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Understanding Cyber Liability Insurance

You may think that cyber attacks only target large companies like Equifax or Colonial Pipeline. In reality, 63% of small and medium-sized businesses (SMB) reported experiencing a data breach in the previous year. Even worse, 83% of SMB owners don’t have the financial resources to recover from a cyberattack.

A data breach can lock you out of your network and lead to losing sensitive information to hackers. While a robust security system is necessary to protect your data, business owners should also consider cyber liability insurance to cover the worst-case scenario.

What is cyber liability insurance?

Cyber liability insurance covers a business’ liability in the event of a data breach that exposes sensitive data like Social Security numbers, account numbers, and other personal information. It may also cover liability for viruses infecting the network or other types of cyber attacks.

Does general liability insurance include cyber liability?

General liability insurance, or even professional liability insurance, may include basic coverage for cybersecurity incidents. However, this may not be enough coverage for your business. As many as 66% of survey respondents reported having stand-alone cyber liability insurance.

If you’re unsure what type of cyber coverage you need, you should reach out to an insurance agency to discuss what is right for your business. Generally speaking, if you store personally identifiable information on employees or customers, you may benefit from additional cyber insurance.

What do cyber insurance policies cover?

It’s essential to note that there is no standardized cyber liability insurance. Each insurer will have a wide variety of coverage, so a business owner should have a general idea of what they need when talking with an insurance agency.

There are two types of coverage available within a cyber liability insurance policy.

First-party coverage involves immediate expenses when a cyber security incident occurs. This can include costs like:

  • Informing employees, customers, and possibly the government about a data breach
  • Repairing damaged computer systems
  • Hiring public relations specialists to handle a public response
  • Interruptions in the business
  • Extortion payment to a hacker

Second-party coverage handles expenses related to lawsuits and other legal claims. It essentially helps pay for a legal defense team to handle affected individuals who file invasion of privacy claims, negligence claims, or lawsuits alleging libel and slander.

Insurers may cover some aspects of both first-party coverage and second-party coverage in cyber liability policies. Other parts may be optional add-ons.

For example, social engineering may have limited coverage. A business owner might need to pay an additional fee to receive coverage in the event that an employee is tricked into sending money to an unauthorized individual.

What is not covered by cyber insurance?

Business owners should also understand what is not included in cyber insurance. They may need to get something like general liability insurance to cover those situations.

Cyber insurance doesn’t cover:

  • Bodily injury
  • Property damage
  • Loss of property
  • Mechanical failure
  • Fraud

Cyber liability insurance may only agree to cover your liability if you have the appropriate cybersecurity measures in place to prevent cyber attacks. An insurance company could deny coverage if an investigation reveals that there wasn’t enough cybersecurity.

 Should I get cyber liability coverage?

Business insurance shouldn’t be considered optional, and neither should cyber liability insurance. An uninsured loss could lead to the closure of your hard-earned business. If you store personal information on your employees or customers, you should ensure that a data breach doesn’t ruin your business.

Ross Insurance Agency is dedicated to our founding principle of unwavering integrity. Our #1 priority is to do what is in your best interest for insurance that covers your assets. We’ll take the time to listen to your situation and explain your options clearly.

Don’t hesitate to give us a call at 717-397-4729 or fill out this form to get a free Ross Review to evaluate your current insurance situation.