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Cyber Insurance, Cyber Risk, and How to Protect Your Company

Cyber insurance was created in order to address the increasing worry regarding cyber risk. Cyber risk is comprised of many different incidences, which can wipe out your entire business. Only the proper insurance will protect your businesses from cyber risks.

What is Cyber Insurance?

Cyber insurance covers the loss of data, destruction of databases and or software, and interruption of business services that occur due to hacker attacks, denial of service attacks, malfunctioning software or hardware, viruses, and other forms of malicious and inadvertent online attacks.

Nowadays, about 29% of all American companies own insurance that protects them from cyber security risks. This is almost a five percent jump from the 25% of companies that possessed it back in 2005. Since almost every company utilizes some sort of database, businesses are vulnerable to losing business due to stolen personal data, network downtime, or other negative events.

These attacks represent just the tip of the iceberg. Phishing attackers, malicious worms, Trojans, viruses, and spy bots also present serious threats to businesses.

Third Party Audits and Approval for Coverage

There are now a number of legitimate insurance companies the provide coverage for cyber related risk. Often times, they will require a security audit to assist the underwriter in determining what terms and conditions he will offer to the customer. This audit surveys a company's existing cyber security practices.

Most insurance companies have developed standards by which they set premiums. These factors include the size of the company, data security policies and procedures, the amount of data that the company holds on file, the number of employees, the number of persons authorized to access the data or database, and previous claims history.

Premiums for cyber insurance can be quite affordable. In fact, a typical policy for a small business usually runs from $1,000 to $5,000 in annual premium. In exchange, the company receives coverage for its physical EDP equipment and limited coverage for its liability resulting from its negligent meeting of its responsibilities to others.

Any company that is considering purchasing cyber insurance needs to analyze their existing business insurance policy. It's possible that some cyber claims may be covered in the existing policy. This isn't likely, but it's important to check. Most new business insurance policies exclude cyber-related claims, hence, the rising popularity of the specialized insurance.

Necessity of Cyber Insurance for Contractors

Freelancers, IT professionals, and independent contractors should also equip themselves with good cyber insurance. These contractors are vulnerable to litigation, especially since they are usually tinkering with precious data. If you are working with a major firm, they will undoubtedly have standards that independent contractors must meet in order to work for them. Cyber insurance has become a necessity for any independent contractor who works in IT or web development.

While many insurance companies are now offering cyber insurance, it's important to be very discriminating when choosing your policy. It's wise to only select an insurance company with a proven track record in insurance. Some insurance companies even specialize in this form of insurance.

You're better off with an insurance company that knows the ins and outs of data loss protection and electronic coverage.

Exercise Prudence Regarding Your Data

Businesses house their most important and precious data in computers, online systems, and databases. As a result, it's extremely important to protect these troves of information. Find a policy that will cover you no matter what happens so that you can focus on running your business.