What Is Cyber Insurance? - NYCM Insurance Blog

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Jun 6, 2022

What Is Cyber Insurance?

 


Unfortunately cyber attacks and data breaches can affect anyone, and business owners are uniquely at risk of being attacked as the keepers of sensitive employee and customer information. Every day cyber criminals attempt to gain access to personal and confidential businesses both large and small through a variety of ransomware, phishing, remote access, and other scam tactics. While a company can do its best to prepare for and prevent these cyber attacks by promoting and enforcing best practices, one of the best protections is to attain cyber insurance.

 

Cyber insurance is a specialty coverage protecting businesses from internet-based risks and risks related to information. Cyber attacks on businesses can be costly. According to the National Association of Insurance Commissioners, a small business loses an average of $38,000 per every cybersecurity incident, and 60 percent of those impacted businesses close within six months of being attacked. Cyber insurance can provide coverage for a wide variety of online exploits that can otherwise permanently impede a business from operating. Continue reading to learn about the perks of cyber insurance!

 

What Does Cyber Insurance Cover?

 

A cyber insurance policy can cover a business’ liability if a data breach occurs. You may ask, “Does general liability coverage cover cyber liability?” And the answer is no—in fact, some general liability coverages may even exclude cyber liability. When data is breached that includes sensitive employee or customer information, like Social Security numbers and payment information, cyber insurance can help cover the costs of legal expenses and fees in the aftermath. Cyber insurance can assist with cyber extortion in the event your business operations are threatened in a targeted attack. It can also help with the process of restoring your systems and aiding affected employees and customers in restoring their identities.

 

Cyber insurance can also help with the cost of lost income to a business after a cyber attack. If a cyber attack occurs that prevents your business from operating, cyber insurance coverage can help cover you for the income you lose while you get back on your feet.

 

What Is First-Party vs. Third-Party Coverage?

 

There are two kinds of cyber insurance: First-party coverage and third-party coverage.

 

       First-party cyber coverage provides reimbursement expenses associated with the cyber attack. It can help with costs related to recovery and replacement of data for employees and customers, legal costs, cyber extortion, crisis management, and public relations.

       Third-party cyber coverage provides protection if a third-party (for example, your customer whose data has been breached) brings a claim against you. This coverage can help with litigation costs, payments to customers, and defamation losses.

 

First-party and third-party cyber protection are bundled together to provide comprehensive coverage to the business owner against cyber attacks.

 

Cybersecurity: Best Practices

 

Beyond purchasing cyber insurance, businesses can prepare for and potentially prevent cyber attacks by following some cybersecurity best practices. The Federal Trade Commission offers some of the following cybersecurity tips to small business owners:

 

       Update your software: Old and out of date software may have proven vulnerabilities that criminals can easily exploit.

       Secure your files offline: Never rely solely on storing your files and data on the cloud; always backup your data offline on an external hard drive.

       Require and regularly change passwords: Require passwords to access any company information, and regularly change these passwords. Passwords should be complex with varying cases, special characters, and numbers, and without any information that can be used to identify you.

       Ensure your internet router is secure: When you first purchase a router, certain steps may need to be taken in order to make it secure. Make sure you change the default name and password of your Wi-Fi and turn off remote management if you have not already done so.

       Regularly train all staff on security practices: Employees are the first wall of defense against most cyber attacks—especially phishing attacks. Keeping them trained and aware of the risks, as well as what red flags to look out for to prevent a successful breach.

       Stay up-to-date on new risks and vulnerabilities: While criminals rely on a lot of familiar tactics to try to break into a network, they are also constantly changing their approach in an effort to trick people. Try to stay aware of whatever schemes are being used by criminals online to avoid falling prey yourself.

      Encrypt your data: The greater the level of encryption, the harder it will be for the data to be accessed and compromised.

 

It’s unfortunate that there’s a deep-rooted risk of cyber attacks when using the internet, but luckily you can know you’re covered from the worst with cyber insurance. Click below to contact an agent today to discuss which policy would be best for you!