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After buying multiple and expensive cyber security products, engaging a remote workforce, and building a global customer base, many companies wonder if they should also pick up some cyber coverage. Many organizations need cyber insurance to comply with notification regulations in case of a data breach—and it would also help them recover financially in the event of an attack. 

With organizations increasingly distributed and a myriad of potential entry points for an attacker, being protected is a must. So, what is cyber insurance for the digital era, and how does it work? 

This post will give you an overview to get you started. 

What is cyber insurance?

Cyber insurance mitigates an organization’s financial risk in case of a data breach, ransomware attack, or other cyber security incidents. 

Early cyber insurance policies consisted of extra liability insurance added to a standard business policy, but the complexity of cyber-attacks made it necessary to create a specific policy. Modern agreements usually cover damage and recovery costs, but some extend to investigations, forensics, fines, lawsuits, and even ransomware payments. 

The cyber insurance market 

The cyber insurance market is growing fast.  During the pandemic, digital processes moved online, remote work increased—and so did cybercrime. Let’s review some statistics about the rise of cyber insurance: 

 

  • Cyber insurance is expected to reach over $20 billion by 2025, an increase from $7 billion in 2020. 


(Source: Global Data)

  • The exponential rise in cyber-attacks, a 50% increase since 2020, drove the need for cyber insurance. 
  • The cost of cybercrime is expected to reach $10.5 trillion by 2025
  • According to Google Trends, interest in cyber insurance is on the rise in the last decade. 

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Types of cyber insurance policies

There are three main cyber insurance types: third-party liability coverage and first-party coverage are the most common. The third kind of policy covers technology errors and omissions. 

Liability coverage

If your customers’ information is compromised in a cyber attack, liability coverage protects you from their lawsuits and associated expenses, like: 

  • Attorney fees
  • Settlements and court costs
  • Non-compliance fines

First party coverage

This covers your org if it’s hacked, providing financial assistance for recovery costs of a cyber attack. First-party policies usually cover: 

  • Investigation of the incident
  • Loss of revenue because of business interruption
  • Ransomware payments according to coverage limits
  • Customer notification and anti-fraud services
  • Systems reparation 

The most common first-party coverage is data breach insurance, which protects an organization financially if confidential information is stolen. Companies of all sizes can be victims of a data breach.  

Technology errors and omissions

This type of policy, also known as “Technology E&O” is useful to protect IT businesses if one of their products is involved in a cyber incident. It’s similar to cyber security liability insurance in that it pays legal fees, court costs, and settlements, only in specific circumstances related to faulty products or services. 

Do you need cyber insurance?

While all organizations may benefit from cyber insurance, some use cases need it more. How do you know if that’s you? If your organization falls into one of these categories, you need cyber insurance: 

 

Case 1: Your org stores sensitive data online or on your servers

If your business stores personal information, such as credit card or social security numbers, attackers will be interested in it. If you store only your own financial information and some customer data, you should have first-party coverage. 

 

Case 2: Your org has a large customer base

If you manage sensitive data from a large number of customers, get cyber insurance. Liability or data breach insurance may help cover the recovery costs and regulatory fines if your business is a victim of a data breach. First-party policies may cover notification costs. 

 

Case 3: Your org has valuable assets and high revenue

Mature businesses with valuable assets may have considerable losses in a cyber incident. A cyber insurance policy can help cover loss of revenue as well as ransom costs. 

What cyber insurance covers (and what it doesn’t)

Remember, cyber insurance doesn’t cover all cyber security incidents and risks. Here’s what’s typically covered and what isn’t: 

Coverage No Coverage 
Notification costs Loss of company value caused by intellectual property theft
Investigation Loss of potential profit 
Income loss Property damage
Ransom payments Self-inflicted cyber incidents
Fines  Intellectual property 
Judgment settlement Identity theft
Legal costs Poor security processes
Human error
Insider attacks
Pre-existing vulnerabilities

 

What do I need to look for in a cyber insurance policy?

Every insurance vendor has a different combination of elements in their policies. However, there are seven basic elements you should look for in a cyber insurance policy: 

  • Notification expenses
  • Legal expenses
  • Regulatory fines 
  • Incident investigation expenses
  • ID Theft Repair
  • Liability costs
  • Public relations expenses to repair reputation damage. 

How much cyber security coverage do you need?

This would depend greatly on your business use case. Most small organizations use a standard $1 million cyber security coverage, but for a larger business, this would not be enough. An insurance agent can help determine the right level of coverage for your business. 

Is cyber insurance enough coverage?

For all its benefits, cyber insurance is not enough protection against cyber attacks. Simply put, it acts to help repair the damage caused by an attack, but it won’t prevent you from getting attacked. You need a robust line of defense to prevent cyber attacks. 

Security tools like XDR cover what insurance doesn’t

Faced with the increase in data breaches, many organizations opt to expand their cyber insurance coverage. While doing so is smart, cyber insurance cannot take the place of defense tools. 

Extended detection and response (XDR) is a cyber security approach that delivers holistic protection against cyber attacks. A robust XDR solution has the following capabilities: 

  • Identifies hidden threats 
  • Tracks threats across multiple components 
  • Increase the efficiency of threat investigation 
  • Detects and responds faster to active threats
  • Provides full visibility of files, networks, hosts, and users

 

Using an XDR can even help reduce your insurance premium. The encompassing protection of an XDR solution significantly lowers the risk of a security incident, bringing a consequent reduction of legal claims. Other benefits of an XDR include: 

  • Improved prevention
  • Granular visibility
  • Greater control over access
  • Increased alert accuracy
  • Effective response

Check out Cynet 360 AutoXDR

Having a good insurance policy is important, but a robust security system that prevents attacks effectively is your best starting point. Cynet 360 AutoXDR is the first autonomous, end-to-end, fully XDR platform. It’s integrates endpoint, network, and user attack prevention, giving a holistic and comprehensive defense solution. 

Want to learn more about how Cynet can help you prevent the need for using your cybersecurity insurance? Let’s chat.