In the digital age, the menace of cyber threats has become more pronounced and diverse. As businesses increasingly operate online, they are confronted with a slew of threats. Ransomware attacks, for instance, not only encrypt a user’s data and demand payment for its release, but can also lead to significant operational downtime, loss of critical business data, and reputational damage. Phishing scams, on the other hand, can deceive employees into revealing sensitive information, potentially leading to financial losses, unauthorized data breaches, and compromised client trust.
The rise in cyber-attacks, both in frequency and sophistication, means that no company, regardless of size or sector, is safe. In 2022 alone, a staggering 81% of organizations fell victim to malware, phishing, and password breaches. And these attacks show no sign of slowing down. According to Security Magazine, cyberattacks increased by 38% globally in 2022. Hacks aren’t only getting more prevalent, but more expensive. Beyond the immediate costs of data recovery, businesses often find themselves compensating affected customers, with the average cybercrime incident costing a hefty $4.35 million in 2022.
But the financial toll is just one aspect; the damage to a company’s reputation can be even more devastating. If customers believe their data is not secure with a business, trust erodes, leading many to take their patronage elsewhere. In such a precarious digital environment, cybersecurity insurance emerges not just as a safety net, but as a critical business necessity, safeguarding both finances and customer trust.
What is Cybersecurity Insurance?
Cybersecurity insurance is a type of insurance policy designed to safeguard businesses from the financial repercussions of cyber incidents. From home and car insurance to life insurance, these policies help protect our loved ones and property from the worst. But dangers aren’t only lurking offline. Cybersecurity insurance helps organizations mitigate the financial risks associated with cyber incidents. It can provide coverage for a range of expenses, from legal fees and public relations efforts to compensate affected customers, ensuring that businesses can recover more swiftly and effectively from a cyber attack.
What’s Covered? What Isn’t?
Cybersecurity insurance coverage can be broken down into two distinct types: first-party and third-party. First-party insurance primarily addresses the direct losses to the insured organization itself, covering aspects like business interruption, data recovery, and ransom payments in the event of a cyber-attack. It’s designed to help the company recover immediate damages and get back to normal operations. On the other hand, third-party insurance pertains to the liabilities that the insured organization might face towards external entities, such as clients or partners, due to a cyber incident. This can include legal defense costs, settlements, and regulatory fines stemming from data breaches that affect third parties.
Every organization’s policy can differ and be customized so that it is unique to their needs, but there are five very popular types of coverage:
- Privacy Liability Coverage: Covers breaches of privacy, including the loss or theft of confidential information or the failure to comply with data protection laws.
- Network Security Coverage: Provides coverage when there’s a failure in the insured’s network security, leading to issues like data breaches or the spread of viruses.
- Network Business Interruption Coverage: Protects against system failures such as a third-party hack or failed software patch.
- Errors and Omissions Coverage: Protects businesses and professionals against claims of negligence, mistakes, or failures in the delivery of their services.
- Media Liability Coverage: Protects your organization’s intellectual property from infringement, including social media posts
However, as with any insurance coverage, there are some exclusions you should be aware of. Cybersecurity insurance does not typically cover:
- Poor security processes: Attacks that happen due to ineffective security processes or poor configuration management.
- Prior breaches: Security events or breaches that took place before the organization acquired a cyber insurance policy.
- Human error: Cyberattacks that are a result of mistakes made by the organization’s staff.
- Insider attacks: Data theft or loss caused by an internal attack from an employee.
- Pre-existing vulnerabilities: Breaches that happen because the organization didn’t address or fix a known vulnerability.
- Technology system improvements: Expenses related to enhancing technology, such as strengthening networks and applications.
How to Choose the Right Cybersecurity Insurance Policy
Choosing the right policy isn’t a one-size-fits-all affair. Each organization has its own needs and risks. Some industries are more vulnerable than others while other organizations are more at risk than others. The policy you ultimately choose (and its cost) will depend on a few factors, including your business’s size, industry, and data handled.
Consider first, taking a risk assessment to find out where your organization is most vulnerable. This assessment should review digital assets, potential vulnerabilities, and the potential financial impact of a cyber incident.
Our IT services team offers a free IT Network Security Assessment that can help you identify your network’s vulnerabilities. and take steps to remediate them. Our end-to-end assessment analyzes your full network, assets, share permissions, and even external vulnerabilities. Then, you’ll be provided with a report that outlines your network’s strengths and weaknesses, as well as recommendations for moving forward. (As a bonus, organizations that prove they’ve conducted an audit and acted upon the recommendations could be eligible for an insurance discount.)
Next, research possible providers. Not all insurance providers offer the same coverage and not all insurance providers offer cybersecurity insurance (though a growing number do). It’s essential to research and shortlist providers known for their cybersecurity insurance offerings. Your provider will be a true partner, helping you choose the best policy, so it is important to do your research and ensure you partner with a provider who will take the time to understand your company.
And remember: cyber threats evolve, and so should the insurance policy. Regularly reviewing and updating the policy ensures that the business remains adequately protected.
Fortify Your Business Against Cyber Threats
Shockingly, a majority of businesses (over 70%) still don’t have cybersecurity insurance. But understanding and obtaining this insurance isn’t hard, especially if you have a trusted insurance provider and technology partner at your side to help you find the best coverage and keep your network protected.
In the battle against cyber threats, preparation is half the victory. We may not be able to help you find cybersecurity insurance, but we can help you update and upgrade your network so can improve your chances of eligibility for top policies. From our free IT Network Security Assessment to regular employee training, our IT team can keep your organization secure. Contact us today.