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Cyber Insurance: What Is It and Do You Need It?

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Cyberattacks on individuals and companies have evolved to such an extent that good cybersecurity has become a fundamental part of daily life. Even as experts develop ways to thwart cybercriminals, hackers keep getting around their defenses. That means that all the sensitive information about you or your company is at risk of being stolen, sold, or used against you.

And what’s the best way to deal with risk? Insurance.

What is cyber insurance?

The idea of cyber insurance, also known as cyber liability insurance, first came about in the 1980s. The first known cyber insurance policy wasn’t written until 2000, though, and it was for Lloyd’s of London. In the years that followed, cyber insurance became increasingly common for businesses and organizations. It’s only within the last few years that personal cyber liability insurance has taken off.

Personal cyber insurance is meant to address the fallout from cyberattacks. Victims of cybercrime can face exorbitant financial burdens in the form of extortion demands, lawsuits, or even moving expenses due to cyberbullying. To cover these risks, some insurance companies have started offering personal cyber insurance.

What kinds of attacks does cyber insurance cover?

Cyber insurance may not cover specific types of cyberattacks, but rather the fallout from one of these attacks. Given how quickly cyber threats evolve, it would be impractical for insurance companies to attempt to create a comprehensive list of attacks that would be eligible for coverage.

Instead, cyber liability policies usually offer coverage related to a range of cybercrimes, including:

  • Paying for removing viruses or reprogramming computers, mobile devices, and Internet access points such as smart home devices
  • Covering expenses for lost wages, legal fees, or temporary relocation as a result of online harassment
  • Covering expenses related to school discipline and wrongful termination as a result of online harassment
  • Reimbursement for ransom paid as part of a ransomware attack
  • Assistance from experts during a ransomware attack
  • Paying for services to other individuals whose data was entrusted to you and then breached
  • Paying for direct financial losses such as identity theft, unauthorized banking transfers, and phishing scams

Cyber liability insurance may also provide you with access to specialists who can assist you in the fraud recovery and resolution process. You may also get cyber monitoring services so you can be alerted when there’s a threat and to help you minimize any potential loss.

Coverage varies by insurance provider so it’s important to know which services are included before you sign up for a policy. When looking for a cyber insurance plan, you can reference the above list to determine if it’s a good plan or not.

How to know if you need cyber insurance

You might be wondering if cyber insurance is worth it. If it can’t prevent cyberattacks from happening, what’s the point?

In this day in age, cybercrime can be debilitating. Recovering from a cyberattack, data breach, or online harassment can ruin you financially. Not to mention it could take a heavy mental or emotional toll.

For some people, being careful online is enough to stay safe from cyberattacks. But this approach doesn’t work for everyone. Individuals with an active online presence, such as influencers or thought leaders, could easily be targets for cybercrime and suffer losses no matter how careful they are.

If you feel concerned about cybercrime and have an active online presence or own your own business, it’s worth considering a cyber liability insurance policy.

How much you should expect to pay for cyber insurance

The monthly or annual premium on a cyber insurance policy varies by the insurance company. It could cost you as little as $25 or as much as $80 or more per year. Each company’s policies also have varying coverage limits.

State Farm, for example, has a plan that costs $25 per year with a $500 deductible and $50,000 annual expense reimbursement. PURE insurance offers a cyber insurance policy available at different coverage levels, ranging from $100,000 to $2,000,000.

Source: https://www.valuepenguin.com/personal-cyber-home-insurance
Source: https://www.valuepenguin.com/personal-cyber-home-insurance

These tables created by Value Penguin, a consumer analyst tool, provide you with a good idea of what you can expect to pay for cyber insurance from both smaller insurers (first table) and larger ones (second table).

If you are looking to take out a cyber insurance policy, the first place you should check is the company you have a homeowners’ or renters’ insurance policy with. Many companies offer cyber coverage as an add-on to one of these existing policies.

Cyber insurance is becoming more essential

Technology will only continue to move forward, allowing cybercrimes to get more sophisticated and forcing individuals to bolster their cyber defenses. Being cautious online and with your personal data is a must and in many cases can prevent you from becoming a target. But it won’t guarantee protection. You could find yourself as a victim of cybercrime at some point and when you do, you might be glad you have a way to recover your losses.

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