What is Data Breach Insurance and Why You Need It
A few short years ago, if someone asked if you are prepared for a data breach, you might have responded: “what is a data breach?”
A lot has changed in only a few years, when most people hardly knew what a data breach was. Today, it is shockingly common to hear about data breaches. Why the rapid change?
Recent advances in technology have helped businesses run more smoothly and efficiently. Unfortunately, this progress has also created vulnerabilities. Easier-to-use systems such as cloud-based storage make data more accessible. Businesses have made data readily available and easily shareable for employees, no matter where they are located. But more convenience increases the risk of unauthorized access to a company’s sensitive information.
If you have the type of business that stores data, you are vulnerable to a data breach. Even simple credit card information can lead hackers to your front door. That’s why more firms are looking into data breach insurance to protect their assets.
What is Data Breach Insurance (IE Cyber Liability)?
Data breach insurance protects a business that becomes the victim of a cyber-attack. If a hacker were to expose confidential client information, data breach insurance would help you pay for the associated loss. Policy specifics depend on what carrier you have and what type of coverage you have. In general, though, data breach insurance covers losses caused by a variety of attacks:
- Data Theft
- Viruses
- Malware
- Hackers
- System Malfunctions
- Employee Mistakes
There are two main types of data breach insurance: first-party and third-party insurance.
First-Party Insurance: pays for data breach response costs. If you were to get hacked, first-party insurance would cover losses such as customer notification expenses, future fraud monitoring services for your clients, or lost income from the attack.
Third-Party Insurance: pays for the costs of a lawsuit, to defend and settle litigation. If a client were to sue you for a data breach at your business, third-party insurance would cover claims against you such as any losses your client may incur, emotional distress and/or invasion of privacy.
What counts as a data breach?
A data breach can be any security incident in which your company information is accessed without permission. It could include an attack committed by an outside hacker, a breach by an internal thief, or even something as simple as an employee error. A data breach involves any exposure of sensitive information such as credit card numbers, social security numbers, healthcare information, customer lists, trade secrets or even software codes.
The most well-known kind of data breach is when a hacker breaks into a company’s systems to steal sensitive information. Other types include a hacker shutting down your company systems so you are no longer able to do business, stealing a device, accessing trade secrets, or destroying data. These are some of the worst types of data breaches. Less extreme examples include human error that compromises data, such as an employee reviewing unauthorized information in the workplace, unsecure disposal of trade secrets, or internal mishandling of documents.
How much coverage will I need?
Data breaches are a relatively new threat for most businesses. As a newer form of coverage, data breach insurance types depend on individual situations. Coverage and premiums can vary greatly by carrier. Other factors that impact the cost include your company’s annual revenue, the type of industry you work in, the number of records you are storing, and the coverage limits you are seeking.
To make sure you are getting the coverage you need, you will first need to figure out what your greatest risk is. You can quantify your risk using a Cyber Liability Self-Assessment. Don’t forget, even though small limits are available, the option for the lowest limits may not give you the coverage your firm needs. A good insurance agent will take the time to help you evaluate what you need.
How to prevent a data breach
Of course, the best place to start is to shore up your vulnerabilities. Unfortunately, there is no proven way to prevent a data breach, but here are 4 steps you can take to help protect your firm:
- Keep up to date with your malware protection.
- Conduct ongoing security tests to make sure all your systems are protected.
- Train your employees.
- Protect your data using strong passwords. (CLICK HERE to read one of our latest blogs written on “password guidelines”)
Taking these steps will not prevent an attack from occurring but can help in keeping your business safe. It is also smart to create a data breach response plan. It can be paralyzing to find out your business has fallen victim to an attack. Putting a plan in place today gives you more control in protecting your business.
Moving forward with confidence
Unfortunately, data breaches have become part of our everyday vocabulary. It’s never safe to assume that your business isn’t vulnerable. Storing any kind of data on your system brings with it an inherent risk. Want to feel more confident in your company’s security? Start by taking the above steps to protect your business. Quantify your risk and make a plan. Then explore data breach/cyber liability insurance for even more protection and peace of mind.
