Cyber liability insurance is necessary in order to address the first-party and third-party risks that are associated with doing business over the Internet, e-businesses, informational assets and networks. This type of coverage provides progressive protection for the unique risk exposures that arise from Internet communications.
The main concept behind cyber liability insurance is to take into consideration the first-party and third-party risks. The risks in this category include virus transmission, infringement of intellectual property, privacy issues and other serious problems that can be passed from the first-party to the third-party associated to the Internet.
First-party cyber liability coverage will provide financial compensation in order to help with the addressing of immediate business and customer needs, such as those that may be necessary due to the failure of your in-house IT network. Third-party cyber liability coverage will protect you in the event of legal action from a partner or customer because of a data breach that results from the actions or negligence of your business. Depending on the specific needs of your organizations, you may want to purchase either or both types of this liability coverage.
When Is Cyber Liability Insurance Necessary?
These days, if you have a website, you have the same legal liabilities as a publisher. That technical sensation of global communication known as the Internet has created an entirely new network of liability exposures.
Building a website is a simple task. However, the risk exposures that come with it are incredibly complicated. As a privately owned company venturing into the world of Internet communication, you face risk exposures that are constantly evolving, emerging and becoming increasingly complex.
A company that distributes information to the public through a website faces the same legal risks as publishers do. However, many businesses are not aware of their legal responsibilities. In addition, new legislation is continually creating potential liabilities, especially in the areas of domain name infringement and user privacy.
Why You Need Cyber Liability Insurance
In just a moment, a skilled hacker could attack your company, accessing the names, addresses and other private information of all or your customers and business associates. In addition, they could also disable your website, preventing you from collecting payments and taking orders, severely damaging your business structure.
When operating a business, one of your most important assets is data. However, data is generally not covered by a standard business liability insurance policy. Should that data be damaged or destroyed, the results could be crippling to your establishment. A cyber liability policy will provide you with comprehensive coverage for rectification and data restoration up to the limits of your policy in the event of a loss regardless of the cause.
Your day-to-day business operations rely on systems to perform core functions, from hotel reservations to electronic point of sales software. If a hacker attack, your systems become infected with a virus or the actions of a malicious employee were to bring down your system, you may not be covered by a conventional business interruption policy. You need cyber liability insurance to cover the loss of profits that related to the outage of your systems resulting from such a non-physical peril.
New cybercrimes are arising on an almost daily basis, making it the fastest growing type of crime in the world. Yet, most of these attacks are not protected by a standard commercial property or crime insurance policy.
By conducting operations over the Internet, your business is exposed to criminals all over the world, making it vulnerable to attacks at all hours of the day or night. Identity theft, phone hacking and phishing scams are all crimes that are not covered by traditional insurance. Cyber insurance will offer you comprehensive coverage for a broad range of electronic threats that are progressively threatening your financial resources.
You could be liable for the loss of valuable third-party data. Businesses of today are holding more data belonging to their suppliers and customers than they ever have in the past. Commercial contracts and non-disclosure agreements often feature indemnities and warranties related to the security of such data. In the event of a breach, expensive damage claims could be triggered. More consumers than ever before are taking legal action against companies that lose their data, so it is crucial to have the proper liability policies in place to protect your business.
If a retailer loses a customer's credit card information, they could face serious penalties. Credit card crime around the world is worth more than $7.5 billion with the risk transferring to the retailers responsible for the lost data. Compromised retailers may be held liable under the merchant service agreements for the reissuance of credit cards, the cost of forensic investigation as well as the actual fraud made on the stolen cards. Such loses can cost even a small retailer hundreds of thousands of dollars. However, cyber liability will provide you with protection against these costs.
The use of social media networks is at an all-time high, which means associated claims are also on the rise. As the fastest growing channel of entertainment all around the world, social media networks are used to transport information at lightning speeds, exposing it to the world.
Unfortunately, there is very little that you can do to control the things that your employees say and the way they present information via social media. This means that your business could be held liable for the actions of your employees on a wide variety of social media networks. However, your cyber liability coverage will protect you against claims related to copyright infringement, defamatory statements and leaked information.
Do not make the mistake of thinking your business is too small to fall victim to a cyber-attack. While the larger scale attacks that you see on the new are usually aimed at the bigger corporations, smaller organizations are also at risk. The main difference is the smaller companies lack the financial resources to get back on their feet following such an attack. Cyber liability insurance can protect your company regardless of size from the effects of data loss or a privacy breach that could lead to financial devastation.