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Small Business Digest


Cyber Insurance - The Newest Business Insurance

Businesses have to protect themselves with all kinds of insurance liability, health and life insurance for their employees, property insurance, directors/officers insurance, etc.  But theres a new type of insurance that companies may not have heard about yet: it's called cyber insurance. 

This type of insurance may also be referred to as e-commerce, e-business, information security, cyber risk, network security or hacker insurance.  Cyber insurance includes policies that cover hacked computers, virus attacks, denial-of-service attacks, copyright infringement, web content liability and other technology related areas. 

While computer hardware is often covered under a general liability policy, the data on the hardware that can be lost generally isnt.  Industry experts recommend that small businesses, especially, look into cyber insurance.  This is because they often use a third-party company to host their website or other data tools and can find themselves in trouble if that third-party isnt responsible and doesnt have reliable data management and maintenance practices in place to protect the data being hosted.

Cyber insurance policies will often cover the following:

  • Network security protects a company from damage due to a virus, hacker or identify theft

  • Web content liability protects a company from damages due to libel, copyright and trademark issues

  • Internet liability covers a company if their internet service provider (ISP) is not functioning or suffers from a computer hacker

  • Business interruption covers any income the company loses from a computer virus, hacker, or other attack

Before looking into a new cyber insurance policy, a company should make sure to take a look at their current liability insurance to see what is covered in the existing policy.  Then when the company invests in a new cyber insurance policy, they can ask the liability insurer to remove those areas (such as hardware damage) from the existing policy that will be covered under the new policy.  This will hopefully allow the business to save money and also reduce duplicate coverage.

In order to get a cyber insurance policy, a company will have to undergo an audit process that will generally be conducted by a third-party company on behalf of the insurance company.  Theyll look at the companys current data practices, virus software, firewall procedures, etc.  If the company doesnt have good practices currently in place, they may be denied coverage.

As companies look into new policies, they should make sure to only pick items that are relevant to their specific business.  For example, if the company has a website, but doesnt allow customer comments or have a message forum area, they may not need web content liability since theyll know whats being placed on the site and can approve content for any copyright issues before its published.  It will be important to select the policy that meets the companys needs and that doesnt end up costing a great deal of money in premiums for something that theyll probably never make a claim about and that they cant afford to just cover on their own.  To learn more about this new type of insurance, check with an insurance company or broker.

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