Is Cyber Insurance Worth It? 3 Cyber Insurance Myths Debunked
With cyberattacks, ransomware, and business email compromise (BEC) on the rise, you might be considering investing in cyber insurance. Unexpected cybercrime has brought the average cost of a data breach is $3.86 million, thanks to the legal fees and regulatory fines that follow when sensitive data is compromised.
Data breaches leak sensitive information that can put people at risk for identity theft, as well as being held liable for non-compliance and ruining your company’s reputation. Recovery from a cyberattack is costly, and cyber insurance is one-way businesses can protect themselves from financial loss in the aftermath of a cyber event.
Unfortunately, cyber insurance myths can prohibit your organization from understanding which insurance fits your business’s needs. Today we’ll go over the benefits of cyber coverage and debunk three cyber insurance myths so you can insure and better protect your business.
What Is Cyber Insurance?
Cybercrimes like data breaches, malware, and phishing attacks are very common today. Although media stories about cyberattacks typically cover major corporations and government agencies, small businesses are still vulnerable. In fact, 49 percent of small businesses in the U.S. have experienced a data breach. It’s no longer a question of if your company will experience a data breach … but when.
Sometimes known as “cyber risk insurance” or “cyber liability insurance,” cyber insurance provides a combination of coverage options to protect your business’s liability for cyber incidents. These could include a data breach that leaked sensitive customer information or a ransomware attack that locked employees out of their devices.
Who Needs Cyber Insurance?
Organizations that handle or store any customer information or intellectual property should consider a cyber policy. Cyberattacks often target organizations that handle the following data:
- Social Security numbers
- Driver’s license numbers
- Customer names, addresses, phone numbers, and email addresses
- Financial information like credit card and bank account information
- Medical records and personal identification details
Hackers often target organizations like retailers, healthcare providers, banks, financial service providers, and municipal organizations. However, any business that stores data digitally can be at risk for a cyberattack.
What Are The Benefits of Having Cyber Insurance?
General liability insurance usually covers only bodily injuries and property damage, not cybersecurity incidents. However, as technology has become more complex and integrated into our lives, businesses are facing increasing cyber risks. That’s why many organizations have started investing in cyber insurance policies to protect their data and reputation in the event of a cyberattack.
What Should You Look for in Cyber Insurance Coverage?
Cybercrime continues to evolve, with hackers developing more sophisticated attacks every day. Depending on the nature of your business, your organization might be at greater risk for some attacks over others. For example, healthcare organizations and government agencies are often in danger of ransomware attacks because attackers know they cannot continue operations without access to their systems, making them more likely to pay the threatened ransom fee.
When shopping for cyber coverage, look for a policy that covers:
- Data breaches involving theft of personal information
- Cyberattacks, like network breaches, on your systems
- Cyberattacks on data stored by vendors and other third parties
- Terrorist acts
What Does Cyber Insurance Cover?
In addition to the expected costs of legal fees and regulatory fines, cyber insurance can cover many other costs associated with a cyberattack.
For example, when a business has undergone a cyber incident that compromised personally identifiable information (PII), most states require the company to inform all affected consumers about the incident and their exposed data. In addition, cyber insurance costs can cover notifying customers about a data breach, such as contracting out a call center or the overhead of producing and sending out notices.
Cyber insurance also covers:
- Recovery of lost or compromised data
- Repair of damaged network hardware and computer systems
- Network security and privacy liability
First-Party vs. Third-Party Cyber Insurance
First-party cyber insurance includes any damages that your business suffers due to a cyber incident, such as:
- Recovery and replacement of lost or stolen data
- Customer notification services
- Credit monitoring and identity restoration for affected consumers
- Lost income due to interrupted operations
- Cyber extortion and fraud
- Public relations costs for damage control
- Legal costs for customer notification and regulatory obligations
- Other fees, fines, and penalties resulting from the cyber incident
On the other hand, third-party cyber insurance covers any damages that your customers, partners, and other third parties experience due to a cyberattack on your business, like:
- Any payments to consumers affected by a cyber incident, such as out-of-court settlements and civil damages
- Losses related to defamation and copyright or trademark infringement
- Legal costs for litigation and regulatory inquiries
Cyber Liability vs. Data Breach Insurance
Cyber liability insurance applies when your business causes a cyber incident for a third party.
Data breach insurance protects your business if PII or protected health information (PHI) is lost or stolen in a breach. Data breach coverage can cover the costs for:
- Notifying affected consumers, patients, or employees
- Providing credit monitoring and identity restoration services
- Hiring a public relations firm
3 Cyber Insurance Myths — Busted
Don’t let cyber insurance myths prevent you from better protecting your business and customers. Knowledge is power, so we are busting the three most common cyber insurance myths that many businesses believe.
Myth #1: We Invest in Cybersecurity So We Don’t Need Cyber Insurance
No matter how much your business invests in cybersecurity, there is never a 100 percent guarantee when it comes to preventing a cyber incident. However, cyber insurance can work in conjunction with your cybersecurity plan, so your business is prepared to respond in the event of a breach.
Myth #2: We Outsource Our IT So Our Business Isn’t Exposed
Even if you outsource a third party to fulfill your team’s IT needs, it is still your business’s sole responsibility to protect your customers’ data. If your IT provider experiences a system failure, it could interrupt your business, put sensitive data at risk, and leave you with thousands or millions of dollars in losses.
Myth #3: We Don’t Handle Sensitive Data
Although personal data is a common target in many cyberattacks, businesses are still at risk even if they do not collect sensitive data. Many cybercriminals conduct phishing attacks to trick victims into carrying out fund transfer fraud without the need to exfiltrate the victim’s personal data.
Ransomware attacks can also interrupt business operations by holding critical systems hostage until targets pay the ransom.
Protect Your Organization From Targeted Email Attacks With Armorblox
Over 90 percent of cyberattacks are caused by human error. However, you can reduce your risk of data breaches and other cyberattacks by investing in email security software.
At Armorblox, we use advanced NLU algorithms to understand the content and context of email communications to stop today’s advanced cyber threats. Our automated response actions protect your business before threats happen, saving your business both time and money.
To learn more about Armorblox, take a quick product tour today.