What is Cyber Liability Insurance and Why is it Important?

Nearly all modern business owners have an online presence. If you collect any private information from your clients, you face specific risks and carry responsibilities to protect the data of your clients. In the event of a data breach, cyber liability insurance can protect a multitude of things ranging from financial costs to reputation with current and future clients. In addition, cyber liability insurance can help you deal with data ransom situations and communicating about the breach with clients. While it may not cover everything (which we will get into), cyber liability insurance is a great investment for those who collect and store client information.
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Cover Investigative Costs

Once you're aware of a cyber security breach, you need to know how much data has been taken, how many clients are impacted, and how the breach occurred. Your policy can help cover the costs to investigate the attack and loss of data. 

This insurance policy can also plan for future risk assessment. Documentation is key as you work with your IT team on the best computer programs to use as you recover from a cyber attack. After suffering a cyber security breach, many clients will rethink their trust in you when it comes to keeping their information safe. Being able to clearly demonstrate the steps you take after a breach will do a great deal to reduce reputation damage amongst your clients. Be sure to note any improvements you plan to make in your training program and systems to reduce the risk of hackers gaining access to your client data.​​​​​​​

Guard Your Bottom Line

If your data is breached by a hacker, your clients may need to jump through a lot of hoops such as recovering the compromised data and repairing (or replacing when necessary) the damaged computer systems. With the right insurance in place, you'll have the resources to aid clients by offering additional credit monitoring and other protections after a data breach. 

Furthermore, hackers are always changing their method of attack. As hackers change their focus and attempt to get to your client data from different directions, new laws and regulations are likely being added to cyber safety requirements. You must be constantly learning about regulations and laws that impact your business, particularly when it comes to guarding client data. 

While your IT team works to improve cybersecurity and protect both your proprietary data and your client data, consider talking with your cyber insurance professional to be fully aware of your exposure. From your marketing database to your current client list, guarding every aspect of your current data collection is critical.
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Handle a Data Ransom Situation

Hackers may also take advantage of weaknesses in your cyber shield. If your data is locked down by a hacker, you may need to ransom back your entire database system. Cyber insurance can help you repair the damage done, cover funds lost due to down time, and work with experts who can help you recapture your data. 

It's important to note that some cyber liability insurance policies can help you cover the cost of ransom fees in the event of a data lockdown. That being said, it is crucial that your business plan is also adjusted to improve your cyber security. Finding cyber liability insurance in the future that will cover the cost of a ransom may simply not be possible. 

Your current awareness and knowledge of risk may also come into consideration when you're seeking to make a claim against your cyber liability insurance. If you suffer a data breach or ransom experience and don't take steps to prevent future problems, you are functionally aware of a potential problem. Upping your cyber liability insurance may not protect you from the financial damage of future attacks if you don't make changes to your cyber protection. 

One step you can take to prevent future problems is implementing your own cyber defenses. This can range from data encryption programs to anti-malware solutions, both of which will make it harder for hackers to steal your data. 

It’s also worth noting that cyber liability insurance cannot cover lost funds caused by a data breach at another business. If you're a retailing drop-shipper and your website is well-secured, but a supplier is locked down by a serious data breach, any financial losses you suffer will not be covered by cyber liability insurance.
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Legal Protections and Support

If you're sued by an individual, another company or are the target of a class-action lawsuit, your cyber liability insurance will cover it. This insurance will not cover legal protections for any criminal charges you face.

Should you find out that someone in your organization acted directly to put the data your clients have submitted at risk, cyber liability insurance will not cover your losses. Therefore, full awareness of what your employees have access to and what they're doing with your data, from proprietary data to client data, should be included in the due diligence offered by your IT department. 

The event of a criminal loss, such as a direct action as described above, doesn't remove reporting requirements. Your clients always need to know of any cyber attacks or data breaches suffered by your business. After a criminal loss, your attorney can give you the best guidance regarding what information you cannot share, such as any information that is protected by a pending investigation.

Communication Support

After a data breach, you are required by law to notify your customers of any risks to their data. This notification process may include letters, emails, texts or phone calls. For the safety of your credibility, it may be best to share information about a data breach via all available channels. 

Your cyber liability insurance policy can be used to pay for the resources used to connect with your clients. But be aware that your cyber liability insurance policy cannot be used to upgrade the security on your website. Because it is so important to make steady improvements to your cyber security, it's a good idea to maintain careful records regarding:

• Improvements you make
• Training you offer to your employees
• Review of regulation changes

Offering a transparent record of your reviews and updates can also be helpful in maintaining positive contact with clients and investors. Cyber criminals are endlessly inventive. A data breach doesn't have to wipe out your credibility with clients or investors. Poor communication following such a data breach could damage your reputation.

Set Yourself Up for Success

Cyber liability insurance, like many forms of insurance, is one of those safety measures you really hope never to use. You can reduce your risk of facing a cyber attack by building your business on platforms that will help it scale easily and efficiently.

Building a thriving business means creating a design that can grow. As you add clients, your current contact database or client database may simply not manage the load. As you scale, take the time to work with your IT department to use tools that can be protected, updated, and monitored. 

Old, unsupported software that can't be updated and protected will hamper your ability to protect the data your clients have submitted. One hacker with malicious intent can cause a great deal of damage and cost you a lot of time just by scrambling your mailing database. 

Gathering data from your clients is the best way to market to them effectively. Clients who love your products and services may be happy to store their credit card information with your business for easy check-out. The responsibility of storing this information will require constant training and data protections. 

However, it only takes one data breach to lose credibility and send happy clients elsewhere. Rebuilding your brand will take time and resources, only part of which will be covered by your cyber liability insurance policy. Following regulatory changes, carefully choosing secure digital tools and platforms to safeguard your data that can be expanded and updated, and training employees to safely manage and protect your data is the best way to build a thriving business.