Let's talk about Shelby. Shelby runs a successful online artisanal soap store, priding herself on quality and attention to detail. So when an email lands in her inbox from a customer complaining about a recent purchase, she's ready to make things right.
But something feels off. The email is written in broken English, and the customer is demanding a refund without returning the product. Shelby digs a little deeper and discovers her website has been hacked. An attacker has stolen customer data and is using it to make fraudulent purchases.
Panic sets in. The cybercriminals have locked her out of her own website and are demanding a hefty ransom to release it. How does she even begin to recover from this?
Stories like Shelby’s show exactly why cyber insurance is a critical part of any business's security plan. It’s not just about protecting your finances—it’s about protecting your reputation and your future.
Understanding cyber insurance coverage
Cyber insurance isn't a one-size-fits-all product. Coverage is typically broken down into two main categories: first-party and third-party.
First-party coverage
This covers the direct financial losses your business suffers from a security incident. Key areas include:
Business Interruption: Compensates for lost income and extra expenses if your business has downtime after a cyberattack.
Data Recovery: Covers the cost of restoring, recreating, or recovering data that has been lost, stolen, or corrupted.
Cyber Extortion: Reimburses for ransom payments made to end a ransomware attack or other extortion threat. This is not always the case, keep in mind every policy is different and you should read the fine print.
Incident Response Costs: Covers fees for forensic investigators, legal counsel, and PR firms to manage the crisis.
Third-party coverage
This protects you from claims and lawsuits filed by others (like customers or partners) who were affected by a security breach at your company. This includes:
Privacy Liability: Covers costs related to lawsuits from customers whose personally identifiable information (PII) was compromised.
Network Security Liability: Protects against claims that your security failure caused financial harm to others, like spreading a virus to their systems.
Regulatory Fines and Penalties: Covers fines from regulatory bodies (like under GDPR or CCPA) resulting from a data breach.
Media Liability: Addresses claims of copyright infringement, defamation, or plagiarism related to your online content.
In this guide, we will get into why cyber insurance is a non-negotiable for your business's cybersecurity strategy.
What Is Cyber Insurance?
Think of cyber insurance as a seatbelt for your business's online security. You wouldn't drive without one, so you definitely shouldn't navigate your connected business without this financial protection in case of a cyberattack.
A policy can cover a range of expenses your business might face if your data is compromised, including:
Extortion payments from ransomware attacks
Notifying customers of a security breach
Legal fees and fines
Hiring experts to recover lost data
But let's be clear: cyber insurance is a backup plan, not your main line of defense. You still need solid cybersecurity measures in place to prevent an attack from happening in the first place.
How Does Cyber Insurance Work?
To get the right coverage, insurers will thoroughly vet applicants to understand their financial risk. This process often includes:
A full security audit
A review of your breach history
An evaluation of data backup and disaster recovery plans
An assessment of company security policies
By assessing these factors, insurers can offer a policy tailored to your business’s specific needs, ensuring you get the right level of coverage.
Why Consider Cyber Insurance?
If you fall victim to a cyber attack, the fallout can be devastating, and it's not just about losing data.
You could face legal fees, lost income due to business interruption, and fines and penalties. With cyber insurance, you can protect yourself and your business from these costs.
Cyber insurance can cover expenses related to investigating and mitigating the attack, recovering stolen data and notifying customers. It can even cover crisis management and public relations costs, ensuring that your business can recover as quickly as possible.
Understanding cyber insurance coverage
Cyber insurance isn't a one-size-fits-all product. Coverage is typically broken down into two main categories: first-party and third-party.
First-party coverage
This covers the direct financial losses your business suffers from a security incident. Key areas include:
Business Interruption: Compensates for lost income and extra expenses if your business has downtime after a cyberattack.
Data Recovery: Covers the cost of restoring, recreating, or recovering data that has been lost, stolen, or corrupted.
Cyber Extortion: Reimburses for ransom payments made to end a ransomware attack or other extortion threat. This is not always the case, keep in mind every policy is different and you should read the fine print.
Incident Response Costs: Covers fees for forensic investigators, legal counsel, and PR firms to manage the crisis.
Third-party coverage
This protects you from claims and lawsuits filed by others (like customers or partners) who were affected by a security breach at your company. This includes:
Privacy Liability: Covers costs related to lawsuits from customers whose personally identifiable information (PII) was compromised.
Network Security Liability: Protects against claims that your security failure caused financial harm to others, like spreading a virus to their systems.
Regulatory Fines and Penalties: Covers fines from regulatory bodies (like under GDPR or CCPA) resulting from a data breach.
Media Liability: Addresses claims of copyright infringement, defamation, or plagiarism related to your online content.
Common Cybersecurity Requirements
Want to qualify for a policy? Insurers will expect you to have specific security measures in place.
Endpoint Detection and Response (EDR): Continuously monitors all devices on your network to detect, investigate, and respond to threats. Insurers require EDR because it provides comprehensive visibility and response capabilities.
