Data Breach Coverage Insurance and Why Your Business Needs It

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Major corporations are not the only ones at risk for cyber attacks. Even small businesses are susceptible to data breaches. In fact, research shows that 1 in 3 data breaches occur in businesses that have less than 100 employees. All types of businesses that process payment transactions or handle customer data online are at risk of a data breach. Fortunately, there are ways to reduce the chance of an attack on your system. Learn about data breach coverage insurance and why your business needs it.

What Is Data Breach Insurance?

A cyber attack can have devastating effects on your business. Data shows that in 2016 alone, U.S. businesses and government agencies experienced a record breaking 1,093 data breaches. This was a 40 percent increase from 2015. Data breach coverage insurance is specifically designed to help support and protect businesses if they become victims of cyber attacks. Data breach insurance provides businesses of all sizes with comprehensive coverage that can help save them from financial ruin in the event of a malicious breach of data.

There are a number of circumstances in which data breach insurance can be helpful. For example, data breach coverage can offer businesses protection if a hacker attempts to hold a business to ransom. If a business is forced to pay the hacker, the insurance will typically cover the cost of the ransom while also helping you to better manage the situation in the proper way. Other types of support may include providing businesses with legal advice, sending notifications to clients, hiring forensic investigators, and offering support to customers who may have been affected by the breach via tools like credit card monitoring. With the proper support you can move past a data breach and prevent an extended delay in operations.

What Does Data Breach Insurance Cover?

Data breach insurance helps cover the costs associated with a data security breach. It can be used to support and protect a wide range of components, such as public relations, protection solutions, and liability. It may also cover any legal fees accumulated from the breach. You probably already know how expensive lawsuits can be. When facing a data breach lawsuit, you could be stuck paying for court costs, lawyers’ fees, settlements, and a judgement if you lose in court. Data breach coverage insurance can help cover these costs and potentially prevent a lawsuit from ruining your finances.

a man with a hooded jacket shown behind lines of code which show an imminent cyber attack on a small businessThere are various types of data breaches and cyber attacks covered by data breach insurance. While most people think of hackers when they hear about a data breach, other types of cyber incidents can also occur. Some of the most common types of data breaches typically covered by insurance include system malfunctions, malware attacks, data theft by employees, insider data breaches, employee mistakes, and ransomware. However, your amount of coverage will depend on the level of insurance you have.

What Are First- and Third-Party Losses?

Just last year, Equifax, one of the biggest consumer credit reporting agencies, experienced a data breach exposing data from more than 147 million consumers. The high-profile data breach led to criminal investigations, class action lawsuits, and of course regulator scrutiny. This type of breach can happen to any business and the outcome can be detrimental if you do not have the proper precautions in place.

Data breach coverage insurance often covers both first- and third-party losses. With first-party losses, a business would typically receive funds for notifying clients of the breach, launching a public relations campaign, purchasing credit monitoring services for customers affected by the breach, and compensating the business for any income lost during the fallout of the cyber attack.

Third-party insurance coverage typically covers people and businesses that are deemed responsible for the systems that allowed the data breach to occur in the first place. Businesses may choose to file a claim with its third-party insurance policy if certain events occurred, such as the failure to prevent or anticipate the transmission of a virus to a third party, infringement to the right to privacy, or the disclosure, misuse, or theft of private information that is stored on a private network.

Why Do Businesses Need Data Breach Coverage Insurance?

Data breach coverage insurance is one of the most effective ways that businesses can mitigate the risk of civil litigation and associated penalties when a data breach occurs. When a data breach does happen, you can gain access to professionals who can help you respond quickly to the situation to minimize the impact of the data security issue. Remember that when a cyber attack occurs, your reputation is at risk. There are also important laws and regulations that you will want to address to avoid certain penalties and to reduce your risk of a lawsuit.

a business team that are discussing their recent cyber attacks on the company and are deciding on whether or not to purchase data breach coverage insuranceMost business owners understand that having confidential customer information on their computer system makes them a direct target for hackers and similar types of data breaches. However, while there is plenty of information out there that detail the seriousness of these cyber attacks, many companies continue to fall short by not taking adequate measures to protect their business. With data breach coverage insurance, you can receive immediate help with all response-related expenses and lower your risk of costly lawsuits. You can also have your insurance policy tailored specifically to the needs of your company to ensure that you are adequately protected.

Learn More About Data Breach Coverage Insurance

While you never expect a cyber attack to happen at your workplace, there is always a risk that your company could become hacked or experience a theft or system malfunction. No matter how secure you think your system is, no computer or network is ever completely safe. With cyber attacks at an all-time high, it is important than ever to invest in data breach coverage insurance for the benefit of your business, your employees, and your customers. For more information about data breach insurance or any other type of business insurance, contact a professional benefits consultant at Business Benefits Group today.