You have probably heard or read about something like this in the news- a large company is hacked, leading to a major data breach. For example, not too long ago, big box store Target was the victim of a hacker, and thousands of customers had their sensitive information exposed. Fortunately for big companies like Target, they are large enough to survive a cyber liability lawsuit. Unfortunately, many small businesses aren’t so lucky. In fact, more than 60% of small businesses go under within 6 months of a cyberattack. Cyber liability breaches (and claims) come with expensive legal settlements and large fines, not to mention damage to your reputation and brand. It is important to have the right cyber liability insurance policy, because recovering from a cyber security breach can drain your business’s time and money.
How Much Can Cyber Claims Cost Your Business?
Data breaches can cost your business an enormous amount of money. There is a lot you need to do in the case of breach, which all adds up. You have to notify all of your customers whose information was affected as soon as possible (as required by state law). You must also investigate and correct the breach, which can cost a lot of money, and take months or even years. A study from the IBM/Ponemon Institute found that data breaches cost businesses $242 per stolen record on average. That means the average U.S. data breach costs more than $8 million.
The reason cyber liability claims cost so much is that they include the costs of:
- Finding and repairing the cause of the breach– Hiring an expert can cost anywhere from $200 to $2,000 per hour.
- Notifying customers– Contacting the affected parties can cost anywhere from $1 to $5 per notice.
- Credit monitoring for affected customers for two to three years– This can cost anywhere from $10 to $30 per individual, and needs to continue for at least 2 years.
- Fines or penalties
- Client’s financial losses if you are sued– The average cost for legal defense is $740,000, while the average legal settlement is about $2 million.
- Defense costs and legal fees
What Cyber Liability Insurance Covers
While some small business owners might think that cyber liability insurance is only necessary for big companies, this couldn’t be further from the truth. Any business, no matter the size, can be hacked, and a network failure or breach can end up costing you hundreds of thousands of dollars. Any business that operates online and handles sensitive information needs cyber liability insurance. For example, if customers use credit cards to pay for your services on your site, then you are at risk of a breach.
Cyber insurance provides protection for your business from financial losses as well as the cost of data loss to your customers. It covers:
- Cyber Extortion– If a hacker accesses your database and is holding it for ransom, cyber liability insurance will help recover those losses.
- Forensic Support– Your policy will cover investigation-related expenses and consultation fees.
- Legal Fees– Cyber liability insurance helps pay for legal help and advice when dealing with a lawsuit brought by clients or staff.
- Business Interruption– A data breach affects your day-to-day operations, which leads to additional losses of income and revenue. Cyber liability can help cover these losses.
Different Cyber Liability Insurance
There are two kinds of cyber liability coverage:
- First-party cyber liability insurance covers costs from a cyberattack or data breach on your own network or systems.
- Third-party cyber liability insurance protects businesses from lawsuits related to a cyber incident that affects a client.
Cyber liability insurance might seem pricey, but when considering the cost of cyber liability claims, it is a necessary expense. If you are worried about the cost, remember that there are many different plans that can be tailored to your specific business and needs. You can choose how much coverage you need and how much you can afford to spend. Most business owners add first-party cyber liability insurance coverage to their general liability policy, so you might be able to get a deal if you bundle your policies.
If you are interested in cyber liability insurance, and do not know where to start or what type of coverage you need, EZ can help. EZ.Insure understands just how important it is to protect customer’s information. We will provide you with an agent to help you find the right plan to fully cover you and protect your customers’ privacy. Your agent will compare quotes from all plans available in your area, and find the best plan at the best price. Even having the best cybersecurity does not completely eliminate the risk of a data breach, so it is best to protect your business with insurance. To get instant free quotes, simply enter your zip code in the bar above, or to speak directly to an agent, call 888-615-4893.