What is Data Breach Insurance?
Data Breach Insurance, also known as Cyber Liability Insurance, provides coverage after the theft or loss of both first-party and third-party data. This means that, whether the data breach happens directly to your company or to a company whose data you are working with, you’re covered.
Why Do I Need Data Breach Insurance?
In 2009, the average cost of a data breach at a business was a whopping $6.7 million, according to the Ponemon Institute, a research center dedicated to privacy, data protection, and information security policy. Even worse? This number is expected to grow as business expand their technologies, like using cloud computing. Losses can include…
- Investigation expenses to determine what happened.
- Costs of notifying affected parties.
- Credit monitoring costs.
- Litigation expenses (which might include attorney’s fees, court costs, and settlements or judgments).
- Lost business.
- Damage to the company’s reputation.
- Decrease in stock price.
Legal requirements for handling data breaches are instituted at the state level. From one state to another, those requirements vary widely in terms of what you must do to notify the people affected by a breach. Typical requirements include providing identity theft monitoring services, paying for credit reports, paying for police reports, and paying fines.
What Does Data Breach Insurance Cover?
When working with client data, your business assumes responsibility for the security and privacy of a client’s data on your servers. You might think you’re covered through your General Liability Insurance – but you’re not. With Data Breach Insurance, your firm would typically be covered for…
- Denial of service attacks or inability to access websites or systems.
- Unauthorized access to, use of, or tampering with data.
- Disclosure of confidential data (invasion of privacy).
- Loss of data or digital assets (malicious or accidental).
- Introduction of malicious code or viruses.
- Cyber extortion or terrorism threats.
- Personal media injury (defamation, libel, or slander) from electronic content.
- Regulatory action, notification, or defense expenses.
- Crisis management and public relations expenses.
- Data or system restoration.
- Business interruption expenses.
If you are rethinking your insurance, great! Most small businesses are not adequately covered against data breaches. It’s better to be safe than sorry. You and your insurance agent can put together a policy that meets your business’ data breach liability needs.