Cyber insurance is becoming more popular, in part to the large expense of recovery from a cyber attack. Just as we insure houses due to the high cost to replace a house after a disaster, businesses increasingly realize the financial impact of recovering from a cyber event. A study by Experian found that 31% of companies surveyed have coverage, and 39% plan to purchase cyber insurance in the future.
Is cyber insurance right for you?
A few things you should consider when evaluating coverage inculde:
- 1st party coverage and 3rd party coverage
You need to decide if you want 1st and 3rd party coverage once a cyber event occurs. Do you want to cover costs associated with just your internal impacts or also extended impacts, such as those due to customer action?
1st party coverage deals with the direct loss of data or business interruption due to damaged data, network, or software
3rd party coverage includes lawsuits or claims from 3rd parties resulting from a data breach or cyber event
- Customer notification and identity theft resolution coverage
Do you want your policy to cover the expenses or notify customers once their data is stolen? Laws exist in almost all states now on how notifications must be made. You will most likely need legal counsel through the notification process and may want coverage for that also.
You may want to provide credit monitoring services to your customers after a cyber event. Cyber insurance can cover these expenses.
- Rebuild costs
Consider having your policy cover the cost to replace, repair or enhance your network system. If you are hacked, and afterwards find you need a new network, you may want to have coverage that pays for new equipment, software and implementation services.
Additional factors to think about when shopping for cyber insurance include:
- Does the policy cover cyber extortion? This is becoming a bigger risk that a year ago.
- Does it cover costs of business interruption, or does your existing business insurance cover this?
- Does it cover loss of intellectual property?
- Does it cover theft of money?
As you plan for 2015, think about how to be cyber safe and control your direct costs of recovery. Start next year with a conversation about cyber insurance. Call your business insurance broker and find out what he/she suggests. If you need to, shop around for a broker than can provide several quotes so you can select the best option for your business.