not cover? In many instances, your cyber risk insurance policy will not cover things like loss of future profits due to a damaged reputation, upgrading your computer systems to meet new standards, or the value of intellectual property that was lost or stolen in the breach.
This is why it is so important to be specific and read through all policy provisions carefully when purchasing cyber risk insurance. Look for things like first-party coverages, third-party coverages, deductible amounts, inclusions, and any specific exclusions. By knowing your policy inside and out, you can prepare yourself for what to expect if you ever have a data breach and need to file a claim.
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Purchasing cyber security insurance is not difficult, but it does take a little more effort than buying a policy for your home or automobile, or even general liability coverage. First, you need to determine your exact level of risk. You can do this by either talking directly to a cyber security insurance broker or using an online calculator tool. By going through this process and answering all questions fully and honestly, it will be easy to see whether you have a slim chance of a breach happening or if the threat is basically imminent.
Then ask yourself, “How much cyber insurance do I need in the event of a data breach or other incident?” Add up all the costs you feel would be associated with this happening. Remember to include things like the cost of mailing notices to affected customers, reputation management, technological repairs, and even legal fees. Always be a little more liberal with those numbers and pad them just a bit when coming up with how much insurance you need. After all, it is better to be overinsured than underinsured. When you have a final figure, that should be close to the amount of coverage you should consider.
If trying to figure out your own policy coverage requirements seems like a bit of a hassle, don’t worry. There are tons of cyber insurance calculator tools out there designed to help you determine a figure in a very short period of time.
What is a cyber risk calculator? This digital tool generally asks a series of questions to help determine a very basic level of risk and associate it with a coordinating premium cost. Cyber insurance pricing is based on risk, so the higher the number the calculator figures out for you, the more coverage you need and the more expensive your annual rate.
Common questions include the type of industry you are in, how you collect data from customers, and whether or not you’ve had any previous claims. If you’re undergoing this process before you’ve spoken to an insurance agent, there’s a good chance that the calculator will just give you a basic rate idea and not the exact final price you’ll pay for coverage.
Why is this? When you actually purchase a policy, the questionnaire is more in depth to help accurately depict your risk level.
What is the process for buying a cyber insurance policy? Well, this usually depends on whether you’re purchasing cyber insurance for individuals or for a business.
On an individual basis, the policyholder usually selects a figure for overall coverage and a deductible amount. In the event of a claim, most individuals generally only need a small amount to help pay for credit monitoring, financial repair, and basic legal fee coverage to get through a security breach. In some cases, it might even be best for a person to add an endorsement to their existing homeowner’s insurance policy versus having a specific cyber insurance policy.
On the other hand, companies have a much larger requirement when it comes to cyber risk insurance. As the ones trusted with an individual's personal data, it is important to ensure they are looking at all angles of risk and have the maximum amount of coverage possible.
When buying cyber risk insurance for a business, you’ll generally be asked to provide specific information about the company to determine how risky your enterprise actually is in terms of a data breach happening. The process is a little more intensive than for an individual, as companies generally shoulder a bigger liability load and cost if there is ever a malware or virus attack that leaks third-party data.