Network security and privacy liability insurance
Network security and privacy liability insurance, also called cyber liability insurance, protects small businesses from the significant costs of data breaches and malicious software attacks. This coverage includes legal fees, penalties, and credit monitoring services.
What is network security and privacy 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.
What does privacy liability coverage protect insured businesses from?
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
What is first-party and third-party network security and privacy insurance coverage?
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.
First-party coverage
First-party liability coverage, sometimes called data breach insurance, covers costs from a data breach or malicious code attack on your business’s computer systems, including:
- Data breach notification costs: State laws usually require businesses to respond to a data breach by conducting a forensic investigation, notifying customers, providing credit monitoring services to impacted individuals, and paying Payment Card Industry (PCI) penalties.
- Ransomware payments: When hackers encrypt a company’s private data or intellectual property (IP) and hold it for ransom, this is known as cyber extortion.
- Business interruption expenses: If a cyber event interferes with business income and operations, companies may need to hire extra staff, pay for third-party services, or hire a crisis management team to help with the damage.
Third-party coverage
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.
Why is network security and privacy liability coverage important?
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.
How much is network security liability insurance?
Insureon customers pay an average premium of $129 per month for network security and privacy liability insurance. The cost of this coverage is based on several factors, including:
- Amount of sensitive data handled
- Your industry
- Coverage limits and deductible
- Number of employees
- Claims history
All of these factors will be instrumental in determining how much cyber insurance your small business needs.
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Who needs a network security and privacy liability policy?
While Insureon’s insurance experts recommend that every business has network security and privacy liability insurance, there are a handful of industries that are extremely vulnerable due to the nature of their business. These industries include:
- IT and technology: Providing clients with software recommendations and cybersecurity guidance or overseeing a client’s network security.
- Retail: Handling consumers’ email addresses, credit card numbers, and other personal information.
- Healthcare: Storing patients’ sensitive information and having to comply with strict privacy and security guidelines, such as the Health Insurance Portability and Accountability Act (HIPAA), to avoid regulatory fines and other legal consequences.
- Finance: Handling confidential customer information, including social security numbers, bank account numbers, and tax records.
- Real estate: Having access to sensitive financial information for your clients, including bank statements and social security numbers.
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What does network security and privacy liability insurance not cover?
While a network security and privacy liability policy covers network security breaches, there are some things it does not protect, including:
Mistakes and oversights
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.
Physical accidents that lose customer data
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.
Damaged electronics
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).
How do I choose the right network security and privacy liability insurance solutions for my business?
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.
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