In the market for an EDR solution? Check out The Straightforward Buyer's Guide to EDR.Security Awareness Training: Employees can be prime targets for attackers. Regular employee awareness training teaches them how to spot and avoid malicious content. Insurers need to know your team is equipped to protect sensitive information.
Multi-Factor Authentication (MFA): Requiring at least two forms of identification adds a critical layer of protection, making it much harder for unauthorized users to access sensitive data. It's a non-negotiable for most insurers.
Patching High/Critical Issues: The longer a vulnerability is left unpatched, the more time attackers have to exploit it. Timely patching is essential for reducing your risk.
Robust Backups: Backups protect against human error, hardware failures, and cyberattacks. You need a solid data backup policy and a regular schedule for testing those backups.
Endpoint Detection and Response (EDR)
Endpoint Detection and Response (EDR) is often a requirement for cyber insurance because it is a comprehensive endpoint security solution that can detect, investigate, and respond to cyber threats.
EDR works by continuously monitoring all devices in your network, collecting process data and analyzing it to identify any suspicious or malicious activity. If a threat is detected, EDR alerts security personnel, who can then respond and remediate the threat.
By requiring EDR, insurers help ensure that your business has the necessary tools to detect and respond to cyber threats, which can help prevent costly data breaches and other security incidents.
💡 In the market for an EDR solution? Check out our Ultimate Buyer's Guide to EDR.
Security Awareness Training
Just like a bullseye in a game of darts, employees can become prime targets for cyber attackers.
Regular security awareness training teaches employees how to spot and avoid malicious content, which is crucial for any good defense.
Cyber insurers often require this kind of training to be implemented in businesses because it's important that all employees are well-equipped with the knowledge to help protect sensitive information.
Effective security awareness training should include educational content relevant to each employee's role, consistent training and messaging, testing to confirm understanding and measuring employee participation to ensure everyone is on board.
Multi-Factor Authentication (MFA)
Multi-factor authentication (MFA) is another security measure that helps protect against cyber attacks.
By requiring at least two forms of identification, MFA adds an extra layer of protection, making it more difficult for hackers and unauthorized users to access your sensitive information. This is why cyber insurance companies often stipulate it as a common and important requirement.
MFA ensures that even if a hacker gains access to one form of authentication, they will still need to provide another form of verification to gain access.
Patching High/Critical Issues
When it comes to patching known vulnerabilities or critical issues, time is of the essence.
The longer you wait, the more vulnerable your systems are to be exploited by attackers who will capitalize on those vulnerabilities.
Hackers can use ransomware and other malware to attack your system through these vulnerabilities, putting your company and customer data at risk.
By patching these vulnerabilities as soon as possible, you can reduce the window of opportunity for attackers and better secure your systems against potential breaches.
Robust Backups
Backups protect against human error, hardware failures, cyber attacks, and other unforeseen events.
The key here is to have a data backup policy and regularly check backups.
Top cyber insurance providers: A comparison
Finding the right provider can be tough. Here’s a quick look at some of the top players in the game.
Provider | Best For | Key Features | Pricing Range (Annual) |
Chubb | Large Enterprises | Comprehensive coverage, global reach, high policy limits. | $$$$ |
Hiscox | Small Businesses | Tailored policies for SMBs, includes employee training. | $$ |
Travelers | Mid-Sized Businesses | Flexible options, strong risk management services. | $$$ |
Coalition | Tech-Focused Companies | Proactive security tools included with the policy, real-time risk assessment. | $$$ |
At-Bay | Digital Risk Management | Combines insurance with active security monitoring to prevent incidents. | $$ |
Pricing is an estimate and varies based on your company's size, industry, revenue, and security posture.
Frequently asked questions (FAQ)
What doesn't cyber insurance cover?
Policies typically exclude losses from future profit projections, costs to improve internal technology systems after an incident, and reputational harm that doesn't result in a direct financial loss. Always read the fine print of your specific policy.
How much does cyber insurance cost?
Costs vary widely depending on your industry, revenue, the amount of sensitive data you handle, and your current security posture. A small business might pay a few thousand dollars annually, while a large enterprise could pay tens or hundreds of thousands.
Is cyber insurance mandatory?
While not legally required by a federal mandate, some contracts with clients or partners may require you to have it. Regardless, in today's threat landscape, it's a business necessity.
How do I file a claim?
If you experience an incident, you should contact your insurer immediately through their claims hotline. They will guide you through the next steps, which typically involve engaging a pre-approved incident response team to assess and contain the damage.
The bottom line
Cyber threats are on the rise, and without the right protection, your business is a sitting duck.
Implementing strong cybersecurity measures and investing in the right cyber insurance policy gives your business a fighting chance.
Stay ahead of the threats. Learn how the Huntress Managed Security Platform can help you implement strong cybersecurity measures and get your business ready for whatever comes next.
