What Does Cyber Insurance Cost

In today’s digital landscape, businesses face constant cyber threats.

Having an online presence is essential, but it also makes companies vulnerable to cyberattacks.

Cyber liability insurance, offered by insurers, helps businesses transfer the financial and reputational risks associated with cybercrimes to a third party.

This insurance is crucial due to the rising number of cyberattacks, providing a level of protection when best practices alone are not enough.

Cyber insurance cost
What does cyber insurance cost: Photo source (Fortinet)

Who Needs Cyber Liability Insurance?

In today’s business world, nearly every business needs cyber liability insurance.

If you store sensitive data or conduct electronic transactions, it’s essential.

Contrary to a common myth, small businesses are not exempt from cyberattacks; in fact, they are increasingly targeted.

The trend is expected to rise, especially due to the COVID-19 pandemic, leading to more businesses needing protection.

Determining the right type and cost of cyber insurance is crucial.

First-Party vs. Third-Party Cyber Insurance

Cyber liability insurance comes in two types: first-party and third-party.

First-party insurance covers your business expenses in a cyberattack, including forensic analysis, client notifications, and loss of income.

It’s crucial for any business dealing with electronic data.

On the other hand, third-party insurance protects businesses providing professional services, covering legal fees and settlements if another company sues you for errors leading to losses.

Choose the right type based on your company’s needs.

Common Types of Cyber Liability Claims

Cyber insurance claims mostly stem from three types of attacks: hacking, social engineering, and malware attacks.

Hacking involves unauthorized access to your system, leading to expenses like legal defense and regulatory fines covered by cyber policies.

Social engineering relies on tricking employees into granting access to data, emphasizing the need for staff education.

Malware attacks, including ransomware and spyware, vary in infiltration methods, making recovery costly and time-consuming.

Cyber insurance helps mitigate these risks.

How Much Does Cyber Insurance Cost?

Your cyber insurance cost is influenced by your business type and level of cyber risks.

A study showed the average cost in 2019 was $1,500 per year for $1 million coverage with a $10,000 deductible.

Actual costs vary based on specific business factors.

What Affects Cyber Insurance Cost?

Let’s take a look at some of the key business characteristics insurers will need to investigate and identify before being able to calculate your business’s cyber insurance cost and premium.

Size and Industry

Company size affects phishing and social engineering risk. Industry determines cyber insurance needs based on data stored, categorized into low, medium, or high-risk tiers.

Amount and Sensitivity of Data

Low-risk businesses pay less for cyber insurance, e.g., local shops.

High-risk firms like hospitals, storing sensitive data, pay more due to increased vulnerability.

Annual Revenue

The more money your business makes, in the eyes of the insurer, the greater chances are that a cybercriminal will want to target your company.

Therefore, the more revenue your business generates, the more you’ll have to pay for cyber liability insurance.

Strength of Security Measures

Businesses preventing cybercrime get lower premiums.

High-risk firms educate staff, hire experts, and establish security measures to prepare for potential cyberattacks.

Policy Terms

Premiums depend on coverage limits and deductible. Higher limits mean higher premiums.

Deductible is the business’s responsibility in covered cyberattacks.

Consult brokers to choose the right options; lower deductible means less payment in case of cybercrime but higher premiums.

How to Keep Your Cyber Insurance Cost Down

By focusing on cyberthreat prevention and management, businesses can effectively reduce their insurance costs.

Furthermore, when there are fewer claims, insurers offer more favorable premiums.

It is essential to educate employees about various cyberattacks and provide training to help them recognize phishing and social engineering attempts.

Additionally, having in-house security teams dedicated to safeguarding the business from cyberthreats is a wise investment.

Equally important is ensuring that business partners and third-party entities with network access are well-protected, thus enhancing overall risk mitigation efforts.

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