Three Things To Know About Cyber Liability Coverage

Three Things To Know About Cyber Liability Coverage

January 25, 2023

Don’t leave the future of your business in the hands of hackers. Learn more about how cyber liability and data breach insurance can help protect your company. Here are the things you should know about cyber liability coverage. 

What Is Cyber Liability Insurance?

Cyber liability insurance is an important type of coverage for any company that uses devices that are connected to the internet, such as servers, computers, laptops, mobile devices, POS systems, etc.  Additionally, any company that has customers or vendors personally identifiable information (PII), should have cyber liability or data breach coverage.  Today’s data hackers are growing in intelligence, and their attacks are becoming harder to defend against and detect. Cyber liability insurance helps your business handle the cost of a data breach or other covered cyber event..

The right cyber liability insurance will protect your business from any risks related to data exposure linked to privacy, security, or operations and services. In the event of a network failure linked to malware, ransomware, cyber-attacks, or data breaches, your company will be protected with cyber liability insurance.

Who Needs Cyber Liability Insurance?

All businesses that use computers to store or process Personally Identifiable Information (PII) and other important data  should have some form of cyber liability and data breach insurance. In today’s world, that means almost every company needs coverage against cyber attacks.

But let’s start with Data Breach…

What is PII?  Every state has a slightly different definition of Personally Identifiable Information.  From Arizona’s Data-Breach Notification Law FAQ: The Notification Law defines “personal information” to include an individual’s first name or first initial and last name in combination with at least one “specified data element,” such as a Social Security or driver’s license number; taxpayer ID; medical or mental-health information; or biometric data.  (For a full list of specified data elements, see A.R.S. § 18-551(11).)  “Personal information” also includes an individual’s user name or e-mail address, in combination with a password or security question and answer, that allows access to an online account.  “Personal information,” however, does not include information publicly available from government records or widely distributed media.  This means that the law is more than just businesses who take credit cards.  If you have a database of client names with an email address, that is a PII record.   

If you have 1,000 or more records of PII breached, you’re required to report this breach to multiple government agencies, including your state Attorney General, Department of Homeland Security, and all credit reporting agencies within 45 days.

Regardless of the size of the breach, ANY Arizona resident must be notified within 45 days of the determination of a data breach.

The average cost of a data breach is $232 PER RECORD.  Quick math is telling us that if you have 1,000 records (Name plus an email address for example), the costs that you will be legally obligated to incur are on average $232,000.  

Keep in mind, with a fire or car crash, you can choose to rebuild a building.  You can choose to replace your car.  With a data breach, you’re required by law to do these things.  There is no choice as to whether you want to incur the cost.  Can your small business afford that?

Moving on to Cyber Liability coverage…

Businesses that have computer systems that are critical to the operation of their business should have cyber liability.   Well, that’s pretty much any business now!

Are you an internet retailer that relies on software to allow your ecommerce business to operate?  Are you a brick and mortar retail store that uses a POS system to track inventory and record sales?  Are you a contractor that uses software to design bids and proposals?  Are you an insurance agency that uses software to provide auto ID cards or certificates of insurance?

Let’s say you run a business that manufactures widgets.  Some of the machinery that helps with your manufacturing process operates off of a computer system.  Really though, think about your business and what the most critical computer system you use would be.  How long could you operate your business without it?

That system is hacked and has ransomware put on it.  You’re asked to pay $500,000 to get your systems back.  In order to get back up and running, you either have to pay the ransom or buy new systems.  The costs of either could be significant to your business.

Don’t think ransomware could happen to you?  How about a recent story from another business owner.  The owner of a business had his email hacked.  The hacker was in his email system for months, viewing emails about various business deals, including an acquisition of a competitor the business owner was negotiating.  Upon agreeing on terms, the business owner was asked via an email that he thought was the seller of the business providing a link to make a down payment for the business purchase.  Unfortunately, it was not the business owner that was selling.  It was the hacker, who had waited for just the right time to send him a phishing email that made it look like it had come from the business he was acquiring.  Fortunately, they had cyber liability coverage.  But the claim was over $1,000,000 including all costs to restore security to his systems and recover his money.

Whether you have a significant amount of PII or you have computer systems that are critical to the operation of your business, you should ask an independent insurance agent about cyber liability and data breach insurance. 

What Does Cyber Liability Insurance Cover?

With a comprehensive cyber liability policy, you’ll be covered in the case of a data breach or other related issues. These are just some of the things that cyber liability insurance covers.

  • Compromised Data Protection: Covers employee and customer information if your company data is hacked, stolen, corrupted, or subject to procedural errors or internal fraud.
  • Legal Cost Protection: To cover any costs incurred by legal reviews.
  • Forensic Services: You may find yourself having to pay for these services to determine the nature, extent, and perpetrators of an electronic breach of your company data.
  • Personal Services: These protections cover any costs towards services for any persons affected by a data break. Services may include helplines, credit monitoring, and case managers for identifying theft victims.
  • Public Relations: The costs paid for firms to review and respond to the potential impact of the data compromise.
  • Costs of Legal Defense: Protection in the event that your company is sued due to a breach.
  • Identity Recovery Protection: Covers costs related to helping identity fraud victims by restoring their credit history and records. Victims may include owners, employees, and family members.

The biggest comfort in buying cyber liability insurance is knowing that you have a team of people at your disposal that know what to do when something like a data breach or ransomware attack occurs.  Every insurance carrier that writes cyber liability has a team of people that knows exactly what to do, when to do it, and how to do it.

What Is Not Covered By Cyber Liability Insurance?

Cyber liability insurance is a comprehensive way to protect your business from the consequences of a data breach. However, it won’t cover certain situations or results from an attack. Typically, cyber insurance policies will not cover the following.

  • Loss of sales
  • Hardware failure
  • Some software programs
  • Lost equipment
  • Bodily injury or property damage (you need to buy separate business liability insurance to be covered for this)

Get Cyber Liability Insurance From A Trusted Insurance Advisor

Every business should have some type of cyber liability coverage. It’s available for small and large companies, nonprofit organizations, and retailers. You may even be able to save on costs by bundling coverage with another policy to create a comprehensive suite of business liability coverages.

At TruView Insurance, our independent insurance agents have a proven track record of helping business owners in Arizona find insurance. We work with our customers to tailor insurance options to their budgets and coverage needs. If you’re ready to purchase cyber liability insurance for your business, call our office to speak to a professional insurance provider today.