What Is the Average Cost of Cyber Liability Insurance? Blog | What Is the Average Cost of Cyber Liability Insurance?
Cyber 03/04/19

What Is the Average Cost of Cyber Liability Insurance?

The digital age has paved the way for astounding innovation and—as with most emerging technologies—has created new vulnerabilities for people and businesses. And in the case of cyber liability insurance coverage, we’re talking specifically about data breaches.

Today, the average data breach costs $3.86 million. Additionally, you might be surprised to discover that 58% of companies breached are small businesses. With a cyberattack occurring every 39 seconds, businesses are now looking for ways to set up defenses, fortify their IT, and protect their platform in the case of an attack.

And us consumers sit here twiddling our thumbs, at the complete mercy of the companies we provide our information to.

 

Cyber Liability Insurance | Your Shield

First, what is cyber liability insurance? Cyber Liability Insurance is an insurance policy designed to safeguard consumers of technology services and products. This cyber insurance policy is to cover liability and property losses that stem from a company’s engagement in electronic activities, as in making purchases on the internet or collecting sensitive data from users in their network.

Typically, in the case of a breach, a comprehensive cyber liability insurance policy will cover:

  • Business Disruptions
  • Fines
  • Legal Fees
  • PR Expenses
  • Direct Financial Loss
  • Customer Loss

Every policy, however, largely depends on the insurance company’s risk assessment of a given business. Some sectors will have a higher cyber risk, while a “mom and pop shop” that has not yet digitalized their store may not need a cyber liability policy at all.

 

What Is the Cost of Cyber Liability Insurance?

While it is easy to understand the importance of erecting such a liability policy, how much does cyber liability insurance cost on average? And is it feasible for most businesses?

While there is an average cost, it is paramount to consider the underwriting factors an insurer examines when drafting a liability policy. These include but are not limited to:

  • A given number of transactions made per year
  • The type of information or data collected
  • Your number of active employees and devices
  • The security infrastructure currently integrated

With that being said, the average cost of cyber liability insurance coverage in the United States—according to AdvisorSmith Solutions Inc—was $1,501 per year for $1 million in coverage (with a $10k deductible)

Usually, the liability coverage for small and medium-sized businesses is chosen from one of three brackets:

  • $1 Million
  • $500,000
  • $250,000

Again, risk assessment is going to play a tremendous role in the math, but the above is the concrete average. Should your business not have much exposure, you might find a cyber liability policy on the lower end (about $700 annually). Conversely, if you have a small business that, while not having an extended staff of clientele, handles sensitive data, you could be looking at the higher end (about $8000 annually).

Being that various factors play a role in the calculation, the pricing will most always be personalized. There is a general rule of thumb, however…

The more security measures a given company has implemented, the lower the premium.

 

What Does The “Average” Cyber Liability Insurance Policy Cover?

When it comes to cyber liability insurance cost, you want to know what you are paying for. So now there is the question of, what does a cyber liability policy cover? With an all-inclusive insurance coverage plan, the policy will cover first-party and third-party liabilities. To explain further:

 

First-Party Cyber Liability Insurance

First-party liability coverage safeguards any claims related specifically to breaches or cyber threats that have been made against your company. If you are a business owner that saves, sends, and receives data, you will want your cyber liability insurance to cover first-party claims, seeing as some potential expenses include but are not limited to:

  • The money spent notifying clients
  • Credit monitoring services
  • PR costs (to fix reputation)
  • Lost income
  • And even ransom (if hackers take your data hostage)

 

Third-Party Cyber Liability Insurance

The third-party insurance coverage in your policy covers your responsibility for the customers’ data. Claims can be made against your outfit that state you were not compliant or responsible with a given party’s data, thus you failed to protect the customer.

Third-party cyber liability insurance covers:

  • Legal Fees
  • Settlements or payouts from judgments made against your business
  • Fines and penalties

Cyber Liability Insurance, Why You Need It

Now it is time to discuss cyber insurance and why you need it. The reality is that most businesses either do not know (or do not think) they are vulnerable to a cyberattack. With headlines constantly surfacing about large companies or government platforms being hacked and breached, small and medium-sized businesses tend to let their concerns fall to the wayside.

Why would that ever happen to us?

Yet it’s that very logic threaded into the “58% of data breaches occur at small businesses” statistic that needs to be addressed. We have already fully pivoted to digital. The world, as it stands, is only going to become more digital. Thus, the further we progress, the more that $1501 annual average is an absolute imperative.

The losses accrued from a data breach far outweigh the drawbacks of paying an annual premium.

 

 

Sources:
  1. AdvisorSmith. Average Cost of Cyber Insurance.
    https://advisorsmith.com/data/average-cost-of-cyber-insurance/#frequent_claims
  2. IBM. 2018 Cost of a Data Breach Study: Global Overview.
    https://www.ibm.com/downloads/cas/861MNWN2
  3. Verizon. 2018 Data Breach Investigations Report.
    https://enterprise.verizon.com/resources/reports/DBIR_2018_Report.pdf
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