Between the COVID-19 pandemic and the war in Ukraine, it’s no secret that data breaches and cyber attacks have been steadily on the rise.
This is largely the result of our increased technological dependence. Whether we’re working, studying or spending time with loved ones, a large portion of our time is spent online.
Without a doubt, the best way to mitigate escalating cyber risk is to maintain a strong security posture. But what happens when, despite our best efforts, disaster strikes?
We are forced to rely on other measures put in place like a cybersecurity insurance policy, which we recommend to our clients. In this article, we discuss what cyber insurance is, its necessity for every business owner, and what you should expect to pay in terms of cyber insurance costs.
What is Cybersecurity Insurance?
Cybersecurity insurance protects your organization against the steep expenses associated with a data breach. A data breach occurs when unauthorized or malicious agents gain access to sensitive data, such as:
- Employee information
- Personal address information
- Protected health information (PHI)
- Personally identifiable information (PII)
- Payment card industry (PCI) information
It’s important to note that cyber liability coverage cannot prevent a cyber attack or data breach.
Like car, home, or health insurance, cyber liability insurance compensates you for the financial damages incurred as a result of a breach. This is similar to wearing a seatbelt while driving. It won’t preventa car accident, but it will help keep you safe in the event of an accident.
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How Much Does Cyber Liability Insurance Cost?
So, how much does cyber insurance cost? According to insurance company marketplace Insureon, the average cost of cyber liability insurance is around $145 per month, or $1,740 per year, for small businesses.
Of course, as with other insurance services, your insurance premium depends on a handful of factors. You should expect to pay a monthly or quarterly amount based on the following criteria:
- Annual revenue
- Security posture
- Number of users
- Regulatory compliance
- Insurance claims history
- Exposure to security risks
- Type of business and industry
- Cybersecurity policies and coverage needs
As a function of these fluctuating criteria, cyber liability insurance costs vary from payment to payment. Therefore, when choosing a policy, it’s important to thoroughly review the details.
Make sure the policy suits your needs by offering the right provisions and protections, including coverage against emerging threats.
One final consideration is that the cybersecurity market is still relatively new, meaning that most businesses remain on the fence about cyber insurance.
The good news is that, as cyber risk continues to grow, the Cybersecurity and Infrastructure Security Agency (CISA) is encouraging early adopters, promising affordable rates and improved coverage.
What Does Cybersecurity Insurance Include?
Cyber insurance can be either limited in scope or full-featured. For instance, if you’re in the market for a small amount of coverage, you can opt for third-party cyber liability insurance.
This covers the legal fees and damages you’ll need to pay to clients who suffered cyber losses as a result of your organization’s breach.
In contrast, comprehensive cyber liability and data breach insurance gives you access to extensive third- and first-party coverage. Some key benefits include:
- Cyber liability coverage
- Breach of contract and negligence fines
- Losses due to phishing or transfer fraud
- Regulatory compliance penalties and fines
- Legal costs (including defense and settlements costs)
- Compromised system remediation and data restoration
- Official notifications (usually delivered through certified mail to affected parties)
- Miscellaneous associated costs (such as hiring a call center to speak with clients or a public relations firm to do damage control)
In the event of a data breach, a comprehensive insurance package will drastically reduce your out-of-pocket costs by providing both third-party and first-party coverage. Speak to an insurance professional to find out which option is right for your business.
Is Cyber Insurance Necessary for My Business?
Between 2010 and 2021, the number of data breaches in the U.S. nearly doubled. Of these incidents, over 80% were targeted at small businesses, averaging a remediation cost of approximately $80,000.
This cost doesn’t include the reputational damage, lost opportunities, and indirect expenses associated with the event.
With these figures in mind, it comes as no surprise that most uninsured organizations never recover from an attack. In fact, it’s estimated that within just six months of suffering a data breach, about 60% of small businesses will permanently close.
Most of these breaches result from external threats, such as:
- Transfer fraud
- Theft of intellectual property (IP)
- Corporate or geopolitical espionage
- Social engineering attacks (phishing)
- Distributed denial of service (DDoS) attacks
To cite one famous example, consider what happened to Sony in 2011. Their PlayStation Network was hacked, leading to a data breach that compromised the PII of 77 million users and caused a service outage that lasted for 23 days.
Because Sony lacked a cyber insurance policy, they were forced to pay out more than $171 million in damages that may have otherwise been covered. In hindsight, a brief consultation with licensed insurance professionals could have made a big difference.
The moral of this story is that while cyber liability coverage isn’t strictly necessary, it remains a critical component of any smart risk management plan.
Interested in learning more about cybersecurity? Check out these blogs:
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As we’ve seen, the answer to the question of “how much does cyber security insurance cost?” varies.
Although your own insurance cost can differ based on several factors, one thing is certain: whatever the cost of cyber insurance, the cost of not having it is immeasurably greater.
Interested in getting an insurance quote for your business, but unsure which policies and defenses you need to get approved? As a premier managed services provider (MSP), NetGain Technologies can help you get the required defenses in place so you can get approved for a cyber insurance policy for your organization.
Combined with our comprehensive cybersecurity services, you can get peace of mind knowing your business is fully protected. Contact us today to learn more about cyber insurance costs.