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Technology and data are now a big part of our lives, whether personally or in business. Information is now one of the most valuable commodities, and hackers know it.
This is why, whatever kind of business you have, you will need cyber liability insurance when you start collecting valuable and sensitive data.
This article will discuss cyber liability insurance: what it’s for, why you should have it, and how it can help your business.
What is Cyber Liability Insurance?
This insurance policy protects you from the financial damages of a breach in cybersecurity.
Nowadays, any serious commercial endeavor must collect consumer or partner information. It could be as simple as contact information, but it can be as sophisticated and sensitive as advanced consumer behavior trackers.
When hackers breach your network and steal or otherwise compromise these data, or when ransomware infects your network and holds sensitive files hostage, you will become liable for the sensitive information you collect from any third party.
Your customers, stakeholders, partners, regulators, and other third parties can file a case against you.
Whether this case pushes through or you can settle it outside of court, the whole affair will not be cheap. You will incur financial burdens, both expected and unexpected. For example, you might wish to pay legal fees and the like. Still, in cyber liability cases, you will also be expected to pay forensic IT experts to track down how the cybersecurity breach occurred.
Cyber liability insurance acts as a safety net that will cover the financial responsibilities of this incident; from paying settlements, legal fees, and beyond.
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Cyber Insurance Coverage
The role of cybersecurity in maintaining strong business-to-consumer and business-to-business relationships is only being recently explored.
Of course, this comes on the heels of hackers and malware exploiting highly-technical advantages that most ordinary people have never even heard of, with consequences that the average business owner rarely thinks about.
When you are on the receiving end of this kind of security compromise, you need to know what you can count on cyber insurance coverage to cover. These can be the following:
- Legal fees
- Settlements
- Ransoms
- Digital forensic fees
- Public relation efforts
- Business interruption, and more
Cyber Insurance Coverage Checklist
Cases that arose from compromised cybersecurity can be pretty high-profile cases and thus will incur much scrutiny not just from the legal authorities but also from the media and other independent watchdog organizations.
Legal fees
Many types of legal fees can arise from a cybersecurity breach case. This can include:
- Representation. This includes the fees used to pay for any firms involved in your case. Since cybersecurity is a controversial and specialized issue, you may need more specialized lawyers or firms to deal with the case, incur higher fees.
- Defense costs. Aside from the attorney, you will still have to pay additional expenses when mounting your defense. The costs of reserving courtrooms and presenting expert witnesses in a high-tech case can be expensive.
- Judgments. If a court has determined that you or your firm has to pay specific amounts, you will have to pay those out of pocket unless you have cyber liability insurance.
Settlements
ISettlements between the policyholder and the complainant will also be included in the coverage, whether it happens out of court or inside the court.
Ransoms
Hackers use a particular type of malware to make money from unwary organizations called ransomware. Simply put, ransomware infects your organizations’ network and controls your files – preventing access and holding them hostage unless you give them the adequate ransom.
Because of its specificity and prevalence, no other type of business insurance covers the amounts you pay for these types of ransom – which can range from thousands to tens of thousands of dollars.
Digital forensic fees
Even if you’ve already paid the ransom or gotten rid of the virus, you will need to inspect your network to know how it got in and make sure it never happened again. Your business partners, stakeholders, or clients might also demand it.
You will have to pay for digital forensic experts to thoroughly scan your network and present their recommendations when this happens.
Cyber security liability insurance can insure you against that as well.
Public relation efforts
You will have to rebuild trust with the public if you’re recovering from being hacked, especially if you’re a company that deals with the public themselves. This policy will also cover expenses to rebuild your credibility, up to a certain amount.
Business interruption
Some types of cyber liability insurance also cover business interruption costs.
How Much Does Cyber Liability Insurance Cost?
Cyber liability insurance premiums will depend on several things, such as:
- Coverage level
- Business size
- Industry
- Number of sensitive records
- Cybersecurity practices
Getting Cyber Liability Insurance
The internet world is growing more dangerous by the day.
If your business handles any kind of sensitive data, cyber liability insurance is critical to help keep your business safe in case the worse happens.
Want to know more? Contact Magnum Insurance today!
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