What is cyber insurance?
Cyber insurance is a protection for companies against the significant losses that can come from a security breach or data hack. With this first-party coverage, the company receives financial assistance with the expenses that may be incurred when a cyberattack takes place. Costs associated with a cyber-related incident can include lost income, legal fees, settlements, system repairs, or public relations efforts.
Synonyms for cyber insurance
While looking into cyber insurance, you may see other terms defining similar coverage. The following term is synonymous with cyber insurance and may be used interchangeably:
- Cyber liability insurance: These are specialty lines of coverage that may be underwritten to address specific risks associated with internet usage and connectivity. Policies pay for investigation expenses, recovery efforts, and client or consumer notification of a breach.
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When do I need to be aware of cyber insurance?
Companies that rely on digital transactions, cloud-based storage, electronic processing, or any cyber involvement are exposed to liabilities of the dark web or illegal activities. Personal identifiable information for employees and any client or vendor information is at risk for hacking or theft. Exposures can occur through phishing emails, ransomware, direct attacks, or a downloaded virus.
What is important to know about cyber insurance?
Cyber insurance is uniquely underwritten to address the specific needs of a company. While there are inclusions for privacy lawsuits, regulatory fines, negligence claims, or breach of contract claims, policies will often exclude coverage if the incident involves social engineering and purposeful criminal activity. There are some other important items you should know about cyber insurance:
- Companies are often required to maintain certain cyber security protocols for the policy to remain in effect, such as implementing a cybersecurity system, collecting only the minimum amount of personal data, and conducting risk assessment audits and instituting multi-factor authentication (MFA) for access to websites or applications.
- Premiums are factored according to desired coverage limits, company security measures, the industry, and claims history.
- Many states require consumer notification if a breach has occurred, increasing the financial responsibilities of a company’s response to cyberattacks, but one the cyber insurance will address.