November 21, 2023

Cybersecurity Insurance: Does Your Business Need It?

An image representing cybersecurity with a circuit board and a lock shaped chip with a keyhole in it.

Businesses today use the Internet to store, manage, and distribute important – often sensitive – information. While this process has changed the way we work forever, it also makes modern organizations vulnerable to cyberattacks. To protect their clients against threats like identity theft, data breaches, and wrongful financial losses, a lot of insurance companies have started to offer cybersecurity insurance policies. But what exactly is cybersecurity insurance, and who needs it most?

What is Cybersecurity Insurance?

Think of it as a digital safety net; it financially protects businesses from the consequences of cyber incidents – like an unauthorized leak of important data, or a ransomware attack where software blocks computer functions until money is sent to a cybercriminal. You have a lot of coverage options when it comes to creating a cybersecurity insurance plan, and each kind is tailored to specific scenarios:

Identity Theft Protection: Coverage that makes sure no bad actors gain access to your resources and information. Identity theft protection usually includes:

  • Monitoring your business’ online transactions
  • Scraping websites you’ve visited for personally identifiable information
  • Scanning “underground” sources like hacker dump sites or black market forums for proprietary info.

First-Party Coverage: This type of insurance covers the direct costs a company incurs because of a cyber incident. Those costs might come from:

  • Investigating the breach
  • Risk assessment for future incidents
  • Lost revenue from business interruption
  • Ransom payments (up to a set coverage limit)
  • Customer notifications and associated anti-fraud services

Third-Party or Cyber Liability Coverage: This coverage comes into play if a third party, like a customer or partner, sues your business for damages they suffered during a cyber incident. It’s usually designed to cover:

  • Legal fees and court costs
  • Settlements and court judgments
  • Regulatory fines (due to previous security non-compliance)
  • Technology Errors and Omissions (E&O): This is specifically for businesses that produce tech products or offer tech services. If an error on your end leads to a cybersecurity issue for a client, tech E&O coverage has your back, taking care of legal fees, court costs, and settlements related to the issue.

Okay, But What Doesn't Cybersecurity Insurance Cover?

While you can tailor coverage to your specific business needs, there are limits to the protection offered by typical plans. Some common ones include:

Property Damage: If a cyberattack damages physical property, like computer hardware, that damage typically falls outside cybersecurity insurance coverage.

Intellectual Property (IP) Losses: Losses related to IP, or missed income due to its improper use, are often not covered.

Proactive Preventive Measures: Costs for measures to prevent future attacks, such as employee training, setting up VPNs, or upgraded devices are usually not part of a plan.

Self-Inflicted Incidents or Crimes: If your business plays a major role in causing a cyber incident or is charged with a related crime, your coverage might even be voided.

So Who is Cybersecurity Insurance Really For?

The short answer? Practically any business. In our interconnected world, cyber threats are here to stay. Some types of companies may find it especially critical, though:

Data-Driven Businesses: Storing important data, such as credit card information, phone numbers, or Social Security numbers makes you a prime target for cyberattacks.

Businesses with Growing Customer Bases: Companies with a longer list of consumers may face higher costs when notifying customers of data breaches— which is a requirement in many states. Insurance can help mitigate those costs.

Businesses with Expensive Goods or Significant Revenue: These are especially tempting targets for cybercriminals, due to high potential ransom or recovery costs.

If you're still on the fence about your business's cybersecurity needs, an agent with one of our 40+ carriers would love to provide clarity on policy types and potential premiums.

How Do I Get Cybersecurity Insurance?

Many of Lindow’s business insurance providers offer cybersecurity insurance, often as an add-on to their primary policies. For those with more intricate needs, a standalone policy can be the way to go. Getting a few quotes before you choose your plan – and making sure you understand what is and isn’t included – will be key.

That said, getting a cyber insurance policy can be a bit more involved than just paying a premium. Providers can have specific cybersecurity standards that companies need to meet. They might ask for your business to adopt multi-factor authentication, regular data backups, endpoint detection, and breach response systems. Staying in compliance with these requirements will guarantee that your claims are honored if a cyber incident occurs.

Surf a Little Safer

Cybersecurity insurance isn't just some fancy add-on. In case of a cyber incident, it’s the only thing standing between your business and a huge legal and financial headache. As cyber threats evolve and become even more sophisticated, Having a comprehensive protection plan in place makes all the difference. 

Lindow’s 40+ carriers create tailored insurance solutions for businesses from small start-ups to growing corporations. Design a cybersecurity insurance policy today and make a huge difference in your peace of mind and future success!

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