Cyber liability insurance covers the expenses of legal representation, public relations and other costs that may arise from a lawsuit after a data breach or issue with information mismanagement. It is often a necessary expense for technology companies who hold personal client information in an online database.
It is important for all businesses to consider cyber liability insurance and make an informed decision as to whether or not they need it. In general, companies who are vulnerable to lawsuits related to mismanagement of personal information make ideal candidates.
The following is a complete overview of cyber liability insurance, including what it is, who can benefit from it and what areas it covers.
What is Cyber Liability Insurance?
One of the primary concerns of technology companies is the threat of a data breach or information mismanagement. Oftentimes, technology companies hold personal information about their clients in a database, leaving them vulnerable to dire consequences should there be a data breach.
If a breach occurs, the private records can end up in the wrong hands. The records often include social security numbers, credit card information, customer records, employee health records and more.
If this occurs, the technology company is at risk of lawsuits by clients, which can lead to a long path of legal battles with many expenses. It covers legal fees, settlement payments, customer notifications, public relations and more when data ends up in the wrong hands online and subsequent lawsuits follow.
Companies Who Benefit from Cyber Liability Insurance
Any business that stores personal client information in a cloud or through another use of information technology should strongly consider the benefits and need for cyber liability insurance.
Regardless of how secure a company’s online network may be, a data breach should always be considered a possibility. Of course, strong preventive efforts are essential to protect personal information, but it is also essential to have coverage in the event a worst-case scenario occurs.
There are certain industries that require cyber liability insurance more than others. Most notably, technology companies can greatly benefit from cyber liability insurance.
Not only are they vulnerable to a data breach within their business, but they may become vulnerable to other forms of lawsuits if a company to which they sell software or other forms of technology experiences a data breach or information mismanagement of their own.
With that said, it is certainly not limited to only technology companies, and every business should consider whether or not cyber liability insurance is right for them.
Fields of Coverage
A common misconception is that cyber liability insurance only covers legal fees of a lawsuit. However, it is a much more inclusive service that covers a range of expenses and processes. It is important to understand what coverage a business receives if they need to use it after a data breach or information mismanagement.
The primary reason a company would need to use their cyber liability insurance is that there was a data breach. A data breach is the accidental or intentional release of confidential information about clients to an untrusted and potentially vulnerable environment.
It may include the accidental release or loss of social security numbers. It could be the result of criminal behavior by someone inside or outside of the company, or it could simply be due to an accidental release of privileged information due to miscommunication. Regardless, a data breach is a serious concern and often leads to an expensive and long legal process, as well as a damaged reputation.
Oftentimes the primary concern of businesses, especially small businesses, during a lawsuit is the legal fees. With cyber liability insurance, companies who are sued after a data breach or information mismanagement are covered from all legal fees.
Regardless of whether or not the other party has a legitimate claim, the cost of legal fees is sometimes enough to cripple a small- to mid-sized business. It financially protects businesses during lawsuits that are related to a data breach.
PR Damage Control
As mentioned, cyber liability insurance providers often do much more than simply cover the cost of a lawyer. The best insurance companies will help their clients through the entire lawsuit process, from helping them find the best representation possible to providing PR damage control to help ensure their company’s reputation remains intact during a controversy following a data breach or information mismanagement. They can also cover additional unexpected costs as well.
Acquire Technology Insurance from The Insurance Experts at MFE Insurance
Technology companies are often more vulnerable to lawsuits than the average business, especially if they use information technology (I.T.) that is vulnerable to a data breach or information mismanagement.
To learn more about the benefits of cyber liability insurance and technology insurance as a whole, get in touch with our insurance professionals at MFE insurance today.