Cyber insurance was created in order to address the increasing worry regarding cyber risk. Cyber risk is comprised of many different incidences, which can wipe out your entire business. Only the proper insurance will protect your businesses from cyber risks.
What is Cyber Insurance?
Cyber insurance covers the loss of data, destruction of databases and or software, and interruption of business services that occur due to hacker attacks, denial of service (DoS) attacks, malfunctioning software or hardware, viruses, and other forms of malicious and inadvertent online attacks.
Nowadays, about 29% of all American companies own insurance that protects them from cyber security risks. This is almost a five percent jump from the 25% of companies that possessed it back in 2005. Since almost every company utilizes some sort of database, businesses are vulnerable to losing business due to stolen personal data, network downtime, or other negative events.
These attacks represent just the tip of the iceberg. Phishing attackers, malicious worms, Trojans, viruses, and spybots also present serious threats to businesses.
Third Party Audits and Approval for Coverage
Most cyber insurance policies require that the insured party go through a third-party audit before being approved for coverage. This audit surveys a company’s existing cyber security practices.
Some insurance companies have developed standards by which they set premiums. These factors include the size of the company, data encryption, the amount of data that the company holds on file, the number of employees, the number of persons authorized to access the data or database, and previous claims history.
Premiums for cyber insurance are quite affordable. In fact, a typical policy for a small business usually runs between $1,000-$1,500 in annual premiums. In exchange, the company receives up to $100,000 in coverage.
Any company that is considering purchasing cyber insurance needs to analyze their existing business insurance policy. It’s possible that cyber claims are covered in the existing policy. This isn’t likely, but it’s important to check. Most new business insurance policies exclude cyber-related claims, hence, the rising popularity of the specialized insurance.
Necessity of Cyber Insurance for Contractors
Freelancers, IT professionals, and independent contractors should also equip themselves with good cyber insurance. These contractors are vulnerable to litigation, especially since they are usually tinkering with precious data. Contractors can become a scapegoat for a company that finds itself with a malfunctioning database. No one is flawless, so cyber insurance has become a necessity for any independent contractors who works in IT or web development.
While many insurance companies are now offering cyber insurance, it’s important to be very discriminating when choosing your policy. It’s wise to only select an insurance company with a proven track record in insurance. Some insurance companies even specialize in this form of insurance.
You’re better off with an insurance company that knows the ins and outs of data loss protection and electronic coverage.
Exercise Prudence Regarding Your Data
Businesses house their most important and precious data in computers, online systems, and databases. As a result, it’s extremely important to protect these troves of information. Find a policy that will cover you no matter what happens so that you can focus on running your business.