As the cost of inflation takes a bite out of business profits, many company owners are looking for ways to cut back on coverage. However, cyber liability insurance isn’t an optional policy. It can spell the difference between a business that is successful long-term and one that is forced to shut down permanently. Statistics show that there were over 1,800 data breaches in 2022 alone and experts expect cybercrime incidents to rise by 15% over the next five years. More than 40% of hacks target small and mid-size businesses, as cybercriminals know that these companies often don’t have the resources or expertise to defend themselves. At the same time, large corporations aren’t automatically immune. The healthcare, education, and communications industries are particularly vulnerable, as are financial services and manufacturers.
What Does Cyber Liability Insurance Cover?
Cyber liability insurance covers costs if customers, suppliers, business partners, and/or other third parties that have been affected by a breach sue the business for damages. These costs include court fees, lawyer fees, and settlements.
Cyber liability insurance also covers regulatory fines for noncompliance. Laws such as HIPAA, GLBA, and FIMSA hold companies legally liable if a hacker breaches their network. If medical records are exposed, the fine can be as high as $1.5 million per year. Organizations that store private financial information can be fined up to $100,000 and directors may also face personal fines of up to $10,000.
What Isn’t Covered by Cyber Liability Insurance?
Cyber liability insurance should not be confused with cybersecurity insurance. The latter policy, also known as first-party cybersecurity insurance, covers the costs of investigating a breach, assessing the risk of future breaches, lost revenue due to a breach, ransomware attack payments, and providing affected individuals with anti-fraud services. Companies that depend heavily on their computer network will likely want to purchase both cybersecurity insurance and cyber liability insurance for full coverage.
Cyber liability insurance also doesn’t cover errors and omissions. While this form of coverage doesn’t impact many business owners, it does affect companies that provide tech services. If, for instance, a breach occurs because a tech company employee failed to update software, provided the right type of software, or properly monitor a customer’s account, the business could still be held liable for legal costs unless it has errors and omissions insurance coverage.
How to Find the Right Cyber Liability Insurance Policy
There are several factors to take into account when choosing a cyber liability insurance policy. First, it is important to read the policy carefully to ensure it provides all forms of needed coverage. Next, a business owner should check the policy for limitations on settlement payments and legal fees. These can be as low as $50,000 or as high as $5 million. Naturally, a policy with higher limits will cost more than a policy with low limits. However, it’s important not to limit coverage by choosing a policy with a low limit or setting a high deductible on the policy. Data breaches can occur with no warning and the costs can be high if multiple third parties are affected by the incident.
Cyber liability insurance can be purchased as a stand-alone policy or bundled with other forms of business insurance. A business owner who needs this type of coverage should choose the policy type that best suits his or her company’s needs. Choosing the right insurer is also important. A good insurance company will have a track record for providing fast, efficient services in the event of a breach. This ensures a business has the funds on hand to immediately settle a case and thus avoid the bad publicity that comes with being a victim of a cyberattack.
Grand Mutual Insurance Services provides multiple forms of business insurance coverage. It offers stand-alone policies and comprehensive coverage to suit the needs of businesses of all sizes and from all industries. Its cyber liability insurance coverage options are flexible enough to meet your needs and strong enough to help you overcome legal hurdles related to a cyberattack on your business. Get in touch with us at your convenience to learn more or start the process of providing your business with the coverage it needs and deserves.