Three Reasons Your Cyber Insurance Might Not Protect Your Business

This article was originally published in Fox Cities Chamber Business Magazine.

News of another data breach seems to hit the headlines every week. Rightly so, many business owners look to protect their companies by purchasing cyber liability insurance. However, just as you can get different coverages for a vehicle, cyber insurance offers many options and circumstances under which it will provide coverage.

I’ve come across many woefully inadequate policies when working with potential clients who thought they were covered for various situations, when, in fact, they were exposed to many cyber risks. Let’s take a look at three major areas of cyber liability that are often overlooked and what types of coverage your business may need.

1. Multimedia Coverage

A general liability policy offers coverage for trademark infringement, slander, personal and advertising injury and the like. However, those definitions typically don’t include online publications such as those on social media, videos and some website content. New forms of online communication exist now that didn’t only a few years ago, so it’s crucial to ensure your policy is comprehensive and protects you in each scenario. Lawsuits and their associated costs can mount quickly for these types of claims, and damages can easily exceed $1 million.

2. Security and Privacy

Some cyber policies provide first-party coverage to pay for data loss or a ransomware attack that harms your business. However, what happens if one of your employees unknowingly forwards an email containing a virus to another company? It could cause financial or physical damage and shut down the business, and the company could sue.

Employee education is still the best way to protect your business from cyber threats. It’s estimated that 75% of security breaches are the result of employees mishandling information or unknowingly opening the door to hackers through phishing scams, poor password management and other missteps. In turn, many pass viruses on to outside parties, often leading to litigation. Do you know whether your cyber policy covers these types of third-party claims?

3. Contract Wording

Many vendor and service provider contracts require your company to have cyber liability insurance, but fail to define it. If a contract generally necessitates cyber or data liability insurance, insist that it’s spelled out more clearly before signing. And, as always, read the fine print. A contract may require a third-party coverage amount of $5 million when you only have $1 million, for example.

The risks of living in a hyperconnected world have grown and you need to have insurance for your company’s online activities just as you do for other common business risks. Fortunately, cyber liability insurance is relatively affordable, so work with a reputable insurance agent who can get you the coverage you need.

One of our risk advisors at McClone would be happy to perform a complimentary assessment and propose customized coverage to mitigate your cyber risks and other business insurance needs. Reach out to us today.