UPDATED: Jul 30, 2020
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Regardless of the business affected, the loss or theft of corporate data can be devastating. Bank account information, trade secrets and classified documents can all be lost, amounting to tremendous financial losses to the company. In order to protect against this loss, many businesses choose to purchase data breach insurance. Far from being applicable only to tech businesses, this type of insurance is vital to any company with data to protect.
What Does Data Breach Insurance Cover?
Data breach insurance is a type of cyber liability insurance. This coverage is relatively new and was developed in response to the ever-changing needs of companies that utilize new technology.
Several different situations might be covered by this type of policy:
- Lawsuits arising from the breach of cyber security or loss of data
- Financial loss arising from the leaking of trade secrets or proprietary information
- Financial loss arising from compromised account information
- Legal expenses related to any of the above
For example, imagine that your company stores the credit card information of account holders so that they can make payments online. If your system is hacked, this credit card information could be compromised. Data breach insurance might help to protect your company from lawsuits from the customers whose information was compromised.
If your company is in the data storage business, you may need substantially more insurance than would otherwise be necessary. Be sure to check with the insurer about what types of liability coverage would be necessary to protect your tech business from litigation arising from security breaches.
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Do You Need Data Breach Coverage?
Ultimately, it’s up to you to decide whether this insurance is necessary for your business. If you capture and store any kind of sensitive data, including personally identifiable information or business records, then data breach insurance is a must-have. If your company does not store any sensitive information, or if you store it through a secure third party, then this type of insurance may not be necessary.
How Much Does It Cost?
As a relatively new type of insurance, data breach coverage may have more variation than other types of insurance. Additionally, the price will vary depending on your level of risk and the amount of coverage that you buy. A business with fairly simple data protection needs will have lower costs than one that stores substantial amount of data for third parties.
If you’re interested in adding data breach insurance to your business, you should first obtain a quote from multiple insurers. This will provide you with a ballpark estimate of how much you’ll need to spend on this coverage so that you can budget accordingly and decide whether data breach insurance is right for your needs.