Data breaches affect companies of all sizes in all industries. With the high cost of a data breach, having data breach insurance can be a smart move. In this article, we’ll discuss what data breach insurance is, how it differs from cyber insurance, and some tips for getting the best data breach insurance policy for your business.
data breach insurance definition
Data breach insurance is a form of insurance designed to protect businesses against damage caused by a data breach. Since data breach insurance and cyber insurance have overlapping applications, the two terms are often used interchangeably. but you should not confuse the two as they are not exactly the same.
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Cyber insurance will cover most damages caused by cybersecurity events. a data breach is one of those events. therefore, data breach insurance can be described as cyber insurance designed specifically for data breaches.
what is a data breach?
According to techtarget, a data breach is “a confirmed incident in which sensitive, confidential, or protected data has been accessed and/or disclosed in an unauthorized manner.” A data breach can involve personal data (such as social security data or credit card numbers), government intelligence, trade secrets, and corporate information.
When people talk about data breaches, hacking is usually the first thing that comes to mind. But data breaches aren’t just the work of hackers. malicious insiders, malware and ransomware, bad employee habits, or a malfunction in the cybersecurity system can also cause them.
Data breaches are incredibly expensive and cause so much financial damage that 60% of small businesses go out of business permanently within six months of being breached.
why is data breach insurance important?
In a nutshell, data breaches can be costly. Netdiligence’s 2015 Cyber Claims Study puts the average cost of a lost record at $964.31. Furthermore, in 2019, the average cost of a single data breach ranges from $1.25 million to $8.19 million on average, depending on the country and industry. the ransom demanded by hackers for stolen data, the fines and other penalties imposed by regulatory agencies, and the adverse effects of a data breach on your company’s reputation add up to the total cost of a data breach. In such situations, having data breach insurance can cover some or all of the expenses, help your business resolve the case, and mitigate losses.
how does data breach insurance work?
Data breach insurance policies vary, but most of them will have their own and third-party coverage. We are going to differentiate the two types of coverage:
- First Party Coverage: First party coverage applies directly to the company that purchased the insurance. First-party data breach insurance typically covers the cost of forensic investigation, fines and other penalties due to data loss, monetary loss, hardware and software damage, and the cost of notifying affected customers .
- third party coverage: third party coverage deals with those affected outside the insured company. Under this coverage are legal expenses, damages, settlements and claims from customers or people affected by a data breach.
- Learn what coverage your business needs. Know that a data breach isn’t just about financial risks. Your business may have to report to the government and notify affected customers. your security system has to be updated. All these activities have a cost, and the support provided by a data breach will be of great help.
- Make sure the policy is clearly worded. Know not only the specific coverage offered in what circumstances, but also the covered incidents. For example, if the policy doesn’t mention “hacking,” but the data breach occurred due to hacking, your company could be in trouble during a claim.
- review the policy in light of the company and current laws. this has become more critical, especially with the emergence of new laws and regulations, not to mention the severe fines and penalties that can result of non-compliance with regulations such as gdpr or the california consumer privacy law, among others. Reviewing data breach insurance policies and evaluating coverage options in light of applicable regulations will help ensure you get the right policy.
Contracting your own or third-party insurance depends on the situation of your company. If your company stores customer data on your network, own coverage will always be a significant investment. may provide the funds to notify customers, pay for credit monitoring services, and/or pay penalties. Now, if your business is vulnerable to lawsuits that could be triggered by a data breach, then you should also consider getting third-party insurance coverage.
what to look for in a data breach insurance policy
Once your business decides to get data breach insurance, it’s time to shop around for the right policy. consider the following factors:
Choosing a data breach insurance policy is serious business. While insurance can’t prevent a data breach from happening in the first place, it can help your business mitigate the negative consequences.
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