5 Reasons why you should have cyber insurance
Cyber insurance in today’s times is one of the most essential policies for any business. Since the last decade or more, the world has turned digital. COVID changed this more as everything went online and we saw a greater digital transformation. Due to the lockdown, it was the need of the hour for corporates to go digital for operations. All this had its own benefits but what we did not see coming were the risks that came with it. There has been a drastic increase in the number of cyber threats, ransomware, cyber frauds, data attacks and data breaches. Cyber security is a big issue for businesses and individuals and this makes cyber insurance a must have.
What is cyber insurance?
Cyber insurance is also known as cyber risk insurance or cyber liability insurance and is an insurance product designed to protect a business against the financial effects of cyber crimes like ransomware, malware, cyber extortion and data breaches among others. These crimes cause an interruption in business activities and also result in financial losses. The insurance policy helps them reduce the loss on account of both. These are essentially the shield of a business from any cyber attack. A big business or a start-up needs this support today to ensure that business operations do not get hampered in times of any data breach and cyber-attack.
Reasons why cyber insurance is a must
The world is fast progressing to complete digitalisation and with this increasing the cyber attacks. Like health and car insurance are important, having a cyber insurance policy is also mandatory and a need of the hour for businesses irrespective of their size. Let us see why is cyber insurance essential in today’s times for everyone:
1. Loss of reputation
Be it a small business, entrepreneur or a multinational, the biggest issue that they face with a cyber attack is the loss of reputation. A cyber insurance policy helps in ensuring that the business, irrespective of the size, does not get crippled. They assist the business in every possible to resume operations without much problem. The policy has crisis management, the PR expenses that the company uses to gain back the lost reputation, also stand covered which again helps the business to avoid further losses. Ensuring the reputation is not affected is always the primary cause of concern for any business.
2. Protection from financial losses
Cyber-attacks have the potential to cause a lot of financial loss for the company. The policy provides protection against this as this includes the costs to recover the data, any kind of payment as compensation and legal fees besides the other expenses. Some of the other expenses paid by the cyber insurance policy are:
- Business interruption costs
- Forensic investigation costs
- Cyber extortion expenses
- Legal expenses
- Administrative fines
3. Regulatory and compliance costs
It is possible that the organisation has to pay heavy fines to the authorities due to non-compliance with the data protection laws. The policy will help the organisation to ensure they are compliant and do not need to pay the fines and also avoid financial issues due to payment of the fines by ensuring these are paid by the insurer under the policy.
4. Tailor-made coverage
Insurance companies tailor-made the cyber insurance policy to ensure they meet the requirements of the business. Each business has its unique needs when it comes to cyber protection as they differ in scale of operations and size.
5. Cyber extortion
In case of a cyber-attack, the hacker can get the data and then for the recovery demand a ransom. This is known as a ransomware attack. They have the ability to tamper with the data or even destroy it while they have it. The cyber insurance policy covers this and ensures financial losses are minimised.
While there are many reasons why cyber insurance is considered important, the main and foremost reason is the peace of mind it gives. Knowing that your insurance policy will ensure you are safe and protected, reduces anxiety and stress and one can continue business in the best possible way.
Who needs cyber insurance?
While having a cyber insurance policy is a must-have for businesses today, it should be noted that its use is not limited to a business. The following people have immense use of the policy:
1. Students
There is extensive use of the internet by students today for classes, payment of fees, project work etc. Due to this need protection becomes very important for them.
2. Shoppers
In today’s times, online shopping is extremely popular due to the convenience it offers and the options available. Online payment methods are used by people to pay the bills and this puts them at a high risk of a data breach. Their personal information and bank details are at risk as these can be misused by hackers. Cyber insurance can help them to stay safe from such issues and threats ensuring complete freedom of mind.
3. Family
Insurers today offer cyber insurance plans for the family where the family members and the smart home are protected. This covers all the devices and thus, the family stays protected.
4. For entrepreneurs and small business
Entrepreneurs and small business owners are always at high risk of a cyber attack and thus, it is very important to stay safe as they need to protect their data and insurance is the best solution to the same.
Exclusions of the cyber insurance policy
While we have understood that a cyber insurance policy will take care of both first-party and third party liability, it also has some exclusions. It is important for one to understand the exclusions of the cyber insurance policy:
- Property damage
- Willful violations
- Bodily injury
- Loss due to war or terrorism
- Software, patent and copyright infringement
- Lack of adequate security measures
- Losses of electronic devices
- Disruption in business due to a physical problem or a machinery breakdown
Conclusion
Cyber attack is a big threat to all individuals and businesses today in the present times with rapid digitalisation. One of the best ways to handle this is cyber insurance as this takes care of almost all the consequences one would face. It handles the effects and also takes care of the financial losses. Cyber insurance helps to mitigate the expenses that a business will incur due to a cyber attack. They help in the proper running of a business and ensure complete peace of mind. Thus, all businesses and individuals today should opt for a cyber insurance policy to stay protected in the digital space.
Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales
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