What to Consider Before Purchasing Cyber Insurance in 2023

If you follow cybersecurity trends, you may have heard cyber insurance mentioned at some point. Cyber insurance functions similarly to liability insurance but for a business’s digital presence rather than its physical property.

According to the Federal Trade Commission, cyber insurance should include coverage for data breaches, cyberattacks from anywhere in the world on your data, cyberattacks on third-party vendors that hold some of your data, and digital effects of terrorist attacks. Some policies even include a “duty to defend,” which means the provider will defend you in a lawsuit. Other features to look for include a 24-hour breach hotline available to you and coverage provided more than any other applicable insurance you have.

While cyber insurance covers data, it does not necessarily cover the hardware related to it. For example, if a cyberattack causes a computer to be rendered useless, the computer would still be covered by liability insurance rather than cyber insurance. Generally, any data explicitly related to the business that holds the policy is covered.

If you follow cyber security, cyberattacks can be highly costly to a business. As such, cyber insurance is almost always a good idea. The circumstances in which cyber insurance may not be necessary are if at least two of these conditions are true:

• The business has almost no digital presence.
• The business is hardly ever in digital contact with third parties.
• The business follows strict cybersecurity best practices such as the Zero Trust Model and frequent password expirations.

Even the combination of the last two conditions comes with a small (but noteworthy) risk of significant financial issues from cyberattacks without cyber liability coverage. If a cybersecurity breach costs less in the long term than cyber insurance, cyber insurance is probably unnecessary. That is rarely the case, though, hence why cyber insurance exists.

Though many cyber insurance policies offer similar coverage, several considerations can help a business choose the right one. If the business handles a large amount of third-party or individual data, “duty to defend” policies are essential to avoid high legal costs due to litigation after a security breach.

There’s another important consideration when beginning a cyber insurance policy. It may be helpful to choose the insurers who ask the most questions and seem to understand your business best over those with more generalized policies.

Because of the massive expenses that can come with a cybersecurity breach, cyber insurance is almost always a good idea for a business. Not all policies are created equal, so researching and choosing a policy that fits your business’s needs can be far more helpful than choosing the first cyber insurance policy you see.