Cyber Insurance: Protect Your Digital Assets Today

In today’s fast-changing tech world, cyber threats are more common than ever. They put businesses of all sizes at risk. As a small business owner, I’ve seen how a cyber attack can hurt operations, finances, and reputation¹.

That’s why cyber insurance is key, offering vital protection for your digital assets. With threats always changing, it’s crucial to see why cyber insurance coverage is vital in lowering damage risks.

A recent study showed that 41% of small businesses faced cyberattacks in 2023, up from 38% the year before¹. This rise highlights the need for cyber insurance, no matter your company’s size.

Cyberattacks can cause huge financial losses, harm your reputation, and disrupt your work¹. Having cyber insurance doesn’t just cover these costs. It also helps businesses bounce back faster from such incidents.

Key Takeaways

• Cyber insurance offers vital protection against the growing threat of cyberattacks, affecting businesses of all sizes.
• The average cost of a data breach has hit a record high of $4.45 million, showing the importance of full cyber insurance coverage.
• Cyber insurance can cover costs like business disruption, ransom payments, legal fees, and litigation after a cyber event.
• Small and medium-sized businesses are especially at risk, with only 10-15% having cyber insurance.
• Cyber insurance encourages better digital protection by pushing companies to meet security standards, preventing and reducing cyberattack impacts.

What is Cyber Insurance?

Overview and History of Cyber Insurance

Cyber insurance started in the 1990s with the growth of online shopping. Companies wanted protection from hackers targeting their websites². Today, the US sees more cyber insurance growth due to tough data laws and big fines for data breaches².

This insurance acts as a safety net for companies. It protects against losses from tech threats like data breaches and ransomware². It also covers business interruptions, cyber extortion, and losses to others². For instance, if a company faces a data breach, its cyber insurance might pay for legal costs and expert help to fix the issue².

Businesses should think about what kind of cyber insurance to get. They can choose first-party, third-party, or both². First-party coverage helps with legal fees, data recovery, and more. Third-party coverage covers claims from others and can pay for settlements and legal costs².

Cyber insurance is always changing with new threats and laws³. Knowing about cyber insurance helps businesses protect their online assets and lessen the damage from cyber attacks².

Why is Cyber Insurance Important?

In today’s digital world, cyber insurance is key⁴. With more data in the cloud and remote work, companies face many cybersecurity threats. A data breach can cost a company about $4.45 million on average, says a report by IBM and the Ponemon Institute⁴.

Most companies can’t fully control their cyber risks, with 83% saying they’re not ready for digital threats⁴. That’s where cyber insurance steps in. It helps cover costs from cyber attacks, like investigations and legal fees.

Cyber insurance covers many issues, like data breaches and ransom demands⁴. But, it doesn’t cover problems caused by things you could have prevented. Companies need strong security and cyber insurance to handle risks well.

“Cyber insurance policies typically cover expenses for investigations, credit monitoring services, legal responsibilities, data breaches, business interruption, loss of revenue, and computer system restoration.”⁴

The cyber insurance market is growing, with more policies covering both first-party and third-party risks⁴. This is great for companies that handle sensitive data, as they face more legal risks if there’s a breach.

In summary, cyber insurance is vital for protecting companies from cyber threats. It helps manage the costs of cyber attacks, letting companies focus on keeping their data and reputation safe⁴.

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What Does Cyber Insurance Cover?

Cyber insurance policies protect businesses from many cyber risks and incidents. They cover the costs of a data breach, like managing the event, restoring data, and paying for third-party expenses⁷. Most plans also include costs for network downtime and extortion attempts⁷.

Some policies go further, covering business interruption, property damage, and even physical injuries⁷. But these are less common. Each policy clearly lists what’s covered and what’s needed to keep the coverage⁷.

Yet, some reasons might make an insurer not cover a cyber incident, like not having good security or acts of war⁷. The IBM report found 83% of companies have faced more than one data breach, costing an average of USD 4.35 million⁸.

