With nearly a million new malware attacks released every day, many companies are finding themselves increasingly concerned with cyber security. In addition to increasing their security methods, a business can invest in cyber insurance. Any online business should consider the ramifications of a data breach.
What Is Cyber Insurance?
Cyber insurance protects against the actual costs of a data breach or data security issue. These costs can be extreme: the average cost of a data breach today is $3.79 million. In addition to covering the costs of the data breach itself, cyber insurance will usually cover the cost of business interruption for the duration of the attack. For online businesses, a single missing day of revenue can be significant. Finally, cyber insurance will protect against legal costs associated with a cyber intrusion.
Do You Need Cyber Insurance?
Any online business relies upon their data to operate. As companies are getting more and more reliant on big data processing like bi on Hadoop, security will become more of an issue. Online businesses have a significant amount of identifiable and confidential information, such as credit cards, going through their service at any given time. If you don't have cyber insurance, you may find yourself vulnerable when a security breach does occur. You will need to pay for the damages associated with the breach and you'll also find yourself without revenue while the attack is resolved.
Data breaches can also have additional costs, such as a loss of customer faith and retention, due to negative press. Many companies can find that all of these costs together will be enough to damage their ability to operate. If the company was negligent in any way regarding their security, they may find themselves experiencing law suits, fines, and penalties related to their own security system. This can additionally lead to significant financial damages — even if the company is ultimately found not to be guilty of a security flaw.
How Do You Get Cyber Insurance?
You can get insurance quotes online for cyber insurance just as any other type of business liability insurance. It's usually a good idea to compare multiple quotes and to look for an insurance vendor that will provide coverage for business interruption. Many insurance companies will also help in the recovery process following data recovery, including data risk assessments and an analysis of damages. Businesses that need cyber security insurance should acquire a policy as soon as possible.
Some cyber insurance firms specialize not only in covering damages related to cyber security issues but also in directly helping the business recover. These insurance companies will offer security information and seminars and will help in managing the damages following a security breach. These cyber insurance and cyber security firms can be valuable partners for an online business owner who is not well-versed in security.
Are There Limits on Cyber Insurance?
There are some things a cyber policy won't cover. Usually, retroactive dates are applied. For instance, a policy may have a retroactive date of 50 days. That means that if a hacker had access to your data 60 days ago, it will not be covered under the policy. A longer retroactive date is preferred — and this is another reason why it's important to acquire a cyber insurance policy as soon as possible.
Cyber insurance policies also frown upon delayed notice. A cyber breach needs to be reported to the insurance company immediately after it has been noticed; otherwise the claim or part of the claim may be denied because the breach will have become substantially more severe in the interim.
Finally, some policies may only cover direct theft. That means theft of digital data or hardware containing that data — but it may not cover denial of service attacks or other forms of cyber security issue. These policies are usually far less expensive than more comprehensive policies but could leave a company in a lurch if they experience an aggressive and malicious attack.
Cyber insurance is no longer optional for businesses that operate online. Most businesses will experience some form of data breach during their operations and the costs can be quite substantial. Cyber insurance protects a business not only from the direct costs of a data breach but also liability related to that breach.
Photo Credit: Flickr/William Thomson
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Lindsey Patterson is a freelance writer and entrepreneur who specializes in business technology, customer relationship management, and lead management. She also writes about the latest social trends, specifically involving social media.