Reasons You Should Have Cyber Liability Insurance.
Why Your Business Needs Cyber Liability Insurance
In today’s competitive business environment, an internet presence is considered a necessity. Online services continue to expand and now include sophisticated e-commerce capabilities and mobile access. Businesses of all sizes are collecting credit card information and assembling sophisticated customer databases. By providing information to the public, a business assumes the role of a traditional publisher. This exposure can lead to an assortment of potential liabilities. Whenever data is collected or distributed by a business, the company assumes responsibility for the safety and accuracy of the information. If customer data is stolen or lost, the business can face significant legal liability and possible regulatory action.
The Importance of Cyber Liability Insurance
Cyber liability insurance is critical for every business that operates a website or stores vital customer information. While large ecommerce sites receive the most attention when a cyber crime is committed, over 50 percent of all data breaches occur at companies with less than 100 employees.
Most general liability policies expressly exclude losses incurred from online activity. Conversely, cyber liability insurance covers internet related losses such as penalties, fines, server infrastructure damage and actions related to client data. Cyber liability insurance mitigates these risks and provides protection regardless of where the data is stored.
Since internet liability laws are still in their infancy, many business owners assume they are protected from the effects of a data breach, especially if it occurs through a third party hosting service. Small businesses typically use point-of-sale systems that are outsourced to an independent provider. While the control of the system may be offsite, any revenue losses resulting from a breach are the sole responsibility of the subscriber and not the host.
How Cyber Liability Insurance Reduces Risk
Also known as e-commerce insurance, cyber liability protection was developed to help reduce the risk associated with a company’s internet presence. Policies provide specific safeguards to combat the harmful effects of a cyber attack. While insurance carriers offer different policy features, the most common coverage includes:
- Data Breach Insurance: This provision covers expenses relating to incident management, investigation, victim credit checking services, remediation, legal costs and regulatory fines.
- Cost Reimbursement: This coverage provides reimbursement for costs relating to any cyber attack including staff hiring, independent contractors, supplies and other related expenses.
- Defamation Protection: Coverage is provided for any legal action relating to defamation, copyright infringement or invasion of privacy.
- Network Security Protection: Businesses are covered against third-party inflicted damages that result from denial of access attacks, theft of data actions and other expenses related to lost information.
- Extortion Liability Protection: This provision provides coverage for losses resulting from extortion threats and the professional fees associated with addressing the crime.
Key Elements in a Cyber Liability Policy
Cyber liability insurance policies can be tailored to meet the specific needs of the client. Most policies provide basic coverage and offer a variety of additional options. The core policy should always include coverage for data loss or theft, data corruption and loss of business income from a documented attack. Liability coverage for legal costs, judgments, regulatory actions and settlements is also recommended.