The cyber insurance market is changing, making it key for businesses to pick the right coverage for their needs⁷. The average ransomware attack cost is USD 4.54 million, not including ransom payments⁸. Cyber insurance prices jumped by 110% in early 2022, as reported by Marsh McLennan⁸.

Cyber insurance can help protect businesses, but it might also make ransomware attacks more common⁸. Hackers may see insurance as a reason to demand more ransoms. Insurers are now raising prices and limiting coverage, like AXA stopping ransomware coverage in France⁸.

Lloyd’s of London won’t cover state-sponsored cyberattacks anymore, and insurers are setting stricter security rules for companies⁸. Some think cyber insurers could push for better cybersecurity standards, like the NIST Cybersecurity Framework⁸.

Do Small-to-Medium Sized Businesses Need Cyber Insurance?

Today, small and medium-sized businesses (SMBs) face a big risk from cybercriminals⁹. Big companies often have strong cybersecurity, but SMBs might not be ready to fight cyber threats. These threats are too complex for SMBs to handle alone.

Cybercrime Targets Businesses of All Sizes

⁹ Cyberattacks hit small businesses hard, with 43% targeted at them (Cisco research)⁹. These attacks cost small businesses an average of $955,000 to fix (Cisco)⁹. Human mistakes cause 21% of data breaches, says IBM’s “Cost of a Data Breach” report⁹. A 2022 CNBC survey found many SMBs don’t worry about cyber threats.

That’s why cyber insurance is important for small and mid-sized businesses. It covers cyber extortion, data recovery, and more¹⁰. Tools and coverage can help before, during, and after a cyber attack¹⁰. But, not all coverage is needed by every business. They should pick the biggest risks and plan accordingly¹⁰. More insurance doesn’t always mean better protection.

¹⁰ Insurers want businesses to have basic cybersecurity measures in place¹⁰. The cost of cyber insurance depends on business size, coverage needs, and risk level¹⁰. Regular business insurance often doesn’t cover cyber-related losses¹⁰.

It’s smart to compare different cyber insurance policies to find the best one¹⁰. Businesses should think about their unique risks and needs when picking a policy¹⁰. Steps like cybersecurity training and multi-factor authentication can lower insurance costs.

“Cyber incidents can harm a business’s reputation, leading to lost trust and even closure⁹. Big companies usually recover better from cyber attacks than small ones.”⁹

In conclusion, cyber insurance is crucial for small and medium-sized businesses today. With the right coverage, SMBs can safeguard their digital assets, lessen the impact of cyber threats, and keep their operations strong.

Top Benefits of Cyber Insurance

Data Breach Protection and Compliance

In today’s digital world, cyber insurance is key for businesses of all sizes. It helps protect against the huge costs of data breaches. In 2022, 71% of companies worldwide faced ransomware attacks¹¹. Data breaches in the U.S. cost an average of $9.44 million¹¹. Cyber insurance can cover these losses and pay for incident response, forensic investigations, and legal fees.

Cyber insurance also helps with cybersecurity rules. With laws like the Cyber Incident Reporting for Critical Infrastructure Act (CIRCIA) and the GDPR, it’s crucial for businesses to stay compliant. Cyber insurance covers audit costs, post-breach notifications, and legal fees for not following the rules¹².

Businesses with higher risks find cyber insurance more accessible and affordable¹³. Insurers set security standards to get better rates or coverage. This pushes businesses to improve their security and become more resilient¹³.

Cyber Insurance Limitations

As more companies seek cyber insurance, insurers are tweaking their approaches to manage risks¹⁴. They might set limits on payouts after a cyber attack or increase premiums to protect against losses¹⁴. Some insurers are pulling out of the market, leaving some cyberattacks uncovered by policies¹⁴.

