Should you buy cyber insurance? It’s a question that a lot of business owners are asking these days, as digital security becomes more and more important. In this post, we’ll take a look at what cyber insurance is and how it can help protect your business in the event of a data breach. Stay safe out there!
What is Cyber Insurance?
Cyber insurance, also known as cyber risk insurance, can be defined as “a form of business insurance that covers the cost of data breaches or privacy violations.” This type of coverage provides protection for businesses against security breaches, theft, natural disasters and even lawsuits. It is usually purchased by small to medium-sized companies, but larger businesses may also opt for this type of coverage.
What Does it Cover?
Cyber insurance protects a business from a variety of risks, including: data breaches, system failure, damages to third parties and the cost of credit monitoring services. Some companies choose to have their cyber insurance policy include protection against more specific events, such as: reputational damage, extortion and money laundering.
How Does it Work?
Many cyber insurance companies offer a variety of plans that provide businesses with different levels of coverage. The three most common types of policies are: product liability insurance, general liability insurance and occurrence-based insurance. Additionally, some companies will require policyholders to carry business interruption insurance in order to qualify for cyber insurance.
What’s the Catch?
Unfortunately, there are many catches involved with purchasing cyber insurance. First of all, it can be expensive. Additionally, some policies do not cover every possible risk that a business may face- especially issues related to data breaches or hacking attempts. Other limitations that may apply include: a maximum amount of coverage, a limited length of time that coverage is in effect and specific types of businesses that are ineligible for this type of insurance.
In order to find out if purchasing cyber insurance is right for your business, you need to do some research. Find out how much it will cost by speaking with a broker who has a comprehensive understanding of this particular kind of coverage. You should also carefully read through your policy to see if it covers the risks that you are anticipating.
In general, cyber insurance can be a beneficial option for companies that have been severely affected by data breaches in the past- especially those related to lost customers and financial issues. If you do not face these types of issues and/or you aren’t sure how this type of coverage will benefit your business, you might want to pass on it.
Cyber insurance is definitely a good idea for some businesses; however, it’s not the right option for all companies. Do your research before making a decision!