Cyber insurance is a type of insurance policy that helps protect a business from threats associated with operating online. It is designed to help lessen the financial risks that may arise from doing business in the digital space, particularly when faced with issues like data breaches.
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Also known as cyber liability insurance, it is a type of business insurance that an enterprise would purchase insurance against physical risks and natural issues but is uniquely meant to cover a cyber security incident.
This contract between a business and an insurer will help protect the business from the expenses incurred from internet-based threats that are not usually covered by traditional insurance contracts.
What the data say about cyber attacks
In 2017, it was reported that Canadian organizations lost about $1.5 billion via cybercrime. Data reveals that about 236.1 million ransomware attacks happened all around the world in the early stage of 2022, while data breaches cost businesses an average of $4.35 million in the entire year.
It was also stated that almost 40 percent of businesses in the United Kingdom suffered a cyber attack in 2022, while cybercrime cost these enterprises an average of £4200 in the same year.
Some years ago, Sony’s PlayStation Network was attacked by some hackers who decided to expose the data of millions of its users, thereby making the company incur costs of over $150 million as users were prevented from accessing the service for over 20 days.
The risk of cyberattacks against enterprises (including their networks, devices, and their products) keeps growing.
Why Is Cyber Insurance Important?
Cyber insurance has become important for all businesses around the world operating online in today’s digital age.
A slight compromise or theft of data by mischievous enemies can cost your organization a whole lot such as we’ve seen in different attacks against cryptocurrency platforms.
An attack on your online business can smear your reputation, and make you lose customers, and revenue.
Your business may also be liable for any damage caused by the loss or theft of third-party data, which can occur when least expected.
Hence, when unexpected issues in this digital corridor pop up, your cybersecurity insurance will be very valuable. This unique insurance policy won’t only pay for any financial losses which may come as a result of a cyberattack or data breach, but also cover any costs associated with the remediation process.
Who Needs Cyber Insurance?
Organizations that use, send, or store electronic data in today’s digital age are advised to subscribe to a cyber insurance policy. While it is cardinal for every business to build a robust framework around securing its data (both the ones that belong to the organization as well as sensitive information belonging to its customers), the unexpected can still occur, as even some of the biggest enterprises in the world have been victims of cyber-attacks and data breaches. For instance, Facebook and Instagram have been victims in the past.
We have to admit that many small businesses don’t have the type of resources to fence their digital boundaries from the reach of hackers compared to bigger organizations. Cyber insurance is much more recommended to small businesses.
What Does Cyber insurance cover?
Businesses are usually negatively impacted in the event of loss, compromise, or theft of their electronic data, and the resultant effect is not only limited to a hit on revenue but also flows to the potential financial costs that emanate from the attempts to make things right again.
A standard cyber insurance policy may cover:
- Expenses incurred from restoring personal identities of customers affected by the attacks
- Legal fees
- Expenses incurred from recovering compromised data
- General cost of repairing any damage to compromised computer systems
Summary:
If you are a business owner, your enterprise is responsible for its own cyber security. However, on different occasions, even big organizations have suffered from cyber attacks, and only those with the right insurance can enjoy the necessary support from insurance companies.
So, since more people are embracing the internet to conduct a variety of activities, it also presents more opportunities for mischievous actors to carry out their bad work. Therefore, businesses will make smart decisions by investing in cyber insurance as an adequate strategy to reduce their overall risk should a breach happen.