Cyber liability insurance, also called cybersecurity insurance, protects small businesses from the high costs of a data breach or malicious software attack. It covers expenses such as customer notification, credit monitoring, legal fees, and fines.

Why do small businesses need cyber insurance?
Cyberattacks and data breaches are expensive and increasingly common. Small businesses often have weak cybersecurity and large vulnerabilities, which makes them an attractive target.

A cyberattack isn't just an inconvenience – it can put you out of business. In fact, 60% of small businesses go under within six months of a cyberattack.

Cyber insurance coverage helps your business recover from financial losses caused by cyberattacks and data breaches. It can pay for credit monitoring, attorney's fees, fines, and other costly expenses.

Businesses that purchase cyber insurance typically handle:
- Credit card or bank account information
- Medical information
- Social Security numbers or driver's license numbers
- Customer names, email addresses, phone numbers, and addresses
- Cybersecurity for other businesses

What does cyber liability insurance cover?
Cybersecurity insurance covers costs associated with data breaches and cyberattacks, including the cost of recovering important data and hiring legal representation.

There are two types of cyber liability insurance coverage: first-party coverage and third-party coverage.

Most businesses need first-party cyber liability insurance to defend against their own cyber risks, especially if they handle personally identifiable information (PII) for customers.

Companies that are responsible for their clients' cybersecurity would need third-party cyber liability insurance to provide legal protection from client lawsuits.

What is first-party cyber liability insurance?
First-party cyber liability insurance, sometimes called data breach insurance, covers costs related to a data breach or cyberattack that directly impacts your business.

You can often add this coverage to your general liability insurance. It’s recommended for businesses that collect personal information, such as customer credit card numbers or email addresses.

Specifically, first-party cyber liability insurance can help cover:

- Data breach response costs
State laws typically require a response when a business is impacted by a data breach. Cyber insurance helps cover costs associated with hiring a digital forensic expert to investigate the breach, customer notifications, consumer credit and fraud monitoring services, as well as Payment Card Industry (PCI) compliance fines.

- Business interruption expenses
When a cyber incident brings necessary systems offline or otherwise grinds business to a halt, cyber insurance can help cover business interruption expenses, such as the cost of hiring additional staff or renting equipment. This includes purchasing third- party services, such as hiring a public relations manager or crisis management team.

- Ransomware payments
If a hacker encrypts private information about your company or its employees and holds it for ransom, cyber liability insurance will help with payments to meet cyber extortion demands.

What is third-party cyber insurance coverage?
Third-party cyber liability coverage helps pay for legal costs when a client sues your company for failing to prevent a data breach or cyberattack at their company. This insurance is recommended for technology businesses that make software recommendations to clients or are responsible for their network security.

Third-party coverage can be bundled with your errors and omissions policy into what is known as technology errors and omissions insurance, or tech E&O.

Specifically, third-party cyber insurance can help cover:

- Legal defense costs
If a client sues your business for failing to prevent a data breach at their business, cyber liability insurance could help cover attorney's fees and other legal costs for your defense in court.

- Settlements
If your business faces a lawsuit from a client who experienced a data breach, you and the client could decide upon a settlement out of court that would amend the damages they experienced.

- Court-ordered judgments
If a client accuses you of being responsible for a data breach at their business and sues your company, you may be legally obligated to pay for damages from any judgments in the lawsuit.

How to protect your business from cyberattacks
Cyberattacks are expensive and can take a long time to resolve. A study by IBM and the Ponemon Institute put the average cost of a data breach at $3.86 million. The average time to identify and contain a breach was 280 days.

A cyber liability insurance policy can help pay for:

- Mandatory notification of affected parties
- Investigating and fixing security flaws
- Several years of credit monitoring services for affected customers
- Loss of business opportunities
- Complete our easy online insurance application to get free cyber liability insurance quotes that meet the needs of your small business.

How much does cyber liability insurance cost?
Insureon customers pay an average premium of $145 per month for cyber insurance. The cost of cyber liability insurance is based on several factors including:

- Amount of sensitive data handled
- Your industry
- Coverage limits
- Number of employees

All of these factors will be instrumental in determining how much cyber liability insurance your small business needs.

Who needs cyber insurance?
Cyber liability insurance, sometimes called cybersecurity insurance, is a key policy for companies that operate in cybersecurity, work in a cloud environment, or handle sensitive customer information, such as credit card numbers.

While any business can fall victim to a data breach or cyberattack, a few industries are particularly vulnerable, including:

- IT professionals
- Retailers
- Healthcare organizations
- Financial service providers

What does cyber liability insurance not cover?
While cyber insurance covers costs related to cyber threats, it does have a number of coverage exclusions. For example, it does not cover data loss caused by a power outage.

Other exclusions from cyber liability insurance coverage include:

- Mistakes and oversights
Professional liability insurance, also called errors and omissions insurance, covers the costs of lawsuits over mistakes and oversights. This policy also covers legal costs related to professional negligence.

- Data loss caused by accidental damage
While a cyber insurance policy covers data lost in a software attack, it does not insure data lost from accidental physical damage to a network or storage device.

Electronic data liability coverage expands the property damage coverage in a business owner's policy (BOP) to include a loss of data caused by accidental damage to a customer’s computer, hard drive, or other data storage equipment.

- Data loss from natural occurrences
If you experience data loss during a power surge, fire, or natural disaster, you would need electronic data processing (EDP) insurance. You can typically bundle this coverage in a business owner's policy. It provides protection for data loss in your electronic data processing equipment, such as computers and backup systems.

Insurance to keep you covered