With modern businesses increasingly relying upon data to perform all of their tasks, they to protect their data. Cyber attacks are on the rise, and many small businesses are going to experience an attack eventually.
While businesses can improve their cyber security, they may also want to protect themselves with cyber liability insurance. But what does this type of insurance cover?
When a cyber attack occurs, a business can find itself unable to do business. They may not have any customer information and consequently not be able to collect on accounts. They may not have inventory information, making them unable to stock the products that they need. Until they restore their data or find a way to recover it, the business isn’t going to be able to operate, which means lost revenue.
Cyber liability insurance can help a business with the costs of disruption, with some policies covering the revenue lost up to a certain coverage amount.
There are many direct costs associated with a cyber liability breach:
- Informing and protecting those impacted. Employees, customers, and vendors may have had their identities stolen. Not only will the business need to contact them about the breach, but they may need to pay for things such as identity theft protection.
- Pursuing damages against criminals. A business may need to pursue legal action against those who are believed to be responsible, and may also need to internally investigate their own systems.
- Replacing and repairing equipment. Software and hardware may both need to be upgraded, repaired, or replaced following a data breach attack, as they will have been compromised.
Of course, there are also indirect costs, such as a loss of customer faith.
Data Recovery Costs
Usually, most data actually can be recovered. But the information need to be recovered by professionals, and the cost can be quite extensive, especially if the company held a lot of data on a variety of systems.
Data may even need to be reconstructed from hard copies or from other sources. Cyber liability insurance will generally cover the costs of data recovery, as many businesses need to recover their data to resume operations.
One of the major types of data attack today is called ransomware. Ransomware will steal and encrypt a company’s data and systems, and it will refuse to release these systems until a ransom is paid. In some cases, the ransomware will still delete the information, but in many, they will unencrypt the data automatically.
This ransom can be very significant. The most popular types of ransomware often encrypt each file individually, so it may cost a specific amount to unlock each and every document. In addition to covering data recovery costs, cyber liability insurance will also cover the cost of extortion.
The government strictly regulates how companies must store and protect data. A company found lacking will face significant fines and penalties, and a cyber security breach can reveal these issues.
Cyber liability insurance also often covers a business for fines and penalties associated with its own mistakes. Thus, a business is able to protect itself even from accidents.
Cyber liability insurance is primarily liability insurance, so most of what it covers is the company’s liability due to these damages. For instance, customers or vendors may want to litigate against the company on the basis that the company may have made their information too easily accessible. It is the cost of this litigation that will also be covered under liability.
Does your business need liability insurance for its cyber security? If it has a lot of data that it needs it does. Contact Family Insurance Centers today to learn more.