Cyber liability is not just limited to large companies and governments. Are you surprised to learn that 78% of Canadian businesses experienced at least one attack in a 12-month period in 2020?
More than 12% of your IT budget goes into security. This is even more important in the digital age where you are dealing with customers online including saving credit card information.
As prepared as you are, the unexpected can always happen. This is where cyber liability insurance comes into play. Having cyber liability insurance coverage can help protect you if your company gets hacked or breached.
Want to know more? Keep on reading for your ultimate guide on everything there is to know about cyber liability insurance.
Who Is Cyber Liability Insurance For?
Cyber liability insurance is for any and all companies with an online presence. It’s even more necessary if you have important private information about your customers saved on a server. This can include credit card information, health information, SIN Numbers, or even home addresses.
Remember that the size of the business doesn’t matter. Even small businesses are at risk from cyberattacks.
You can try to implement security procedures, train your employees about phishing and set up identity verification software. This is, of course, essential to running your business. Unfortunately, this does not guarantee that you will not get hacked.
If you get hacked, you can be dealing with customers suing you for breach of data, privacy, and any financial losses they may have had from the breach. You may also have to temporarily close your business and website while you deal with the cyberattack. The loss of revenue and the additional third-party claims can result in financial losses.
More than that, the reputational impact of such a cyberattack can cause you to lose clients.
You want your clients to trust your service. You want them to know that you’re a brand that can be trusted and their information is safe with you. By having cyber liability insurance, you can protect yourself in the worst of situations.
What Does Cyber Liability Insurance Cover?
You no longer have a hacker in his basement stealing credit cards for identity theft purposes. Rather, there’s a trend towards higher profile sophisticated attacks leading to increasing ransom demands.
Did you know global ransomware attacks increased by 151% in 2021? In Canada, the average cost of a data breach is $6.35 million.
Let’s talk about how cyber liability insurance can help you cover the financial losses from a data breach.
If you’re a professional, you spend your time providing advice to your clients. You should be comfortable and have the freedom to provide advice based on your expertise without having to worry about getting sued.
This is even more important if their private data is made public. If you don’t pay the hackers who hold your data ransom, you can end up causing all of that confidential information and advice to be made public.
Your clients can sue you for not meeting your responsibilities as a professional and not completing your end of the contract.
Even if you are right, you can end up dealing with legal fees and settlements just to protect your business and reputation. This is where professional liability insurance can help protect you. Any business that provides professional advice, recommendations or solutions should consider professional liability insurance.
Intellectual Property Infringement
Your data and software are considered intellectual property. Intellectual property is a broad term that can include any logos, brands, formulas, and designs. They have value in the marketplace just like any product or asset you may have.
You could also be working in collaboration with other businesses. In this case, you will have access to their intellectual property for limited purposes. A cyberattack opens you up to intellectual property infringement claims.
When you get hacked and your data is stolen and made public, you can end up dealing with the cost of defending against an intellectual property infringement claim. These claims are quite significant.
You may have to compensate the other party for its losses. You would need to determine how much money they would have made if there was no intellectual property infringement. The losses plus any royalty rate are the damages that courts will ask you to pay.
Privacy Breach Liability
You are provided with private information from your clients and other businesses. When you get that information, you are entering into contracts to keep that information confidential. Where this information is then made public, you can be held liable for privacy breaches.
You will have to deal with the cost of litigation including legal fees and settlements.
Privacy Breach Expense
Privacy breaches are not just about legal costs. You also have to deal with other expenses including notifying customers and ongoing post-breach fraud monitoring. You may have to put into extra security and upgrade your software to ensure it doesn’t happen again.
You may even have to hire forensic consultants to review your systems to determine how breaches can take place and how you can address the issues in advance.
You still have to deal with the regular liabilities and risk of running a business including people getting hurt on your premises. General liability coverage will provide protection in those cases.
Your business contents are at risk from theft, vandalism and natural disasters. Business contents coverage will protect your office equipment and other contents of your office in case of unexpected events.
Where your business is interrupted because of unexpected events including cyberattacks, you will have to shut down your business and website. This can result in lost revenue. You still have to pay your rent and your employees.
Business interruption insurance can help protect your business from financial ruin in the event you can run your business temporarily.
Types of Cyber Liability Insurance
You should understand what types of cyber liability insurance are available so you can speak to your insurance company with confidence.
