Cybercrime is surging. Over 790,000 cybercrime complaints with a total of $4.2 billion in losses occurred in 2020. Incidents have increased 69 percent since 2019.
Are you covered if your business is targeted by cybercriminals? The average cost for data breaches or ransomware damages is over $4 million. Without cyber liability insurance, that loss comes from your business and your own pocket.
If you need cyber liability insurance but aren’t sure where to start, this guide will help you learn more. Read on for everything you need to know about cyber liability coverage.
Is Your Business At Risk For Cybercrimes?
Any business that collects sensitive consumer and client information is a cybercrime target. Cybercriminals target companies both large and small.
Simply storing credit card information for faster payment processing is a data breach opportunity. Cybercriminals will also infect your IT systems with ransomware and malware until you pay their extortion price.
Federal and state regulations require companies to take certain steps to safeguard consumer data. Your business is still liable for cybercrime damages even if you use a third party for tech solutions like data processing and storage.
If you handle sensitive data and use an internet-connected IT system, you need cyber liability coverage.
Cybercriminals use sophisticated methods to breach even the most top-notch systems. Cyber liability insurance protects your business in case the worst happens.
What Is Cyber Liability Insurance?
Cyber liability insurance began its modern evolution in the early 2000s. Companies saw a growing need for legal protection in case they unknowingly shared computer viruses.
For most U.S. companies, cyber liability insurance is now used to cover damage costs not included under other business insurance policies. These costs include:
- Notifying customers
- Data breach, destruction, and recovery
- Incident detection and investigation
- Loss of business income
- Ransom demands
- Identity theft
- Legal and liability defense
- Third-party coverage
Many companies are ready to detect and repel cyber invaders. But very few are actually prepared for the damages after a successful invader gets through.
Target’s 2013 data breach served as a warning for other companies. Despite all their IT safeguards already in place, cybercriminals still managed to get around their system.
The cybercriminals used email phishing scams on a third-party vendor that worked with Target. Then they used the vendor’s stolen credentials to access Target’s systems and install malware.
Over 11 million people had their data stolen or compromised. The total loss for Target was over $200 million, including an $18.5 million legal settlement.
Benefits Of Cyber Liability Insurance Explained
Cyber liability insurance is generally used to cover damage costs. But it has two other key benefits: regulatory compliance and risk management.
1. Cyber Liability Insurance And Regulatory Compliance
Cyber liability insurance providers don’t want to cover costly legal fees either. They have a vested interest to help clients remain in compliance.
Compliance isn’t a fun process for anyone, except maybe regulators who really love their job. But it’s necessary to keep consumers safe from company negligence.
Target’s legal settlement concluded the company could have done more to keep their customers’ data safe. Target also acknowledged they were slow to catch the breach once it started.
Keeping up with regulatory requirements is a lot of work. But it helps smaller companies and their insurance providers avoid similar million-dollar settlements.
Federal Regulations
Federal regulations are not comprehensive. Date security regulations go by industrial sector. They’re enforced by different government entities.
For example, the Federal Trade Commission (FTC) oversees the financial sector, like banks and mortgage brokers. Its data security regulations are enforced under the Gramm-Leach-Bliley Act.
Other sector regulators and their cyber security regulations include (but aren’t limited to):
- HHS: HIPAA
- SEC: Sarbanes-Oxley Act
- CFTC: Code of Federal Regulations
- DHS: Cybersecurity Information Sharing Act
- DoD: Defense Federal Acquisition Regulations, Homeland Security Act
- FDA: Regulations for the Use of Electronic Records
It’s important to know which federal regulations apply to your company. Failure to maintain compliance can result in civil fines and even criminal penalties like imprisonment.
State Regulations
In addition to federal compliance, states have their own regulatory requirements. California has some of the strictest requirements under the Consumer Privacy Act and Notice of Security Breach Act.
Many states are still enacting laws and regulations as cyber security evolves. Compliance includes keeping up with any new regulations that apply to your company.
2. Cyber Liability Insurance And Risk Management
Like compliance, your insurance provider is committed to your company’s safety from cyber attacks. No system is 100% crime-proof. But risk management helps companies reduce their cyber-attack vulnerabilities and weak spots.
An insurance provider will assess your IT system and your cyber security measures. This helps them determine how much risk they will be insuring.
If you have cyber security gaps, cyber liability coverage can help you find them. Some insurance providers even include risk assessments as part of their coverage.
Cyber Liability Insurance Tips
Some insurance policies are better for your needs than others. Like any insurance type, there are simple tips for getting the most from your cyber liability coverage.
1. Know Your Cyber Liability Coverage Needs
Before diving into a policy, it helps to assess what needs to be covered and what doesn’t. You’ll get all the coverage you need without paying extra for protections that don’t apply to your company.
2. Know Your Cyber Liability Coverage Options
Like regulations, there’s no comprehensive qualifier for cyber liability insurance yet. Some insurance providers offer more coverage than others.
3. Tighten Up Your Cyber Security Measures
Cybercrime is complex and ever-evolving. It never hurts to have an independent review go over your IT system and see if you have any vulnerabilities or outdated security measures.
Not only will it safeguard your business, it could also lower your insurance premiums.
Finding The Best Cyber Liability Insurance Near Me
You shouldn’t lose your hard-earned money because of other people’s criminal activities. Cyber liability insurance keeps you, your business, and your bank balance covered.
If you’re ready to get started on a new policy, connect with us for more information or a free quote! Our agency is always ready to help you find your best protection plans.
