What is Cyber Liability Insurance?
If your business handles sensitive customer data (such as credit card or bank account numbers), data breaches pose a serious threat to your financial stability. Cyber Liability Insurance protects startups against the expenses associated with a data breach, which can run into the hundreds of thousands of dollars.
A lawsuit resulting from a data breach means your business is responsible for paying legal fees, court-ordered judgments or settlements, and other court-related costs. In addition, your business will likely have to notify your customers of the breach, provide them with credit monitoring services, and invest in public relations efforts to repair your business’s image. In the absence of Cyber Liability Insurance, these costs can quickly drain a startup’s financial reserves.
When you do carry Cyber Liability Insurance, it protects your business assets by paying for a legal defense, court-ordered compensation, and other related expenses. In other words, cyber liability coverage allows you to focus on rebuilding and restoring your customers’ faith without worrying about the data breach-related expenses.
Why do I need Cyber Liability Coverage?
For many startups and small businesses, Cyber Liability Insurance is available both as a stand-alone policy and as an add-on to a Business Owner’s Policy.
The two major types of Cyber Liability Insurance are first-party coverage and third-party defense and liability coverage. First-party coverage offers financial compensation to help you address immediate customer and business needs, such as those that result when your in-house IT network goes down.
Third-party coverage protects you in the event of a lawsuit brought by a customer or partner for a data breach that your business’s actions or negligence allowed. Depending on your business’s specific needs, you may choose either or both types of coverage.
Some of the policies include additional tools and consultation services to help your business continue operating in the event of a security breach by evaluating the extent of the problem, restoring your reputation, and preventing future data breaches.