Investing in a cyber insurance policy is an important step for organizations looking to expand their cybersecurity practices and reduce their potential liability. Before you choose a policy, it’s important to review internal security procedures, external benchmarks, and several details related to policy structure and coverage.
Cyber Security Strategy
Before purchasing a cyber insurance policy, it’s essential to review your own cybersecurity policies and strategy. This will help your team understand your data security needs and potential cybersecurity risks. We’ve created this convenient cyber insurance checklist that can help during your review, and these are the key areas to focus on:
- What kinds of data does your company collect or handle?
- What are your current data storage and backup practices? Are they secure?
- Does your business rely heavily on confidentiality?
- Do you have a website or app that stores sensitive data?
- Are there third-party vendors that access your IT infrastructure?
- Do you allow employees to bring their own devices?
- What is your cyber insurance budget?
In addition to these areas, it may also be useful to review your existing insurance policies to determine if any cybersecurity coverage is also included. There may be existing coverage for certain situations that can supplement a dedicated cyber insurance policy, which may impact the amount of liability you determine you need in your policy. As with all forms of insurance, it’s also a good practice to review your coverage each year and make any necessary changes.
Cyber Insurance Policies
The format and structure of cyber insurance policies can vary widely between providers, as there is no set standard in the industry. Therefore, it is essential to review each policy’s details and understand the exact types of coverage and support provided. With your budget in mind, you can also adjust the liability limits for particular areas and find a nice balance between cost and coverage for your needs. It’s crucial to ask questions and verify the details of a policy before signing up for coverage. There will be little chance of adjusting coverage if a data breach occurs, and your current policy terms will bind you.
Cyber Insurance Coverage
To fully understand a cyber insurance policy, it’s necessary to look beyond the summary of coverage and review the details. Cyber insurance is generally divided into two parts: first-party coverage and third-party liability. To better understand what these policies cover, let’s look at the specific areas of cyber insurance coverage:
- Business Interruption and Extortion. This form of coverage is related to specific first-party costs that may be incurred during a data breach or cybercrime. This includes damage related to cyber extortion, computer attacks, misdirected payment fraud, computer fraud, and telecommunications fraud.
- Public Relations and Identity Recovery. Coverage related to PR and identity recovery is typically used during an event that compromises sensitive customer information. This can include a breach of personal identification, health, and financial information, which is considered first-party coverage.
- Crisis Management. Additional first-party coverage is often extended to other expenses that are needed to identify, mitigate, and recover from a cyber-attack or breach. This can include costs related to incident response, forensic accounting services, and regulatory fines.
- Third-Party Lawsuits. Third-party coverage is used to protect against liabilities that may result from a data breach. When sensitive data is compromised, there is often a legal obligation for a company to disclose this information to their customers. This may result in lawsuits related to network security or electronic media liabilities.
When reviewing areas of coverage, always look for exclusions and make sure that these do not result in unnecessary liability for potential damages. It’s also recommended to choose a level of cyber insurance coverage that is appropriate for your business and not underestimate or overestimate your liability. The best policies are those that address your unique cybersecurity risks and offer a balance of first and third-party coverage.
A cyber insurance policy can make a huge difference for a business affected by a cyberattack or data breach. Having support during a crisis makes it easier to manage the many activities needed to recover fully. You should always look for a cyber insurance policy that matches well with your cybersecurity needs and offers coverage that is adequate to mitigate your identified areas of risk. Working with a trusted cyber insurance provider can help ensure that you choose the right coverage and are well prepared for managing a cyber event if and when it occurs.
If you're interested in learning more about cyber insurance and how it can protect your small to medium sized business, check out some of our other articles:
What Does Cyber Insurance Cover?
