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IT Services: 5 Things to Know About Cybersecurity Insurance

Cybersecurity Insurance

As cyberattacks have increased in recent years, insurance companies have been quick to respond with a new product: cybersecurity insurance. Your company might consider picking up a cybersecurity insurance policy to protect itself in the event of a breach. However, insurance is only an additional safety net. Before signing a new insurance policy, you need to make sure your organization is secure in the first place. IT services can keep your company safe, with or without insurance.

IT Services: 5 Things to Know About Cybersecurity Insurance

1. Cybersecurity Insurance Does Not Protect Your Business From Attacks

The first and most important thing to understand about cybersecurity insurance is that it does not protect your company from cyberattacks themselves. All insurance can do is provide a level of financial protection from the damages that an attack creates. If you really want to keep your company safe, you need more than insurance. Some companies believe that they can simply buy the insurance and forget about cybersecurity altogether. That would be a huge mistake.

Cyberattacks are on the rise, and they are taking new forms. Cryptolockers and crypto-jacking software exploded in 2020 and continue to threaten companies of all sizes. Even mobile devices are vulnerable as new malware has been made to target phone operating systems. And now there are deep fakes and organized cybercrime to worry about. Overall, estimates suggest that cybercrime will cost the global economy upwards of $10 trillion in the near future. You need real protection, not just insurance.

2. Cybersecurity Insurance Imposes Rules on Your Company

Something else to consider is that, like any insurance policy, there are rules for your company to follow. Insurance companies evaluate their clients to determine their level of risk. Just as a car insurance broker evaluates a driver's record, a cybersecurity insurance broker will evaluate your whole company. If you haven't implemented good cybersecurity practices already, then you might be surprised when you see the final quote from the insurance company.

What do cybersecurity insurers look for in their evaluation?

Data security is usually the top concern. Does your company have a data policy? Does that policy conform to best practices, and is it compliant with data privacy laws like the GDPR or CCPA? Do you encrypt your files or anonymize personal information so that if your files are stolen, the data inside is still protected? Who has access to your systems, and how is this access managed? These are just some of the questions insurers ask during an audit.

3. Cybersecurity Insurance May Not Cover All Damages

As with any insurance policy, there is a lot of fine print that you must read carefully. While most insurance policies will cover your liabilities in most data breaches, some policies are more comprehensive than others. In the industry, there are two types of coverage. First-party coverage protects the company's assets, while third-party coverage only protects you from liabilities related to those affected by the breach. This is similar to how car insurance can be liability-only or include the vehicle.

First-party coverage will also cover things like investigations to determine the cause of the breach. It may also cover lost income while your business stops operations to address the problem. It can also even cover your legal expenses. The third-party coverage will mostly focus on lawsuits that come in from consumers. The FTC has a great guide explaining both types of cybersecurity insurance plans.

4. Cybersecurity Insurance Has Limits

Be aware that there are limits to your cybersecurity insurance policy. Many basic plans will readily offer hundreds of thousands or perhaps a million dollars in coverage, which may seem like more than enough. However, data breaches routinely cost well over a million dollars. Between the cost of lost business, fines, and potential lawsuits, you could run against your coverage limit very quickly.

The best way to prevent this from happening is to make sure your company has excellent cybersecurity. Companies that are prepared for a breach typically resolve them much faster, which limits the damage caused. When you have quality IT services supporting your business, you will be protected against the worst possible outcomes. Visit this page to learn more about the services that IT service providers offer, including cybersecurity.

5. Cybersecurity Insurance Policies Have Exceptions

Imagine if you had a data breach only for your cybersecurity insurance provider to declare that your case was ineligible for coverage. This can happen because there are exceptions to each policy. For example, some policies won't cover acts of terrorism. For businesses in the infrastructure industry, this is a serious concern, as cyberterrorism from state sponsors of terrorism could pose a real threat. Other policies might exclude coverage if a disgruntled employee were to leak information.

Look for insurance policies that provide as much coverage as possible with minimal exceptions. Regardless of the policy you choose, make sure you are also securing your company with the help of professionals. Insurance policies don't stop breaches; cybersecurity services do.

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