Is Cyber Insurance Worth It? A Comprehensive Analysis

According to Check Point Research’s 2021 Cyberattacks report, there has been a significant rise in cyberattacks, peaking at 925 attacks per week per organization globally.

It’s not just tech companies or banks; businesses of all sizes and industries need cybersecurity insurance.

In 2021, education/research had the highest attack volume, averaging 1,605 attacks per organization per week (75% increase from 2020), followed by government/military (1,136 attacks per week, 47% increase) and communications (1,079 attacks per week, 51% increase).

Given the prevalence of cyber threats, many businesses wonder if cybersecurity insurance is worthwhile.

However, in today’s world of identity theft, viruses, and breaches, it’s becoming increasingly crucial.

Cyber security insurance
Cyber security insurance: Photo source (Fortinet)

What is Cybersecurity Insurance?

Cybersecurity insurance, also known as cyber liability insurance, safeguards against cyberattack losses.

It includes various coverage types: first-party, third-party, and cyber extortion.

Some insurers offer additional options like crime policies and device protection.

Policies target different businesses, from small to large enterprises.

It’s not mandatory and can be tailored to your industry and needs, with premiums based on your vulnerability to cyber risks.

Consider extras like product liability and D&O protection.

How Does Cybersecurity Insurance Work?

Cyber insurance reduces cyber liability and risk from threats like data breaches, malware, and DoS attacks.

Despite its affordability, medium to large businesses often choose it for security reasons.

How to buy cyber insurance?

Many companies that provide E&O (errors and omissions) insurance, commercial liability insurance, and commercial property insurance also offer cyber insurance coverage.

Which Businesses Need Cybersecurity Insurance?

Cybersecurity insurance is essential for enterprises heavily invested in IT or dealing with sensitive data like credit card numbers.

It’s crucial for businesses relying on IT infrastructure and handling private or confidential information, such as financial or healthcare data.

It provides external coverage for breaches, protecting your budget.

Businesses heavily reliant on IT systems should consider it to mitigate downtime costs without compromising customer data.

What does cyber security insurance cover?

Key cyber insurance coverage includes:

  1. Third-party indemnification: Covers damages to other entities if your data breach harms them.
  2. Data breach notification: Informs affected parties (customers, banks, government) when sensitive information is compromised.
  3. Network security audit coverage: Addresses software vulnerabilities found in audits.
  4. Defense costs: Helps with expenses after hacker attacks, like ransomware.
  5. Remediation assistance: Covers legal fees for threat response and recovery, addressing reputational damage.
  6. Credit monitoring: Offers credit monitoring services if data ends up on the dark web.
  7. Breach containment: Limits damage by isolating affected computers to prevent further intrusion.

Benefits of Cybersecurity Insurance

Cybersecurity insurance offers four key benefits:

  1. Legal expense coverage for cyberattack-related damages.
  2. Crisis management support to prevent further harm post-attack.
  3. Coverage for regulatory fines and penalties resulting from financial losses.
  4. Fills gaps in general liability policies, covering damage from viruses, ransomware, and other cyber threats. It’s a vital part of your business continuity strategy, facilitating quick recovery and cost savings.

Disadvantage of Cyber Liability Insurance

Cybersecurity insurance can be costly for SMBs, adding overhead.

It’s not a replacement for strong cybersecurity measures and doesn’t cover property damage, intellectual property, or security costs.

Should Enterprise Buy Cyber Liability Insurance?

Indeed, cybercrime is a genuine concern for businesses reliant on digital content.

Cybersecurity is costly, but insurance can protect against data breaches and attacks.

Restoration and backup expenses can add up, making insurance a cost-effective choice.

Standard business liability policies may not cover such losses, so cyber insurance is essential for companies dependent on computer systems.

It limits financial exposure and ensures losses from security breaches are covered externally.

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