Why Cyber Liability Insurance Claims Cost So Much
For many small businesses, Cyber Liability Insurance is an afterthought. Why? Because unlike computers and office furniture, its value is difficult to estimate. In today's world, small businesses may handle terabytes' worth of customer records, work projects, and sensitive data such as Social Security numbers.
When a business suffers a data breach, it can be hard to determine what was stolen, who was affected, and the real dollar value of the damage caused. Thousands of passwords, account numbers, and credit card numbers may be swiped in a single event. This is one reason why Cyber Liability claims often run into the hundreds of thousands of dollars.
But it's not just the immediate threat of credit card fraud or stolen identities that costs companies. Businesses that suffer data breaches often have to pay for…
- Notification of affected customers and employees.
- Forensic services to determine if and how a breach occurred.
- Credit monitoring services to protect customers against fraud.
- Public relations outreach to rebuild the business's reputation.
- Additional labor to help with these and other business activities.
Most small-business owners aren't even aware of what actions they'll have to take if they suffer a data breach, and this can cost them big. That's why having a Cyber Liability Insurance policy can help mitigate the cost.
How a Cyber Liability Claim Works
Say a small business is covered by Cyber Liability Insurance and wants to file a claim. This claim is the formal request to their insurance company asking for a specified payment based on the terms of the insurance policy. The business may have reason to file if it experiences any of the following scenarios covered under its policy:
- A data breach, where an outside party gains access to sensitive information.
- Loss of a digital device or devices that hold sensitive data, possibly due to theft.
- Damage to its IT network caused by outside parties.
- Attacks by hackers or malware.
- A lawsuit by a third party alleging a data breach caused by the business's actions or negligence.
The insurance company that provides the Cyber Liability Insurance policy will then have a representative investigate the specific details of the claim and determine what is reasonable compensation to be paid out to the insured. This compensation may cover the cost of repairing damage, paying out court-mandated settlements, and supplying business interruption expenses, as well as other costs that are covered under the policy.
The insurance company representative may adjust the amount of compensation to be paid, depending on the circumstances of the claim and the type of damage done. Keep in mind, too, that Cyber Liability policies vary significantly from one provider to another. Talk with your insurance agent to understand what your policy covers and excludes.
How to Address Cyber Risk
If, like many small-business owners, you rely on other contractors or employees to run your websites or IT networks, you may not be familiar with how your data is exposed and how much risk that exposure presents. Talk with your IT specialists (whether in-house or contractors) to better understand your risks and how you can mitigate them.
Additionally, make sure your business is covered under Cyber Liability Insurance for when the worst happens. You can purchase it as a standalone policy or add it to your Business Owner's Policy. With the increasing amount of data that's copied and stored every day, it's only a matter of time until a security measure fails and you face a costly data breach. Cyber Liability Insurance can help cover those costs and turn what might have been a financial and reputational disaster into a minor inconvenience.
Fill out an online insurance application with Insureon today and receive multiple free quotes for Cyber Liability Insurance.