How Much Cyber Insurance Do I Need? A Comprehensive Guide

How much cyber insurance do I need? Every business owner is conscious of the necessity of cyber liability insurance for the business they run. Even if you think that you do not have any valuable information within your systems, and thus you’re not a target for cybercriminals could be wrong.

Analyzing the potential risk of a cyberattack in your field and the costs associated with the recovery of data and legal expenses can help you figure out the amount of cyber liability insurance your small business requires.

You might be asking What amount of cyber insurance do I need? Do I really need to spend time looking at policy limits? Let’s take a look at a large-scale illustration that illustrates how important it is to establish appropriate policy limits.

2013 was the year that retailer Target Corp. suffered a data breach which cost the company the company $292 million. The incident occurred in 2013, however, the costs and consequences kept increasing even after the event.

Target had the benefit of a cyber insurance policy that covered $90 million. However, they had to pay for the remaining expenses which left them with a loss of 202 million.

This example can be scaled down to a company of your dimension, yet the amount of the damage isn’t drastically different. The loss of $202 million at Target could translate into a loss of $2 million for your business but why would you choose to risk the future of your company at all?

Let’s talk about the advantages cyber liability insurance could bring your company, and how to determine the most appropriate quantity of coverage for your company.

The Cost of Being Underinsured or Uninsured

If you’re uninsured or uninsured completely in the event of the effects of a cyberattack and are a victim of a cyberattack, you could find yourself in difficulties.

The cost total of the data breach of $4.24 million in 2021 as per IBM as well as Ponemon Institute’sCost of a Data Breach Report 2021. The figure is likely dependent on Cognyte, LinkedIn, Colonial Pipeline, and other breaches however, you should not take this lightly, especially when you’re an entrepreneur with a modest size.

In the event of being underinsured, you’re required to cover a portion of the costs associated with a cyberattack or breach of data. The amount you’ll have to cover is contingent on the cyber insurance or data breach policy limit. It also depends on the extent of the breach and the damage your company suffered.

The worst scenario could occur if you were insolvent. This means you’d be required to pay for all expenses associated with it that could cause financial ruin for your company.

If you think that a data breach won’t ever occur to your business and you’re not then.

Everyone is in danger as some reports suggest that everyone will be affected by the effects of a cyberattack sometime during the life cycle of a company.

It’s true you can be sure that an insurance policy is much less expensive than the cost of a cyberattack. Take a careful look at the consequences before making a decision regarding the cost of cyber insurance.

How does cyber liability insurance protect small businesses?

Every business is susceptible to cyberattacks regardless of the size of the company or the client base it has. The larger, more well-known businesses are certainly more attractive victims than smaller ones, however, hackers have a different set of criteria to consider when picking their targets.

There is a general belief of the smaller firms that they are less secure and that their security measures are more susceptible and easily attacked.

If hackers do not want to prove their point by targeting the biggest players and are more interested in proving their point, they might choose to target small and medium-sized companies and reap their earnings there. And it could be very difficult to come back from the aftermath of a cyberattack.

Holding your data hostage, taking it away from you, and then selling it to the dark market taking down your website, and causing extensive downtime are only a few of the ways cybercriminals could harm your business and cause financial loss.

Cyber insurance helps you financially be prepared for the financial burden of cyberattacks and data breaches. Prevention is, obviously the best protection against cyberattacks.

Any small business owner with a computer and an Internet connection has to deal with some degree of cyber security risk as cybercriminals are able to attack them with phishing malware, ransomware, and other attacks.

Cyber liability insurance does not just cover the cost of repairing the effects of a data breach and provides support with lawsuits that usually result. Legal costs can include the cost of attorney’s fees, court-ordered verdicts, and settlements.

Additional costs could be incurred for:

  • Insurance for business interruption (or business income coverage) while you recover from an attack
  • Payment for an investigation into digital forensics
  • Resolving security weaknesses
  • Informing all affected clients
  • Paying a ransom in order to unlock your data
  • Monitoring of credit cards and fraud services for customers affected by fraud and credit card
  • Fines and penalties for regulatory violations imposed by PCI. Payment Card Industry (PCI)
  • Public relations can protect and improve your image

How much cyber insurance does my business need?

How much cyber insurance do I need? The amount of cyber-liability coverage you need will depend on the industry you work in, the type of business you operate in, and the type of customer or personal information you manage.

If your business stores personally identifiable information (PII) on its servers, you may be liable to costly legal proceedings and fines from the government due to stolen information.

PII includes complete name, Social Security numbers driver’s license number account details as well as credit card details along with email addresses.

The majority of small businesses purchase a cyber liability insurance policy that has a one million dollar per occurrence limit, a $1 million aggregate limit, and a $1,000 deductible.

If a data breach cost businesses around$180 for each lost or stolen customer PIIThis coverage amount will be enough to safeguard all small business that handles a handful of thousand records.

The risk is particularly high when you deal with documents that fall under theHealth Insurance Portability and Accountability Act(HIPAA) which sets national standards to protect personal information and the reporting of damaged information. HIPAA breaches can lead to massive penalties.

If your business handles information that could put the company at greater risk, then purchasing an insurance policy that has higher coverage limits might be a wise choice.

