What is Cyber Liability Insurance?
Cyber liability insurance protects a business against an array of cybercrimes, such as hacking, viruses and data breaches. This article will discuss what cyber liability insurance covers and who needs it to help you decide if you should invest in a policy and, if so, what type of coverage to look for.
Cyber insurance definition
According to NimbleFins, cyber insurance is a type of business insurance that provides financial and reputational support in case a business is a victim of a cybercrime. This can include data breaches, hacks, viruses and more. In addition to financial support, cyber insurance provides expert assistance with managing an attack. This is important as most small business owners wouldn’t know where to turn if they are attacked. While larger firms might have a team of IT professionals on hand, most small businesses do not.
Here’s what you need to know about cyber insurance to help you decide if it’s the type of business insurance coverage you need for your business.
What does cyber liability insurance cover?
Cyber insurance primarily covers first party and third party liability, protecting against losses from business interruption, hacking, data and security breaches, viruses and other cybercrime. Not all cyber insurance packages are the same, but here are the areas you should be looking out for.
First party cover includes direct costs to your business as a result of cybercrime, such as:
Business interruption: Where you lose income as an attack or breach has prevented you from trading.
Investigations: Helping to find the source of cybercrime.
Managing an attack: Where legal experts advise on the regulations and processes to comply with the law.
Cyber extortion: If a ransom is ordered, an insurer can advise to escape the ransom and, in some cases, even meet the finance demand.
Recovering lost data or programmes: Insurers can fund experts to repair and restore the items lost.
Restoring computer systems: Covering the cost of experts to restore whole computer systems.
Notification costs: Covering the expense of notifying your customers or other third parties of a data breach.
Reputation management: For example funding a PR campaign or paying for free credit monitoring or credit protection services for affected customers.
Third-party cover deals with losses to your customers or other third parties affected by the cyberattack or system failure. It can cover legal costs and damages such as:
Privacy protection: If you have infringed on a customer’s right to privacy, for example, the GDPR law has been breached, this insurance will cover legal defence costs and settlements.
Media liability: If your third party has their privacy breached or has a claim of defamation from information published in the media, insurance can cover the cost of investigation, defence and damages.
Who needs cyber liability insurance?
Most businesses can be the victim of cybercrime since nearly every business uses computer systems of some kind. Client records might be stored on a computer, for instance. Or if you could inadvertently forward an email with a virus to a client.
It is particularly important if your business deals with payment card information or stores sensitive customer information such as names, addresses, banking information or other personal data, which could see you easily in breach of GDPR laws or with hefty legal costs and damages to pay if there was a security lapse.
Some types of business insurance, such as standalone business interruption insurance or commercial property insurance, might provide some of the coverage you would have with cyber insurance. But businesses that hold sensitive data and financial information should consider a separate cyber liability insurance policy to add to their protection for wider safeguarding.
Cyber insurance can be needed for financial support in case of an attack. For instance, business owners could be forced into paying ransoms costing tens of thousands of pounds or having to shell out for replacement hardware after an attack.
But even if your business does not fall into that category, it is worth investing if you use a large number of computers in a private, internal network. Even a self-employed sole trader using just one laptop can be a victim of cybercrime.
Legal support following a cyber breach was the most common cyber insurance claim of 2020, according to a Government survey. Researchers found 73% of those who had made a claim needed legal assistance, while 68% had made a claim against lost earnings or profits, and 67% against loss of data.