Understanding Cybersecurity Insurance Requirements

Cyberthreats grow more sophisticated every day, making it more difficult to protect your business and sensitive information. Although you can implement extensive measures to prevent cyberattacks and data breaches, these measures won’t always be able to stop them from happening. In these cases, you need comprehensive cybersecurity insurance and an effective breach response. Keep reading to learn more about cybersecurity insurance requirements and how you can protect your data, your customers, and your business.

What Is Cybersecurity Insurance?

Cybersecurity insurance is a requirement that protects your business in the case of a cyber incident. It is also called cyber liability insurance or data breach insurance. As a business owner, you must be prepared to act swiftly to mitigate data loss, damages, and financial penalties. Cybersecurity insurance helps you cover these losses through first- and third-party coverage.

FIRST-PARTY COVERAGE

This type of cybersecurity insurance applies to costs directly related to a cyber incident, such as

• Legal counsel to determine regulatory obligations
• Customer notification
• Recovery of lost data
• Lost income from business interruption
• Public relations
• Digital forensics investigations
• Other fees, fines, and penalties

THIRD-PARTY COVERAGE

Third-party cyber insurance coverage protects you from liability if a third party makes a claim against you. This type of coverage typically includes:

• Payments to affected consumer parties
• Accounting costs
• Claims and settlement expenses for legal disputes
• Litigation costs
• Other settlements or damages

Why Do You Need Cyber Insurance Coverage?

Your business amasses vast volumes of data. Whether your website collects cookies or you compile comprehensive consumer reports, your business is able to thrive based on the information that you subsequently apply to your business practices. As such, you’re responsible for the data that you aggregate. With this responsibility, you need to do everything in your power to protect sensitive data and prevent it from falling into the wrong hands.

Sadly, no matter what industry you work in or how big or small your company is, you’re exposed to various cyber risks. Ransomware attacks, phishing attempts, and denial of service attacks are just a few of the many ways that malicious users attempt to breach your system and exploit your data. When they gain access to your network, devices, or data, these users can wreak havoc on your business by exposing personal information and critical business data. After the breach, you’re left to pick up the pieces while dealing with lost income and significant reputational damage.

Unfortunately, when dealing with cybersecurity breaches, it’s not a matter of “if” they’re going to happen—it’s a matter of “when” they’ll occur. According to a?2021 study by IBM , more than half of?small businesses ?were victims of a cyber attack in the last year, and 10% experienced more than 10 cyberattacks. These attacks don’t appear to be slowing down anytime soon, making it even more critical that businesses find a way to protect their data and information.

THE COST OF A DATA BREACH

Data breaches are costly. For instance, the?2022 Cost of a Data Breach Report ?by IBM determined that the average cost of a data breach this year was $9.44 million. Without the proper protective measures and cyber insurance coverage, your business may have to deal with these costly side effects. Many business owners find they aren’t able to recover from a data breach, and their doors often shutter for good.

REPUTATIONAL DAMAGE

Data breaches don’t just affect your bottom line. They can also severely damage your business’s reputation and disrupt future prospects. Data breaches often expose sensitive, nonpublic personal information, such as credit card information, social security numbers, names, addresses, and phone numbers. Customers don’t want their personal information made public, especially without their consent—people hesitate to engage with organizations that have had trouble with cybersecurity in the past.

LEGAL TROUBLE

Without proper cyber insurance coverage, data and security breaches can land you into legal hot water. As mentioned above, people aren’t often thrilled about having their personal information made public. There are both state and federal notification laws that require businesses to notify their customers of a data breach. Failure to abide by these cybersecurity insurance requirements may result in fines and litigations.

DISRUPTION TO WORKFLOW AND CRITICAL BUSINESS OPERATIONS

Data breaches can leave a wide wake of destruction. This makes managing the aftermath of a data breach rather challenging. For many businesses, it may take months to fully recover as you address systemic flaws, navigate courts, and make client reparations. While this is happening, you’re unable to focus all of your energy on the core of your business.

Types of Cyber Insurance Coverage

PRIVACY LIABILITY COVERAGE

For businesses that deal with sensitive information, privacy liability is a cybersecurity insurance requirement. Data breaches can expose the sensitive information that your business uses and leave you vulnerable to liability. Should you experience a data breach, privacy liability coverage can protect your business from some types of litigation and provide funding for settlements, penalties, and fines.

NETWORK SECURITY COVERAGE

Network security is also a cybersecurity insurance requirement if your business deals with sensitive data. If your network security fails due to malware, ransomware, phishing scams, or other security breaches, network security coverage can handle many of your-first party costs.

ERROR AND OMISSIONS COVERAGE

Error and omissions (E&O) coverage protects your business when you can’t properly deliver your services to customers. This can include breaches of contract, allegations of negligence, or performance failures.

NETWORK BUSINESS INTERRUPTION COVERAGE

Security and data breaches can temporarily put your business offline. This type of cybersecurity insurance can cover fixed expenses and lost profits from security failures or failed software patches.

Network Business Interruption Coverage

At Blue Net, we understand that cybersecurity and compliance are absolute necessities. If you’re unsure about your cybersecurity insurance requirements, we can help. We perform comprehensive cybersecurity insurance audits to determine if you have the right coverage for your business.

Contact us ?today to learn more about cybersecurity insurance and see if your business is protected.

Tina Altman, Technology Success Partner, Blue Net Inc. 612-298-2622