Woman using a computerThe incidence of cybercrime has skyrocketed, and no one is immune, from individuals to businesses of all sizes—even governments. In fact, according to the U.S. Government Accountability Office, the Federal Bureau of Investigation (FBI) received a record 840,000 cybercrime complaints in 2021 with potential losses exceeding $6.9 billion. While the number of reports decreased to 800,944 in 2022, the financial impact increased to at least $10.3 billion. With this in mind, it’s not an overstatement that cyber liability insurance can save your business.

Prepare for the Worst

There are many different types of cybercrime—phishing scams, hacking, ransomware, malware and more—and the sophistication of the attacks has continued to increase. According to Fundera, half of small- and mid-sized companies reported suffering at least one cyberattack in the last year. To protect your business, you should assume that at some point you will also have a data breach.

If you handle any degree of sensitive customer information—from credit card numbers to medical data—a hack can be catastrophic due to the high cost of addressing and recovering from the crime, as well as the impact on your reputation. Fundera reports that small businesses spend an average of nearly $1 million to restore normal business operations after a successful cyberattack. That’s where cyber liability insurance comes in.

Two Types of Cyber Liability Coverage

There are two types of cyber liability insurance that can be used alone or in conjunction with each other.

The first focuses on first-party responses and covers:

  • Legal and related services to identify an actual breach and costs associated with regulatory compliance
  • Addressing customer service needs, like credit monitoring
  • Communications and public relations for crisis management
  • Downtime costs
  • Costs for labor to address the issue

The second covers third-party defense and liability, including:

  • Settlements against your company
  • Copyright infringement
  • Network security
  • Privacy liability

Protection Beyond Insurance

Preventing cybercrime is everyone’s responsibility, so it’s essential to employ the latest data protection measures at your company. Not doing so can negate your cyber liability coverage.

For example, your policy won’t cover cyberattacks:

  • Caused by human error by your employees
  • Resulting from poor or inadequate security processes
  • Due to an insider attack by an employee
  • Pre-existing vulnerabilities that should have been addressed

It’s also important to note that your business liability insurance likely does not cover cyber liability.

Expert Advice

The costs associated with addressing a cyberattack can be devastating, especially for small and mid-size companies, which is why cyber liability insurance can save your business.

Talk to your insurance agent for advice regarding the type and amount of coverage you need based on your industry, the type and size of your business, and the sensitivity of the information you maintain. We’ll customize a policy based on your overall level of risk.