Editor's Note: This was updated on 9/17/2024

As a business owner, you understand the importance of protecting your employees, infrastructure, intellectual property, and investments. In today’s digital age, as data breaches and cyberattacks become more frequent, many companies are turning to Cyber Liability Insurance Coverage (CLIC) as a safety net. However, cyber insurance should complement a strong cybersecurity foundation, not replace it. Before purchasing a policy, it's essential to understand how cyber insurance fits into your overall risk mitigation strategy and what questions to ask.

Learn How to Pick the Right Cyber Insurance Policy for Your Business:

Prevention vs. Reaction: Why Proactive Cybersecurity Matters

When it comes to cybersecurity, prevention always trumps reaction. While cyber insurance can help cover the financial losses after a breach, it can't repair the damage to your reputation or restore customer trust. Implementing strong security measures and maintaining proper cyber hygiene can significantly reduce your risk, making insurance a last resort instead of your first line of defense.

What Does Cyber Insurance Cover?

Cyber insurance has evolved from Errors and Omissions (E&O) coverage and is now a key component for businesses of all sizes, particularly as ransomware and data breaches rise. By 2025, the global cyber insurance market is projected to reach $22.5 billion. However, it's crucial to know what your policy covers — and what it doesn’t.

A typical cyber insurance policy may cover:

• Costs to recover compromised data

• Legal fees, settlements, and regulatory fines

• Hiring experts to identify and patch vulnerabilities

• Customer notification and identity monitoring services

• Business interruption, including network downtime and loss of productivity

Cyber insurance usually provides first-party coverage for your business losses and third-party coverage for legal actions from clients or partners. However, the specifics of your coverage will depend on your industry, data exposure, and existing security policies.

Five Key Questions to Ask Before Buying Cyber Insurance

1. Is the cyber insurance standalone or an extension of another policy?

   • Some insurers bundle cyber insurance with general liability policies, while others offer specialized, customizable plans. Knowing the difference helps assess the coverage depth.

2. Does the policy cover both first-party and third-party incidents, including vendors?

   • Many breaches occur through third-party vendors. Ensure your policy covers incidents involving service providers to achieve full protection.

3. Does the policy cover employee errors and social engineering incidents?

   • Human error is the leading cause of data breaches. Make sure your policy covers non-malicious actions by employees and attacks like phishing or social engineering.

4. Is there retroactive coverage or extended discovery periods?

   • Cyber threats can remain hidden for months or even years. Ask whether your policy covers breaches discovered after the policy period or events occurring before it took effect.

5. Is the policy limited to certain types of attacks?

   • Some policies may only cover targeted incidents, such as ransomware. Ensure your policy covers all potential security events, including opportunistic and highly targeted attacks.
     
     

How Cyber Insurance Fits into a Proactive Security Strategy

Cyber insurance is a financial safeguard, but it should be part of a larger, proactive security strategy. Insurers often require a thorough assessment of your security practices before offering coverage. Failure to meet basic standards can result in higher premiums or even denial of coverage.

To qualify for cyber insurance and keep premiums manageable, businesses should implement key security controls, including:

• Application Allowlisting - Prevents unauthorized software from running on your network.
  
  
• Multi-Factor Authentication (MFA): Strengthens user authentication beyond passwords.
  
  
• Incident Response Plan: A roadmap for quickly mitigating breaches.
  
  
• Email and DNS Filtering: Prevents access to malicious websites and phishing emails.
  
  
• Employee Awareness Training: Educates employees on recognizing and avoiding common threats.
  
  
• Vulnerability Scanning and Penetration Testing: Identifies and tests weak points in your network.
  
  
• Data Encryption: Ensures sensitive data is unreadable, even if intercepted by unauthorized parties.
  
  

Prevention First: The Best Defense

A strong cybersecurity posture minimizes the chances of an attack, reducing your reliance on cyber insurance payouts. This approach not only protects your business but can also lower insurance premiums, as many insurers impose strict security requirements.

At iCorps, our team of experts can assess your current security posture and help strengthen your defenses. A robust cybersecurity strategy enhances your insurance standing and shields your business from evolving threats. Speak with an iCorps expert today.