Cyber and Privacy Insurance

What Is Cyber and Privacy Insurance?

A cyber and privacy insurance coverage policy can provide companies with protection from losses resulting from a data breach or the loss of electronically-stored confidential information.

Cyber and privacy insurance policies are designed to protect a company from the costs related to activities of hackers and other individuals or groups who may gain access to company-stored personal identifying information (PII). Those costs can include restoring system security and providing credit monitoring services to clients, among many other expenses.

How Cyber and Privacy Insurance Works

The use of computers and the internet has become an integral component of business operations over recent decades. Many businesses rely on the internet to reach customers and to deliver services to clients. They frequently transfer of confidential and private information from the client to the company and vice versa.

Information that could be subject to a data breach includes credit card details or other financial information, driver's license numbers, Social Security numbers, health records, and contact information.

A cyber and privacy insurance policy, often called cyber insurance, will cover your business' liability for a data breach that results in an exposure of customer's personal information. It will typically cover legal fees and expenses related to the breach.

Cyber insurance may also include assistance with notifying customers about the breach and restoring the identities of customers who were victims of identity theft. It may also help with the costs of restoring a computer system and recovering compromised data.

Example of Cyber and Privacy Insurance

For example, if you have a small floral shop that delivers flowers, you may keep a database of your customers' information. It may include their email address for you to send marketing material, as well as a record of their payment information and addresses.

If the business suffers a cybersecurity attack, you will face a number of expenses. In most state, you will have to notify customers about a data breach. You may want to provide your customers with credit monitoring as a good gesture. And you may have to restore your computer systems with stronger protection.

Cyber and Privacy Insurance Benefits

Cybersecurity can present a challenge for organizations, no matter how much money they invest in protection. Hacking through the use of social engineering, such as phishing email attacks, or other methods exploits human tendencies as the criminal gains access to sensitive or personal information.

A data breach can have far-reaching and costly implications for a company. It can disrupt day-to-day operations as the company tries to understand how the data breach occurred, repair the damage done to systems, and make the necessary system updates to prevent a similar violation from happening in the future.

The publicity from a breach can negatively impact the business’ standing, as customers who have had their private data compromised may switch to a competitor and potential customers may walk away due to fears of losing their data as well. Providing monitoring of client's credit can restore their peace of mind, and cyber insurance can often help pay for these costs following a data breach.

Data breaches carry a significant threat of legal action. The company may be required to notify clients of the incident and may need to provide credit-monitoring services at no cost to the affected individuals who had their data stolen. Further, the company may be held responsible for fraudulent purchases and fund transfers due to its security cyber-mishap.

In some cases, regulators may levy fines against the company, and individuals may file civil suits against the company for financial issues related to the breach of secured data.

Cyber and privacy insurance coverage can also help your business recover from the financial and regulatory burdens that can result from a security breach. The amount of liability coverage in a cyber and privacy insurance policy depends on the terms of the policy.

The Bottom Line

A data breach can have far-reaching implications for a company. Buying a cyber and privacy insurance policy can help you protect your business from the costs related to a data breach, including the expense of regulatory burden. The amount of liability coverage in a cyber and privacy insurance policy depends on the needs of the company.