Network Security and Privacy Liability
The biggest consideration for cyber liability insurance is the costs of data breach and the subsequent litigation. Network security and privacy liability can help cover you for the costs of data breaches including:
- Upgrading security systems
- Reviewing current systems
- Forensic consultations and investigations
- Informing clients
- Public relations
- Ongoing credit monitoring
- Legal fees
- Ransoms paid
- Fines and penalties
There are many others costs that you go beyond the lost revenue. This coverage can take care of those costs so you can focus your energies on running your business.
Network Business Interruption
A cyberattack is not just limited to a single event. It can be long last repercussions. Most importantly, it can force you to shut down your website.
What this means for you is that you have to deal with lost revenue and profits during this time. Network business interruption can help cover you for that lost revenue and added cost of continuing your business elsewhere.
Digital Data Recovery and Cyber Extortion Expenses
If you've had a cyber attack, you want to recover all the lost data. This might mean paying the ransom or hiring experts to recover the data. Digital data recovery can cover the costs of data recovery including payment of ransom.
Your reputation is your brand. Customers rely on it and purchase your product or service. This is why you need to protect your reputation first.
Where you get sued for libel, copyright or trademark infringement, you want to protect yourself. The cost of such litigation can be high. Even if you’re in the right, you want to make sure you’re defending yourself against such claims.
Media liability insurance coverage covers the legal costs and settlement costs of libel and intellectual property infringement claims.
Errors and Omissions
If you have security software or a consulting business, people rely on your advice. If systems get breached even after you’ve put in your security system, then you will be sued for not fulfilling your obligations under the contracts.
Errors and omissions coverage will protect you from third-party claims where your product or service is at issue. If breaches of your client systems or networks led to cyber-attacks, you can be covered for those third-party claims.
What Is Not Covered by Cyber Liability Insurance?
Cyber liability insurance is specialized insurance that is generally customized to your business. There are certain activities that would not be covered by cyber liability insurance.
First, your equipment can break down from unexpected events. Cyber liability insurance would not cover equipment breakdown. Without this equipment, you will not be able to run your business. This is where equipment breakdown insurance can help protect you from unexpected events.
If you’re also working from home and running your business, then there are specific risks that you have. These would not be covered under cyber liability insurance. Consider home-based insurance. This can include coverage for business interruption to help you recover lost income if you need to stop your business to deal with fires, other property damage or theft.
You should also know that if your employees get injured while working, general liability will not cover you. You will need separate workers' compensation insurance. This is a separate policy that you should discuss with your insurance company.
What to Look for in a Company that Offers Cyber Liability Insurance
You want a company that has the experience to address all your needs. Cyber liability insurance requires insurance companies to get to know you and your business. They also need to understand the current software and security measures you have in place to understand your risk level. Experience is an essential factor in your cyber liability insurance company.
The risk level determines your premiums. You want a company that can offer affordable premiums that are steady over the years, especially if you haven’t had any data breaches.
You want your insurance company to have agents available 24/7 so they can assist you at any time. You want to have agents come and review immediately, so you can start putting your contingency plan in place.
Typical Costs of Cyber Liability Insurance
Because of the increase in cyber-attacks, the cost of cyber liability is increasing as well. The cost of cyber liability insurance depends on how risky your business is. It depends on how much private and confidential data do you have access to, and what is at risk.
The size of your business and the size of your online presence will also impact the cost of cyber liability insurance. The bigger the business, the higher the premiums because you will end up getting sued for higher amounts or have to pay larger ransom amounts.
The number of employees can also increase your costs. The human factor leads to many errors and data breaches, so this can increase your risk of getting hacked.
How to Save Money on Cyber Liability Insurance
The best way to save money is to shop around. Contact different insurance companies and see what premiums they offer. Since cyber liability insurance is customized to your needs, different companies will offer different premiums.
Consider what type of coverage is good for you and what deductible you’re comfortable paying. Choosing the right option can save you some money on cyber liability insurance.
The reality is that any business, whether small or big, needs cyber liability insurance if they have an online presence. You need to conduct a risk assessment and talk to an insurance provider today. Now that you understand the severity of a cyber-attack, you know the benefit of protecting yourself with cyber liability insurance. Our partners at APOLLO Insurance have the experience and knowledge when it comes to the intricate questions you may have surrounding this topic. Speak to an advisor today.