Cyber Liability Insurance: The Importance of Data Breach Protection

Doing business in the digital age is becoming increasingly complex. Competition is heavier than ever before, and the future economic outlook is uncertain. In the security realm, you not only have to protect your physical premises, you also have to make sure your online assets are secure. And if there is a loss due to a break-in, you need the right kind of insurance to cover it.

A general business liability policy is fairly comprehensive and covers a lot of areas, but this type of policy does not address cyber-security. So for businesses that have any kind of online presence at all, they would need additional coverage for this type of risk. Some organizations wonder if they need cyber liability insurance, especially if they are not in banking and/or do not have their own financing operation attached to their business.

Even if you do not deal with banking and financing, you are still at risk for a breach that may expose the data of your clients or customers. For example, you may not have their bank account or credit card information on file, but you may have their name, address, phone number, and Social Security number. And even if you do not have their SS#, it is very easy for a cyber-criminal to obtain this with the other aforementioned information.

Once all this information is obtained, cyber-thieves can obtain a credit report, locate bank account data, and from there, do serious financial damage to your customers. If an incident like this should occur, you are the one that would be held responsible. Note also that even if you accept payments but they are processed through a third party, you may still be held responsible if there is a breach that exposes their data.

What does Cyber Liability Insurance Cover?

Individual policies vary, and cyber liability is a new and evolving area, so you should always shop around to find the right policy for your needs. That said, there are some general areas a cyber insurance policy should cover:

• Loss of Data: A general liability most likely covers damage to your computer and other hardware, but it does not cover the data you have stored on your system if it is lost or stolen.

• Business Interruption: Cyber-attacks often cause your website to go down for an extended period of time. If you depend on your website for all (or most) of your business, this could effectively put you out of business. Cyber insurance should cover losses related to the shutdown of your digital operations.

• Notification Requirement Expenses: If you suffer from a data breach, your state will most likely require you to notify your customers that their personal information was obtained without their authorization. You may also need to cover the cost of one year of credit monitoring for those impacted by the breach.

• Public Relations Management: If your company suffers a data breach and notification goes out to your customers, vendors, etc., you are likely to be the subject of a news story in the not too distant future. To effectively handle the negative publicity coming your way, you may need to hire a good PR firm.

There are numerous other areas cyber liability insurance may cover, and new risks are being added all the time. To find the right policy for your needs, it is best to speak with an independent insurance broker. Independent agents work with several of the top business insurers in your area, and they can find you the right coverage to ensure your organization is fully prepared to take on the challenges of the information age.