What is Cyber Insurance + Why Do You Need It?

Chaz Hager October 04 2022

Cyber insurance is a type of insurance that businesses can buy to protect themselves from possible cyber attacks. The policies can be customized to fit the needs of the business, and they often cover costs related to data breaches, including forensic investigations, notifications to affected customers, and credit monitoring services.

Cyber insurance is an important investment for any business that relies on technology, and it's something that every company should consider. Here's what you need to know about cyber insurance, and why you need it.

What Is Cyber Insurance?

Cyber insurance is a type of insurance coverage that protects businesses and individuals from losses incurred as a result of cyber attacks. It can cover a wide range of risks, including data breaches, hacking, and malware infections.

Cyber insurance can help to offset the costs associated with recovering from a cyber attack, such as the cost of hiring a professional to clean up malware, or the cost of replacing lost or stolen data. It can also help to cover the costs of lawsuits resulting from a data breach.

While cyber insurance is not required by law, it is becoming increasingly common for businesses to purchase coverage as the threat of cyber attacks grows. Many banks and other financial institutions now require their customers to carry cyber insurance, and some businesses are beginning to include it in their employee benefits packages.

What Does Cyber Insurance Cover and What Does It Not Cover?

What Does Cyber Insurance Cover and What Does It Not Cover?

Cyber insurance policies can vary widely in terms of what they cover. Some policies may only provide coverage for data breaches, while others may also cover cyber attacks that result in business interruption or theft of company assets.

In order to provide coverage, insurance companies will typically require certain security methodologies to be in place, such as multi-factor authentication (MFA) or phishing simulation and training, for example. 

In order to pay out a claim, the insurance company will track down the source of the breach and, more importantly, the action steps taken by the business in the wake of a breach. Your cyber incident response plan will be critical in how the insurance company responds to the claim, in addition to any security measures that were implemented prior.

As with any policy, it is important to read the fine print so that you are aware of its limitations.

What Are the Benefits of Cyber Insurance?

Cyber insurance can provide peace of mind in the event that your business is targeted by a cyber attack. It can help offset the costs associated with recovering from an attack and protect your business from lawsuits that may arise as a result of a data breach.

Purchasing cyber insurance can also send a signal to potential attackers that your business is serious about protecting its data, which may deter them from targeting you in the first place.

What Are the Drawbacks of Cyber Insurance?

Cyber insurance policies can be expensive, and the cost of premiums can increase if your business is located in an area with a high risk of cyber attacks. In addition, some policies come with high deductibles, meaning that you would have to pay a significant amount out-of-pocket before the policy would kick in.

Another potential drawback of cyber insurance is that it may give businesses a false sense of security, leading them to take fewer precautions against cyber attacks.

Why Do You Need Cyber Insurance?

There are many reasons why businesses need cyber insurance:

  • First and foremost, it provides financial protection in the event of a successful attack. Cyber attacks can often be expensive to recover from, and they can also cause significant reputational damage. Cyber insurance can help to mitigate these costs.

  • Second, cyber insurance can help businesses to comply with data protection regulations. In the wake of the General Data Protection Regulation (GDPR), businesses need to take data protection seriously or risk hefty fines. Cyber insurance can help businesses to meet their obligations under GDPR by providing cover for expenses such as data breach notifications and legal fees.

  • Third, cyber insurance can help businesses to protect their customers. In the event of a data breach, customers will often hold businesses responsible for their personal data being stolen or leaked. This can lead to loss of business and damage to reputation. Cyber insurance can help businesses to cover the costs of customer notifications and compensation claims.

Northriver IT Can Help Your Business Get Insured

Cyber insurance is a vital tool for protecting your business from the myriad of risks associated with doing business online.

Given the ever-growing number of threats to businesses posed by hackers, ransomware, data breaches and other online attacks, cyber insurance should be at the top of your list of risk management tools.

Download the SMB's Guide to Cyber Insurability + Compliance or schedule a time to talk. 

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