Many businesses struggle to fully protect themselves against cyber threats¹⁴. Research shows 83% of companies feel they’re not ready for digital attacks¹⁴. It’s crucial to pick a policy that fits your business needs, avoiding unnecessary costs or gaps in coverage.

Cyber policies might not cover everything, like patent infringement or loss of future earnings¹⁴. Some policies don’t cover patent infringement, future losses, or acts of war¹⁴. Cyber Insurance should be seen as a part of your security plan, not the only defense against cyber threats¹⁴.

Cyber Insurance can help with business interruption and data breach costs,¹⁴ but different industries, like healthcare, might need special coverage¹⁴. It’s important to keep improving your security and invest in Cyber Insurance¹⁴. Brokers are key in helping businesses find the right Cyber Insurance for their needs¹⁴.

“Cyber Insurance can cover legal costs after a cyber attack, helping organizations pay for post-breach legal help.”¹⁴

Cyber Liability Insurance usually covers costs like legal fees, data recovery, and identity restoration¹⁴. The specifics of your Cyber Insurance policy can affect how you handle cyber crime incidents¹⁴.

1. ¹⁵ Most small businesses get a cyber liability insurance policy with a $1 million limit per incident, a $1 million total limit, and a $1,000 deductible.
2. ¹⁵ A data breach can cost a business about $150 for each lost or stolen customer record of personal info.
3. ¹⁵ Cyber liability insurance costs an average of $145 a month for Insureon customers.
4. ¹⁵ Contracts for independent contractors often require a $1 million limit for cyber liability coverage for third parties.
5. ¹⁵ Cyber liability policies usually have limits between $1 million and $5 million.
6. ¹⁵ Cyber liability policies often include third-party coverage, which also covers lawsuits from contract issues or mistakes.
7. ¹⁵ Businesses handling data security and IT pay more for cyber liability insurance because they’re at higher risk.
8. ¹⁵ The right amount of cyber liability coverage depends on the business type, industry, and how much sensitive data is handled.

Cyber Insurance Coverage for Digital Assets

In today’s world, things like cryptocurrencies, NFTs, and other digital assets are very valuable. That’s why cyber insurance for digital assets is so important¹⁶. This type of insurance helps protect your digital investments from theft, hacking, and other cyber threats¹⁷.

If you run an NFT marketplace or accept crypto payments, you need this insurance. It helps prevent losses from hacks, glitches, accidental double-spends, or chargebacks¹⁷. For digital asset exchanges and custodians, it’s crucial to protect against internal threats and market volatility¹⁷.

Trust is key today, and digital asset insurance is a smart move. It’s not just a cost; it’s an investment in your future growth¹⁶. As cyber insurance changes, it’s becoming more specific to certain industries. This means your business can get the protection it needs to succeed online¹⁷.

By getting cyber insurance for digital assets, you protect your business, customers, and reputation from cyber threats¹⁶. Don’t let a single issue risk the trust and growth of your digital ventures¹⁶. Secure your digital future with a detailed digital asset insurance policy¹⁷.

Who Needs Digital Asset Insurance?

The digital asset world is changing fast, making it crucial to have the right insurance¹⁸. Companies like cryptocurrency exchanges, blockchain businesses, fintech firms, NFT marketplaces, and investment firms need digital asset insurance. This insurance helps protect their work and assets.

Entities at Risk

Cryptocurrency exchanges face big risks from cyber theft and hacking, which can lead to huge losses¹⁸. Blockchain and crypto businesses need insurance to keep their digital assets safe from fraud and other issues¹⁸. Fintech companies must guard against digital fraud and stay stable in the fast-changing financial tech world¹⁸.

NFT marketplaces depend on insurance to protect against theft and technical problems with Non-Fungible Tokens¹⁸. Investment firms handling digital assets look for insurance to manage risks from market changes and new rules¹⁸.

