One of the essential insurance covers for a tech business is cyber liability. Cyberattack is among the greatest risks for most, if not all, businesses.
In the current business environment, where many companies are either contemplating letting their employees work from home on full time or a few days a week, there will be a great need to access the internet. Employees will need access to the company’s files or servers to work away from the physical office location.
Now, more than ever, companies need to protect themselves against cyber attacks. With most of the transactions happening online, one cyber attack would cause many financial and legal losses.
Taking cyber liability cover for your business could be the right move, but startups need to understand the cyber liability insurance basics. How does it work? What areas does it cover?
What This Insurance Policy Covers
Cyber liability insurance is an insurance cover that protects businesses from cyber attacks. A cyber attack could compromise your business’s operations by giving the attacker access to your financial records, supplier and customer information, or any necessary information that could compromise individuals’ or organizations’ security that work with your business.
Mostly, cyber liability insurance covers security risks, privacy risk, and operating risks. These three risks are covered using five main policy agreements:
- Privacy liability
- Network security
- Errors and omissions
- Media liability
- Network business interruption
Privacy Liability Policy
This is ideal for a business with personal information for individuals or companies they deal with. The privacy liability cover protects your company from the risk of losing such private information through an attack, which could compromise the affected parties’ security.
Costs arising from such an incident include legal fees during a litigation process or paying settlement fees to those affected by the data breach. Other legal fees include law enforcement penalties by the industry regulators for failure to protect your consumers’ or suppliers’ privacy.
Network Security Policy
A network security policy covers your startup if there is a data breach, ransomware, malware infection, a compromise of your business emails, or cyber extortion. The cover mostly has first and third-party costs arising from a network risk, including:
- IT forensics fees
- Legal expenses
- Data and identity restoration costs
- Public relationship management fees
- Costs arising from notifying consumers & other parties of the breach
- Call center set up costs
Errors and Omissions Policy (E&O)
Whatever services your startup offers, a cyber attack can keep you from delivering in time. It could also affect your delivery results if you manage to deliver the job at all. An errors and omissions policy protects you and your startup from any legal costs on errors or omissions in the work you deliver from cyber attacks.
Such a cover is essential to a startup dealing with software, consulting, or professional services like accountants, financial advisors, lawyers, among others.
Media Liability Policy
Although this is a type of E&O policy, it is best for businesses in the media business. It covers infringement on intellectual property but does not include patent infringement. That includes publishers, authors, advertising agencies, entertainment companies, broadcasters, or any business that creates content.
Network Business Interruption
Will the operations of your startup stop or stall in case of a cyber attack? If yes, that means your startup is overly reliant on technology, and any downtime from an attack on the network will lead to losses.
A network business interruption policy will help recoup any lost profits and expenses incurred during the whole incident. Most policies will pay for losses arising from:
- A system failure, like human error or failed software
- Security error or failure, like hacking
What To Know Before Buying a Policy
While cyber liability insurance might have one or a blend of these policies, there is no one-size-fits-all cover. Every business is unique, regardless of the industry. It is essential to have an insurance agent and other related parties advise on your startup’s best policies, depending on the specific risks it faces.
Insurance companies often customize policies to suit their client’s needs, and that is what you should aim for your startup.
It is also essential to note that cyber liability insurance does not cover the below:
- Loss of value arising from intellectual property theft
- Potential of future profit losses
- Betterment, which is the cost incurred to improve your startup systems after a cyber attack