In today’s world organizations rely on computer systems and data for pretty much everything, including mission-critical processes and interactions with customers. And given the relentless increase in cybersecurity threats, this means that organizations’ need to protect themselves and their customer data from such threats is paramount.
The average cost of a single data breach in the United States is now $9.44 million. That’s a lot of money under any circumstance, so it should be no surprise that the demand for cyber insurance is surging; businesses need a way to protect themselves from the financial hit of cyber attacks.
That insurance coverage can come in several forms, such as data breach insurance and cyber liability insurance. So what are the differences between those types, and do businesses need cyber insurance or data breach insurance?
What Is Data Breach Insurance Coverage?
Data breach insurance covers financial losses and costs resulting from a breach of data security. This may involve costs for notifying affected parties, offering credit monitoring services, and defending against any resulting lawsuits or regulatory enforcement. Some policies may even cover the cost of hiring a cybersecurity professional to help remediate the breach and prevent future attacks.
Data breach coverage helps organizations recover from, and minimize the risk of, long-term reputation damage, business interruption, and financial loss.
What Is Cyber Liability Insurance?
Cyber liability insurance covers financial losses and damages from a wider range of cyber incidents, such as:
- Malware attacks
- Ransomware attacks
- Data theft or loss
- Insider attacks
- Other security incidents
These insurance policies help organizations mitigate financial losses and legal expenses that may occur because of the above-mentioned events, and can also provide assistance with breach response and notification. Cyber liability insurance is typically meant for larger organizations that need more coverage to fight against cyber attacks.
Cyber liability coverage is usually a distinct cyber insurance policy that includes first-party and third-party coverages, to assure that both the policyholder and any affected parties are protected against financial losses in the event of a breach. First-party coverage encompasses expenses such as investigation costs, notification costs, and costs associated with repairing or replacing damaged or missing equipment.
Third-party coverage offers protection from legal actions against an organization that result from a cyberattack. It will cover the expenses associated with any claims against your company, such as legal representation fees, compensation paid out for settlements or court decisions, and other regulatory fines.
How Are Cyber Liability Insurance and Data Breach Insurance Different?
Data breach insurance and cyber liability insurance are related, but separate types of insurance coverage.
Data breaches, cyberattacks, and other similar situations are all included in the broader coverage offered by cyber liability insurance. Data breach insurance, on the other hand, focuses specifically on covering losses and costs that can arise from a data breach.
More simply, a cyber liability insurance policy often covers data breaches; but breach insurance will not cover cyber attacks that aren’t directly a data breach.
Do Businesses Need Cyber Insurance or Data Breach Insurance?
Businesses can benefit from having either cyber liability insurance or data breach insurance, or both, depending on their risk profile and business needs. Both cyber liability insurance and data breach insurance are important forms of coverage that can help organizations protect themselves against the financial losses and expenses that may result from cyber incidents.
That said, the decision to purchase cyber insurance or data breach insurance will depend on different factors, such as:
- Size and type of the business
- Nature of its operations
- Level of cyber security measures in place
- Type of data being handled
- Budget available
It’s vital for businesses to evaluate their risk exposure carefully and consult with insurance agents to get the appropriate insurance coverage for their needs.
Whatever insurance your organization chooses, that decision will need to be reviewed regularly to stay current with the changing policy options available. For example, it’s an open question in insurance law whether cyber attacks from groups supported by nation states are “traditional” cyber attacks (covered by insurance) or qualify as acts of war from the nation (not covered by insurance). Reviewing your needs and your risks regularly will help minimize possible coverage gaps and assure that your company is fully protected from hackers and cybercriminals.
Protect Your Data with the ROAR Platform
Data breach insurance and cyber liability insurance provide financial protection in the event of a breach. They aren’t enough, however, to be protected from cyber incidents and data breaches completely. It’s important to invest in a risk management system that gives you a comprehensive overview of your company’s threat landscape.
Reciprocity’s ROAR Platform makes cybersecurity more manageable. The platform allows you to gain insight into cyber risks, make necessary changes to protect your infrastructure, and strengthen your overall security posture.
Schedule a demo to learn how Reciprocity ROAR can help you improve your organizational risk posture.