Lockton’s Emerging Asset Protection (LEAP) Team has over 35 experts worldwide who know the blockchain and digital asset fields¹⁹. Digital asset companies can save money and resources by passing on risk to insurers. This lets them focus on new ideas¹⁹. There are different insurance options for digital asset companies, like coverage for keeping assets safe, liability for directors and officers, cyber insurance, and more¹⁹.

The right insurance depends on the business type in the digital asset world, like keeping assets safe, exchanges, services, and tech companies¹⁹. Companies in this field should think about liability for management, cyber insurance, and other products like crime insurance and benefits for employees¹⁹.

Advisors who really get blockchain and digital asset risks can find the best insurance for companies¹⁹. Lockton’s LEAP team helps many companies in the digital asset world, including crypto exchanges, banks, NFT platforms, lending platforms, and traditional financial firms¹⁹.

What Does Digital Asset Insurance Cover?

Digital asset insurance is key to protecting your crypto from loss, theft, or damage²⁰. It covers lost or stolen keys due to mistakes, cyberattacks, or hardware issues²⁰. You’re also covered if you’re legally liable for someone else’s keys²⁰.

This insurance also pays for legal fees, taxes, and employee costs if you face a loss²⁰. You can customize it to fit your crypto’s security level, like multi-signature or single-signature addresses²⁰.

The digital asset industry is growing fast²¹. That means the need for strong insurance is more important than ever²⁰. Companies face risks like cyber threats, regulatory issues, and operational challenges²¹. Digital asset insurance helps them handle these risks with confidence.

This insurance protects against cyber attacks and data breaches²². It also shields directors and officers from liability claims²². By using insurance, companies can focus on innovation and growth without worrying about unexpected costs.

ALIGNED Insurance is a top choice for digital asset insurance²². They offer policies tailored for crypto custodians, custody tech providers, and institutional asset holders²². With their expertise, businesses can be sure their digital assets are safe, making it easier to move forward in the digital world.

Cost and Claim Examples of Digital Asset Insurance

The cost of digital asset insurance varies a lot. It depends on the type and value of the assets, the coverage level, security steps, and the policyholder’s claim history²³. Premiums are usually a percentage of the insured assets’ total value. This rate changes based on the insurer’s risk view and coverage depth.

Even though digital asset insurance costs can be high, it’s vital for protecting against cyber threats and theft. These threats are common in the crypto and NFT markets²⁴. In 2022, a single cyber attack led to unauthorized withdrawals of about $34 million, and hackers took over $80 million from a blockchain extension²³. To fight these risks, big exchanges and custody services have big insurance policies. For example, Coinbase has a $255 million crime policy, and Bitstamp has a $300 million one²³.

When it comes to crypto insurance claims and NFT insurance claims, coverage goes beyond theft or losing digital assets²⁴. Policies might cover IT forensic costs, notification costs, credit protection costs, and crisis management costs. They also cover third-party claims related to breach of Personally Identifiable Information (PII) and other claims²⁴. Extra coverages include Cyber Extortion, Cyber Business Interruption, and Digital Asset Damage.

The cost of digital asset insurance might seem steep, but it’s crucial for protecting against risks in the crypto and NFT markets²⁴. By knowing what’s covered and possible claims, businesses and individuals can make smart choices to protect their digital assets²³.

Conclusion

Cyber insurance and digital asset insurance are now key for businesses of all sizes. They help protect your digital assets and reduce financial risks. By understanding these policies, you can keep your business safe from new cyber threats²⁵.

It’s important to use strong cybersecurity steps. This includes things like multi-factor authentication and good backup plans²⁵. Also, pick an insurance company that pays claims quickly and cares about customers²⁵.

Cyber insurance helps keep your business safe by securing data and covering losses²⁵. With the average data breach costing $4.35 million, the right policy is key²⁵. The market for cyber insurance is growing, reaching $28.25 billion by 2027²⁶. Staying updated on laws and working with insurance companies helps you keep your digital assets safe.