Understanding Cyber Insurance: What It Covers and Why You Need It

What is Cyber Insurance? 

Cyber insurance is specialized insurance that covers potential financial losses companies may face due to ransomware attacks, data breaches, system hacking, and more. Policies can cover damages such as lost data, damaged electronic equipment, incident response costs, revenue loss, and other incident-related costs. Cyber insurance may also be called cyber risk insurance or cybersecurity insurance.  

While cyber insurance is a newer industry, more and more businesses are seeing the value in purchasing a policy. It is important to note that cyber insurance will not prevent a breach or solve all cybersecurity issues. It is designed to help in the aftermath of a cyber-attack and give businesses much-needed support after a breach.  To prevent a breach, businesses should have cybersecurity professionals protecting their company’s sensitive information but have cyber insurance as a backup for any issues.  

Cyber insurance can help relieve some stress by providing financial protection against cyber threats, ensuring peace of mind in the event of potential data breaches, cyberattacks, and other cyber risks. It is an important investment for a company of any size. 

Who Needs Cyber Insurance? 

Most businesses could benefit from cyber insurance, but here are a few examples of industries that should consider a cyber insurance policy: 

• Financial Services: Banks, investment firms, and insurance companies handle financial data, social security numbers, and credit card information, all subject to strict regulations like Gramm-Leach-Bliley (GLBA) and PCI DSS. 

• Healthcare: Hospitals, clinics, and health insurance providers: Manage Electronic Health Records (EHRs) containing sensitive medical history, diagnoses, and treatments. HIPAA (Health Insurance Portability and Accountability Act) governs data privacy in this sector. 

• Legal Services: Law offices that handle confidential client and case information. 

• Educational intuitions that manage and store private student information.  

• Public sector and government agencies with large amounts of personal data.  

• Technology companies that develop software or host data. 

• Companies with a digital presence are the most, if not all, companies now.  

• Any business handling sensitive data, including healthcare and e-commerce. 

• Any type of retail or e-commerce brand that processes payments and stores customer data. 

These are just a few examples of who may need cyber insurance. Many other industries should also consider a cyber insurance policy, so always be sure to consult with a professional to find the best policy for your business.    

Why Does Your Business Need Cyber Insurance? 

Some business owners may think that they don’t need cyber insurance, but as hackers become increasingly proficient, it is an important aspect to think about. Here are six reasons as to why your business needs cyber insurance: 

1. Financial Protection 

Cyber insurance offers financial protection to businesses affected by various cyber-attacks. This financial protection can help keep your business up and running during breaches.  

2.  Risk Management  

With cyber insurance, your business doesn’t have to worry about risk management in the event of a cyber-attack. Your cyber insurance company can navigate the aftermath and control any additional risks.  

3. Business Continuity  

As mentioned before, cyber insurance can cover the costs of a business interruption due to a breach. This helps to minimize downtime and get back to regular business as soon as possible.  

4. Employee & Client Trust 

Having a cyber insurance policy can also help to build trust by demonstrating a commitment to keeping private data safe, which can ease the concerns of employees and clients.  

5. Reputation Protection 

Oftentimes, the aftermath of a cyberattack can affect a company's reputation. Some cyber insurance policies can cover the costs of any PR efforts to repair the company image.  

6. Evolving Threat 

Since cyber threats are constantly evolving, it is essential to have dynamic policies that can change with the trends.  

Statistics on the Cost of Data Breaches for Businesses 

According to IBM’s 2023 report, the average cost of a data breach was at an all-time high of $4.45 million, with the United States having higher-than-average costs. This is an increase from 2022, when the average cost was $4.35 million. If a business does not want to involve any authorities, there can also be other associated costs with data breaches as high as $470,000, with the United States having higher than average costs. 

Some industries are targeted more than others, with varying average breach costs. The top ones are as follows: 

• Healthcare $10.93 million 

• Financial $5.90 million 

• Pharmaceuticals $4.82 million  

• Energy $4.78 million 

• Industrial $4.73 million  

The averages of most industries are on the rise due to more experienced hackers and insufficient cybersecurity protocols.  

Money is not the only cost associated with cyberattacks and data breaches. Many businesses also lose operating time and cannot afford to be down for long. In 2022, the average length of time a business could be down due to a data breach was about 204 days. It can often take an average of 73 days to contain the initial breach before recovery can begin. 

Types of Cyber Insurance Policies and Coverage 

After understanding why it is essential to have cyber insurance, you can begin to look at different policies. Cyber insurance policies typically fall into two categories:   

First-Party Coverage 

This type of coverage offers direct protection against losses from cyber-attacks. This type of policy includes coverage for: 

• Breach and Incident Response 

• Business Interruption Costs 

• Data Recovery 

• Cyber Extortion 

• Reputation Management 

Third-Party Coverage 

Third-Party Coverage covers any lawsuits a business may face after a cyber-attack. The following is often included in their policies: 

• Privacy Liability 

• Network Security Liability 

• Legal Penalties and Fines 

• Media and Public Relations Liability  

Depending on your business, you may need one or both cyber insurance coverage policies. It is important to examine your business to understand what it is most at risk for. You may also need to consider how large your business is and sort out what policy is best. A smaller business may not need coverage of a full-blown PR/crisis team but may need a policy for data recovery but a larger business may need both.  

How to Choose the Right Cyber Insurance Provider 

Now that you understand cyber insurance, you must make sure you choose the right cyber insurance provider. Here are some qualities to consider when shopping around for a policy.  

Easy Claims Process 

As for any type of insurance, the claims process should be easy and simple. It should also be quick since time is valuable during a cyber-attack. You do not want your business to be down for too long, as there is a risk of losing more and more money.  

Fits Your Budget 

Before looking for the right cyber insurance provider, you should assess your budget. You may also have enough allocation for certain policies and a minimal amount of coverage. Always make sure you know how much you can afford.  

Compare Quotes and Pricing 

After you finalize your budget, take time to compare quotes and pricing of different cyber insurance companies. You want to make sure you are getting the best price for the policy you need.  

Good Reputation 

Conduct thorough research on any company you consider for cyber insurance. You want to ensure they have a good reputation with no scandals. Look for testimonials and genuine reviews on the main website or third-party review sites.  

Seek Professional Advice 

If you are now sure where to start, consider working with an insurance broker specializing in cyber insurance to guide you through the process. Some legal professionals may also be able to help with this process by ensuring the policies properly cover any legal trouble.  

Secure Your Future with Castile Security 

Don’t leave your business vulnerable to cyber threats. Partner with Castile Security to navigate the complexities of cyber insurance and safeguard your data. Schedule a call today to learn how we can help protect your organization and lower your cyber insurance premiums.