The digital age we’re living in is the most innovative and fast-paced era in human history—but with all the benefits of new technology also come its risks. Cybercriminals are continuously finding ways to exploit businesses, causing over $320 billion in annual damages. Investing in cybersecurity measures is essential, but it may not be enough. That’s where cyber liability insurance comes in.
What is Cyber Liability Insurance?
Cyber liability insurance, also known as cyber risk insurance, is a type of commercial insurance that protects businesses against internet-based risks. It covers possible financial losses and legal liabilities from online threats. These threats include:
- Data Breaches
- Cyber Extortion
- Network Damages
- Online Privacy Violations
- Business Interruption Due to Cyber Attacks
Any business using technology and storing sensitive data is susceptible to these risks. With the right insurance, your business can transfer the potential financial burden of a cyberattack to an insurance provider and effectively upgrade your risk management strategy.
Key Components of Cyber Liability Insurance
Each insurance policy will vary from insurer to insurer. Still, most include the following key components:
First-Party Coverage
Covers expenses related to data breaches and cyber incidents directly affecting your business.
Third-Party Coverage
Covers liability costs to others, such as legal fees and settlements if your business is found responsible for a data breach.
Additional Coverage
Additional options include business interruption, cyber extortion, network damage, and cybercrime coverage. Depending on your business needs, you can customize your policy to suit your specific risks.
Assessing Cyber Risks and Coverage Needs
Before purchasing insurance, assess your business’s unique risks and coverage needs. Evaluate your potential financial losses and liabilities. What sensitive data do you store? What cybersecurity measures do you have in place? Do you have a crisis response plan in case of a cyber incident?
Knowing your cyber vulnerabilities will help you determine the appropriate coverage limits and policy options.
Understanding Exclusions and Limitations
No matter what insurance policy you choose, it won’t be able to cover everything. It’s crucial to understand the limitations of your policy. The most common exclusions in cyber liability insurance are:
- War and Terrorism
- Employee Dishonesty
- Failure to Meet Industry Standards or Regulatory Requirements
- Prior Knowledge of Security Breaches
- Physical Damage to Property
Be sure to review your policy terms and conditions carefully. Ask your insurer detailed questions until you fully understand what is covered and what is not.
Choosing the Right Insurance Policy
Not every insurance provider is made equal. Evaluate your options carefully and choose a reputable insurer with experience in your industry. Compare coverage features, limits, and premiums. Can your insurance provider customize your coverage to align with your business needs and risks? Don’t be afraid to negotiate for the best coverage and price.
Does Your Insurance Help You Meet Regulatory Compliance?
If your business protects sensitive information such as financial or healthcare records, you may have legal obligations to meet certain cybersecurity and privacy regulations. Some insurance policies include coverage for regulatory fines and penalties if your business fails to comply with these requirements. However, it’s still your responsibility to meet these regulations.
The best way to ensure alignment between your insurance coverage and regulatory requirements is to partner with compliance experts like Simply Systems. We provide the experience and knowledge of trained IT professionals to protect your business from cyber risks.
Ensure Your Cybersecurity Foundation Is Strong With Simple Systems
Understanding cyber liability insurance is crucial, but investing in cybersecurity measures to prevent cyber incidents from ever happening should always be the first line of defense.
At Simple Systems, we offer comprehensive cybersecurity solutions for businesses of all sizes and industries. Our team of IT experts will assess your business’s vulnerabilities and implement proactive measures to mitigate them. Contact us today to learn more.
