What is Cyber Liability Insurance? How Does it Work?

A cyber attack can have devastating effects on a company’s finances. It can also cause huge reputational damage, as you may be judged as unable to protect sensitive data. While a robust security system is your first defence, you also need to protect yourself financially.
Fortunately, with cyber liability insurance, most of the costs associated with a security breach can be covered, allowing the company to recover no matter how hard the hit was. Here you’ll get an insight into this type of insurance and how it can help your company.

Cyber Liability Insurance Basics

As a byproduct of the expansion of our digital world, cyber liability insurance is designed to cover the costs incurred during data breaches or other forms of digital attacks. This includes liability payouts in case the attack on your company damages or impacts the privacy of your clients.
The clients can pursue legal action against the business and seek recovery of losses and fines. If you also factor in the costs of system recovery, the number quickly adds up, potentially causing a major blow to the company’s bottom line. This is where having cyber liability insurance comes in handy.
According to the Royal Canadian Mounted Police, cyberattacks are crimes committed with digital elements. Both incidents where technology is used as a target and where the technology is used as an instrument in the crime are counted here.
The most common cybercrimes are social engineering fraud, where criminals trick someone into handing over access or money, and phishing, which is similar but involves receiving emails, texts and phones and hacking into the company’s software system.
You need cyber liability insurance if you use point-of-sale systems, computer or cloud-based systems for storing data, provide software or hardware services, and store your customer’s information in a digital system.

What Does Cyber Liability Insurance Cover?

 
There are many types of cyber liability policies, depending on the industry and insurance companies. Plus, you also have to factor in that the digital space keeps evolving, and with it, so do the tactics employed by cyber attackers.
That said, here is a basic rundown of what most cyber liability insurance policies generally cover:
Identity Theft – Protection from cyber attacks resulting in stolen identities, covering costs like personal information and theft-related monetary loss recovery.
Legal Costs – Coverage for legal defence costs, settlements, monetary awards against the company, crisis management, and notification fees.
Cyber Extortion – If the attackers hold your information (or access it) for ransom, the policy can help you recover the funds you lost while meeting the extortion demands.
Incident Response – It covers the costs of cyber attack assistance you can get from a complementary incident report hotline.
System Business Interruption – It protects you against losses if your company has to shut down during or after a cyber attack.
System Damage and Restoration Costs – It reimburses the costs of restoring or repairing software systems damaged by the attackers.
Social Engineering – It protects the company if an employee mistakenly sends money to a fraudulent account or provides access to the system to unauthorized personnel.
Reputation Recovery – It covers the expenses associated with damage control, including marketing and public relationship efforts made to save the company’s reputation.
Related article: https://www.rjins.com/resources/our-blog/business-interruption-insurance-protecting-your-company-from-unexpected-disruptions/

What Doesn’t Cyber Liability Insurance Cover?

Most cyber liability insurance policies don’t cover the below or only cover them if you pay for them as an add-on. If you’re not sure what type of insurance you need, then a great insurance broker will be able to go through it with you.
Third-Party Damages – This applies to third-party applications and services, like email, customer relationship management, storage, etc.
Losses Incurred Before the Waiting Period Ends – Most business interruption coverage has a waiting period (about 12 hours, in general). If your business has to shut down, you will be only reimbursed for the losses you incurred after the waiting period.
Software Upgrade and Hardware Replacement Costs – After a cyber-attack, you may decide to update your software or hardware to prevent future incidents, but you won’t be reimbursed under this policy.
Patent or Intellectual Property Infringement – You won’t receive coverage when someone decides to use your patented products or services.
Property Damage and Bodily Injury—Most policies won’t cover the cost of physical damage and bodily injury incurred if attackers target the production facility’s computerized system.

What to Consider When Purchasing Cyber Liability Insurance?

The first factor to consider is your company’s needs, as this will greatly affect your premium. You should also factor in your network security. The more vulnerable it is, the more protection you need (and can gain from cyber liability insurance).
Your claims history will also affect your premiums. If you’ve made previous claims, you’ll be seen as a higher risk and pay more. Likewise, the industry will also have an impact. For example, those working in the finance, IT, or medical sectors will handle higher amounts of sensitive information and will be considered higher risk.
Lastly, the number of entities that can access your data (like using a third-party company for storage or site maintenance) should also be considered. It may cost you more (once again, it will be a higher risk), but you also have more to lose.
Related article: https://www.rjins.com/resources/our-blog/how-can-i-save-money-on-my-insurance/

Final Thoughts

Cyber liability insurance can give you peace of mind, knowing that if your company becomes the victim of a cybercrime, your expenses will be covered. It’s particularly useful for those working in industries where large amounts of customer information are handled.
By covering the associated costs, the insurance policy can mean the difference between successful recovery after a cyber attack or crumbling under financial strain. If you’re looking for a cyber liability insurance quote, then contact Ron Johnston Insurance today and we’ll be more than happy to help.