Network security and privacy liability insurance

If a small business is hit by a cyberattack, the damage can be devastating. Between cyber extortion payments, business interruption expenses, legal bills, and other costs, recovering from a cyber incident can be so expensive that some companies are forced to go under.

Network security and privacy liability insurance, also known as cyber insurance, protects small businesses if they fall victim to a data breach, malware infection, or ransomware demand, handling their recovery expenses so they can stay afloat amidst the destruction.

When it comes to cyberattacks, there are many potential risks that your small business can face, including:

• Network security and privacy liability
• Social engineering
• Cyber extortion
• Ransomware
• Business interruption
• Bricking

Having cyber insurance coverage is a crucial part of protecting your company—and your customers—from these risks and the trail of damage they can leave behind. If your company suffers a network security failure, a network liability and privacy security policy would help pay for:

• Customer notification costs
• Credit monitoring services
• Legal services, including attorney fees for stolen identity issues
• Data restoration, including ransomware payments
• Public relations services to rehabilitate your reputation

There are two types of network security and privacy coverage: first-party and third-party liability. While some businesses might need both, such as technology companies, not everyone does.

It’s important for business owners to understand the coverage each option provides, so that you can select the right policies for your risk management strategy.

If a client sues your business for causing or failing to prevent a cyberattack at their company, third-party liability coverage helps pay your legal defense expenses, such as:

• Attorney fees for your legal defense
• Settlements
• Court-ordered judgments

This insurance is recommended for tech businesses that are responsible for their clients’ network security or provide them with software recommendations.

Third-party coverage can also be bundled with your errors and omissions policy into technology errors and omissions insurance, or tech E&O.

Network security failures can leave a long trail of legal issues, damages, unhappy customers, and financial losses. For small businesses, the average cost of a cyber incident ranges from $120,000 and $1.24 million. The impact of an attack can be so monumental that some small companies recover.

Network security and privacy liability insurance is like a lifejacket, keeping your business afloat after a cyberattack by paying for financial damage, legal services, and compliance fines if your company failed to follow federal and state data privacy regulations.

While a network security and privacy liability policy covers network security breaches, there are some things it does not protect, including:

If your company is sued for professional negligence, such as mistakes, oversights, missed deadlines, and other negligent acts that harm a client, you’d need a professional liability policy. Also called errors and omissions insurance, professional liability would cover your legal expenses, including attorney fees, settlements, or judgments.

A network security and privacy liability policy will cover data losses from a cyberattack, but it won't cover losses from accidental physical damage to your customers’ computers, tablets, or other devices.

Electronic data liability coverage can expand the third-party liability coverage in your general liability insurance to include a loss of data caused by accidental damage to a client’s computer, hard drive, or other data storage device.

If you experience data loss during a power surge, fire, or natural disaster, electronic data processing (EDP) insurance would cover your electronic devices, including laptops, smartphones, and backup systems, along with the data they contain.

You can typically bundle this coverage in a business owner's policy (BOP).

Get free quotes for network security and privacy liability insurance from top-rated insurance providers by filling out our easy online application. You can also speak with a licensed insurance agent, who can answer questions and help you find affordable coverage.

Once you find the right policies for your small business, you can begin coverage in less than 24 hours and get a certificate of insurance (COI) for your small business.