Cyberattacks can be financially devastating for businesses. When tallying up the costs related to data loss, recovery, and legal actions, a single data breach incident can cost businesses over $4.45 million. Fortunately, businesses can set up safety nets against these risks by getting cybersecurity insurance

What is cybersecurity insurance, and why is it important?

Cybersecurity insurance is a type of insurance coverage that protects organizations from the financial fallout of cyberattacks. It typically covers the expenses related to data recovery, system repairs, legal fees, and other costs.
Getting cybersecurity insurance is important because it provides a financial safety net for businesses in the event of a cyberattack. For a relatively small investment, businesses can get the resources required to not only recover from cyberattacks but also deal with the legal and reputational consequences that come with them. The insurance claim may also be used for implementing better security measures and investing in cybersecurity training to prevent future attacks. This gives business owners peace of mind and a sense of security as sophisticated cyberattacks and full-blown data breaches become increasingly common.

What types of risks does cybersecurity insurance cover?

Some common risks covered by cybersecurity insurance include:

  1. Data breaches – Cybersecurity insurance generally covers companies for any technical or human error that leads to the unauthorized access, use, or disclosure of sensitive data (e.g., credit card numbers, Social Security numbers, and medical records). However the coverage may vary based on the nature of the data breach, such as whether it’s a result of hacking, phishing scams, or insider threats.
  2. Data recovery and system repairs – Any expenses related to recovering lost data or repairing damaged systems are usually covered by cybersecurity insurance. This can include costs for hiring external security experts, purchasing new equipment, and restoring backups.
  3. Identity theft – Identity theft involves cases where a cybercriminal uses stolen personal information to conduct fraudulent activities. Cybersecurity insurance may cover the expenses related to helping affected customers recover their identities, such as credit monitoring services.
  4. Ransomware attacks – Ransomware encrypts the victim’s data and demands a ransom payment in exchange for the decryption key. Cybersecurity insurance typically covers the cost of the data lost and downtime suffered as a result of these attacks, but in some cases, it may also cover the ransom payment if there is no other option.
  5. Privacy violations – Cybersecurity insurance may cover liabilities resulting from violations of privacy laws and regulations, such as HIPAA or PCI DSS.
  6. Forensics and investigation – If a cyberattack occurs, businesses may need to conduct forensic investigations to determine the extent of the damage and identify any vulnerabilities that were exploited. Cybersecurity insurance coverage can help pay the costs associated with these investigations.
  7. Customer notifications – In cases where sensitive information is compromised, businesses may be required to notify affected customers. This process can be costly and time-consuming, but it may be covered by certain cybersecurity insurance policies.

What is excluded from cybersecurity insurance coverage?

Even though most cybersecurity insurance policies will offer comprehensive protection, they will often exclude coverage for certain situations, including:

  1. Intentional or fraudulent acts – Cybersecurity insurance is intended to cover unexpected events and accidents, not malicious or intentional actions by the policyholder.
  2. Criminal activities – If a business is involved in illegal activities that result in a cyberattack, its cybersecurity insurance may not provide coverage.
  3. Cybersecurity negligence – Companies are required to have adequate security measures and protocols in place. If a business is found to be negligent and fails to follow industry standards, its cybersecurity insurance may not cover the resulting damages.
  4. Preexisting conditions – Any security gaps or vulnerabilities existing before the policy’s inception are often excluded from cybersecurity insurance coverage.
  5. Previous data breaches – If a company suffered a data breach prior to purchasing cybersecurity insurance, any resulting damages from that particular attack may not be covered.

How to select the right cybersecurity insurance policy for your business

There are many different cybersecurity insurance policies, which is why businesses must carefully select the right one. Here are some important elements to consider:

Risk profile

Before choosing a cybersecurity insurance policy, businesses should assess their level of risk and the likelihood of experiencing a cyberattack. For instance, compared to small retail businesses, healthcare and financial industries may have a higher risk of cyberattacks due to the sensitive data they handle. This risk profile will help determine the appropriate level and type of coverage needed.
Certain policies may also only cover specific types of risks and exclude others, so it’s important to understand your risk profile and choose a policy that covers threats that your business is most likely to face

Coverage limits

Coverage limits refer to the maximum amount an insurance company will pay out in a claim. Businesses should carefully evaluate their coverage needs and select a policy with appropriate limits that can provide adequate protection to their assets.

Exclusions

As mentioned earlier, cybersecurity insurance policies may have certain exclusions. Businesses should carefully review these exclusions and ensure they are comfortable with the potential gaps in coverage. If certain risks or scenarios are not covered by the policy, businesses may need to consider additional coverage through a separate policy or risk management strategies.

Cost of premiums

The cost of cybersecurity insurance premiums can vary greatly depending on the type and level of coverage, industry, size of business, and risk profile. Businesses should carefully consider their budget and compare quotes from multiple insurance companies to find the best value for their needs.

How much does cybersecurity insurance cost?

The cost of cybersecurity insurance varies based on factors such as the size of the business, industry requirements, and the level of coverage needed. Small businesses may find cybersecurity insurance policies for as little as $500 per year. Meanwhile, larger enterprises that have more assets to protect and a higher risk profile may pay insurance premiums upwards of $8,000 per year.
Keep in mind that the cost of a cyberattack can far exceed the cost of annual insurance premiums, making cybersecurity insurance a worthwhile investment for businesses of all sizes. Additionally, some policies may offer discounts and incentives for businesses that implement solid security measures and protocols.

Is insurance a substitute for cybersecurity measures?

While cybersecurity insurance is a crucial component of risk management, it should not be viewed as a substitute for implementing a robust cybersecurity framework. Prevention remains the best defense against cyberthreats. A strong cybersecurity posture, including regular risk assessments, employee training, and up-to-date security measures, is fundamental. Cybersecurity insurance merely serves as a safety net and businesses must actively work toward fortifying their digital defenses.

Related readinge: Find out how to improve your IT security

To ensure holistic protection against cyberthreats, partner with a trusted managed IT services provider like Dynamic Solutions Group. Our experts specialize in crafting resilient cybersecurity frameworks tailored to your business needs. Don’t leave your digital assets to chance — call Dynamic Solutions Group today.