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What Is Cyber Insurance Coverage?

Updated: October 2020

Cyber insurance helps protect your small business against some of the risks of doing business digitally. From collecting customer emails and running credit cards to storing employee information, it's important to keep everyone's personal information secure. Learn more about how cyber insurance can help protect your business against the liability and costs of cyberattacks and compromised data.

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Do I Need Cyber Insurance?

Most businesses use information technology (IT) some way, according to the Insurance Information Institute (III). Every day tasks for a small business, such as sending emails or selling products online, may put employee and customer's personal information at risk. If certain data is compromised, the III says that your company can be held liable — whether you are hacked, your system is infected with malware or a laptop with customer information is stolen.

If your business is found liable for a data breach of customer, partner or employee information, it's not a simple matter of making sure everything is secure again. The III says business owners may also be responsible for:

  • Customer costs: Helps with expenses that affected parties incur.
  • Technology expenses: Helps to have systems and computers restored or replaced.
  • Notifications: May help with the costs of notifying affected parties, which is legally required in every state.
  • Fines: Helps with the costs of fines your company may be required to pay.
  • Legal costs: Helps to pay for any necessary legal fees.
  • You may want to consider purchasing cyber insurance for your business to help with these unexpected costs that can arise after data is compromised.

What Does Cyber Insurance Cover?

Coverage will vary between policies, but cyber insurance typically covers:

  • Data Compromises: Helps with the costs of your company's response when personal information has been breached. Coverage typically helps the policyholder comply with notification laws and, in the case of a lawsuit, legal and settlement costs.
  • Identity Recovery: Provides business owners with assistance after identity theft. Includes support such as case management, financial resources, a dedicated help line and coverage for legal fees.
  • Computer Attacks: Helps to restore, recover or recreate systems and data that are damaged by a hacker, virus, malware or other computer attack. This coverage may also provide some public relations assistance after the attack.
  • Cyber Extortion: This coverage can help with the costs of a negotiator, investigator and costs of responding to and eliminating an extortion threat.
  • Computer Fraud: Helps protect a company against computer fraud that leads to unauthorized, but intentional, changes to data or instructions within your company's computer system.
  • Misdirected Payment: Your policy may help your business recover if someone intentionally and deceptively transfers money that results in a financial loss for the company.
  • Network Security Liability: Helps with legal costs if the business is sued for a system security failure that affected a third party.
  • Electronic Media Liability: This coverage kicks in if your business receives notice of an electronic media liability lawsuit. Your business may be a part of a lawsuit if another party believes that information on your company's website used copyrighted materials, unintentionally defamed another party or violated someone's privacy.

How Can I Reduce Cyber Risks?

The III recommends taking the following steps to help reduce cyber risks:

  • Maintain and update security software and hardware regularly.
  • Work with an IT services provider who can assist with cyber security.
  • Avoid data loss by backing up information at a secure offsite location or to a cloud service.
  • Create, follow and publicly post a data privacy policy.

You may not be able to completely eliminate a cyber risk, but staying on top of changing and advancing technology can help. Knowing your business has cyber insurance protection can also give you peace of mind, because you'll have help if your data or systems are compromised.

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This content is for informational purposes only and may not be applicable to all situations.

Coverage subject to terms, conditions, and availability. Policy issuance is subject to qualifications. Allstate Insurance Company, Allstate Indemnity Company, Allstate Fire and Casualty Insurance Company, Allstate Property and Casualty Insurance Company, Northbrook, IL. © 2020 Allstate Insurance Company, Northbrook, IL.
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