A lot of policies offer a limit of coverage maximum of five million. However, you may discuss your requirements for greater coverage in conjunction with the insurance company.

What do cyber insurance coverage limits mean?

The per-occurrence limit is the maximum amount your insurance company is willing to pay for a single loss in accordance with your policy.

An aggregate limit is the maximum amount a policy will pay for all claims within the policy period which is typically one year.

Distinction between first-party coverage and third-party coverage

It’s crucial to consider the kind of data your company is handling and take into account the cost you’d be facing in case of the event of a data breach. The cyber insurance coverage may include first-party liability protection, third-party liability coverage, or both.

A first-party cyber liability insurance protects your company from direct financial consequences caused by a data breach or cyberattack that could be imposed on your business. This can include the recovery of data, informing customers of the breach, and offering credit monitoring services to the affected customers.

A third-party cyber liability insurance addresses legal expenses if a customer suffers a data breach and seeks to sue your company for failing to stop it.

This coverage is crucial for those in charge of cybersecurity, which includes IT consultants as well as security firms for networks. The client could sue in the event of a data breach, and assert that the tech company did not do enough to safeguard their information.

How much does cyber liability insurance cost?

The cost of cyber liability for your company is contingent on a variety of aspects, such as previous claims of insurance related to data security breaches. Also, consider the kind and amount of sensitive information the company manages, as well as what amount of coverage you require.

The average price of cyber liability insurance is $145 per month for customers of Insureon.

Companies that deal with data security and information technology typically are more expensive with their cyber liability coverage due to the fact that they could be in danger in the event that a client accuses them of security breaches.

How much cyber liability insurance do independent contractors need?

The amount of cyber-liability coverage independent contractors require is contingent on the kind of work they carry out the clients they serve and if they manage any type of data they need to secure.

While it’s unlikely an independent contractor will require first-party cyber-liability coverage, however, they may require third-party cyber insurance to protect themselves from legal action.

This is particularly true when the client handles PII for example, medical records. Some clients handling sensitive data require contractors to carry third-party responsibility coverage to guarantee that they will be able to pay for the cost of a cyber-related lawsuit in case your work causes a data breach. Contracts with clients typically have a $1 million incident limitation.

In our litigious society of today, the contractor may be faced with costly legal costs following the data breach even if they’re not responsible for the breach.

How much cyber liability insurance should your clients have?

If your clients deal with sensitive information, you might require assurance that they are able to manage a lawsuit or any other costs associated with data breaches. It could be beneficial to advise your customers to buy cyber liability insurance, or perhaps require it prior to you begin an untested project.

If you insist that clients purchase cyber liability insurance in a contract of employment, you may define how much coverage. Cyber liability policies come with limits that can range in the range of $1m to $5m or higher. If the data breaches occur and you are unable to prevent legal fees by making sure that your clients are able to cover the costs of a data breach on their own.

Can you add cyber coverage to an existing business insurance policy?

It is possible to include cyber-related liability coverage (also called data breach insurance) to the BOP, or business owners’ policy (BOP), that combines general liability insurance as well as commercial property insurance in one policy typically with a lower price than if the two policies were bought in separate transactions.

General liability insurance covers typical business risks, such as the possibility of a client being wounded, damage to the property of a customer, and advertising-related injuries. Commercial property insurance protects against the loss of business property and theft.

Third-party cyber insurance is often included in errors and omissions (E&O) insurance. E&O insurance is a way to cover the cost of a lawsuit when the client complains about you failing to fulfill an agreement or making an error. In the IT sector, the bundle is called technology errors and omissions insurance or tech E&O.

Final Thought: How much cyber insurance do I need?

You must create your own cyber security risk-management program and instruct staff on the best ways to recognize and avoid cyberattacks.

Employ a cybersecurity expert to assist you in buying the appropriate antivirus software and creating your cyber defense plan and cybersecurity incident plan.

The perfect protection against cyberattacks does not exist, and you must think of insurance as the most reliable line of defense as well as your financial security net. A policy that will best react to a cyberattack on your business is one that includes a cyber liability insurance policy that includes the data breach policy extension.

Cyber insurance would respond if the hacking attack, breach of data as well or social engineering attack resulted in a security breach. Your policy will pay for the costs of recovering data and recreation as well as business interruption cyber extortion, as well as the loss of funds that were transferred such as.

If the breach affected any sensitive information of a partner or client the policy will be able to cover many items, from notification fees and monitoring of credit to lawsuit costs and awards for damages, such as.

Your insurance provider will also help in hiring cybersecurity experts to study the incident fix it and improve your security to reduce the risk of recurrence. Insurance will also pay for employing PR experts to minimize the harm to your reputation.

Dibyajyoti Bordoloi (CS, MBA Finance & Accounting) is the founder of He is a Practising Company Secretary and a real estate and stock market investor. He is the owner of CS Bordoloi and Associates. He is a commerce graduate from Darrang College, Tezpur, Assam. Later on, he pursued his higher studies at the Institute of Company Secretaries of India (ICSI), and completed his MBA (Finance) degree from Guwahati University. With over 16 years of experience in finance and accounting, he teaches personal finance to non-technical common people like you how to do it the right way. He is a proud member of the Chamber of Real Estate and Builders Association (North-East India). He is also a successful Investor and Trader in Equities and Real Estate.