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Data Breach Insurance

Data Breach Insurance

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If your company handles sensitive data of any kind, from customer payment information to intellectual property, you are at risk of a data breach. If your company’s private and confidential data is accessed by unauthorized parties, Data Breach Insurance can help cover the costs of response and recovery.

What is a data breach?

A data breach is a security incident where your company’s private or confidential data is accessed by an unauthorized party. A data breach could involve the loss, theft, or unauthorized access of information such as customer data, financial accounts, passwords, contact information, proprietary corporate data, and more. The breach could be perpetrated by outside parties, such as hackers or cybercriminals, or internal parties, like employees.

With the increasing digitization of the economy and business processes, data breaches are becoming more and more prevalent. Companies in the U.S. spend almost $4 million dollars on average to respond to data breaches, according to IBM, and businesses both large and small are at risk. According to First Data, smaller businesses pay on average $36,000 to recover from a data breach. 

What is Data Breach Insurance?

Data Breach Insurance protects your business from first-party losses related to a data breach. If your business has its data hacked, stolen, or accessed illegally, Data Breach Insurance can help cover the costs of recovering from the breach.

These costs may include:

Data Breach Insurance is also commonly known as first-party cyber liability insurance, as it typically only deals with first-party losses that your business directly incurs, rather than third-party losses where your company’s data breach causes a customer or employee to suffer a financial loss. For third-party coverage for data breaches, consider cyber liability insurance.

Data Breach Insurance is commonly added as an endorsement to a commercial general liability policy or a business owner’s policy. It is also available on a standalone basis, depending on the insurer.

Who needs Data Breach Insurance?

Data Breach Insurance is an important coverage for any business that stores or transmits sensitive, confidential, or proprietary information electronically. This may include personally identifiable information (PII) or protected health information (PHI). For companies that conduct their business online or use online tools as part of their operations, protection against data breaches is critical, as there is a greater chance for outside parties to hack into your systems via nefarious means, including phishing scams, denial of service attacks, or through security loopholes.

Even for businesses that don’t operate online, data breach protection is important. If a company laptop is lost or if an employee steals customer records from an office computer, your business’s confidential data could be exposed.

Increasingly, data breaches are becoming more common, and while you may only hear about large corporations getting hit with cyberattacks, the reality is that both small and large companies are vulnerable. Smaller businesses may be at even greater risk, as they generally have less time and resources to put behind security measures and protocols, and the costs of responding to a data breach could be financially crippling for a small company.

What does Data Breach Insurance cover?

Data Breach Insurance provides coverage for costs related to responding to and recovering from a data security breach. These costs may include:

What are the key exclusions to Data Breach Insurance?

While Data Breach Insurance can cover most costs associated with a data breach, there are some notable exclusions:

What is the difference between cyber liability insurance and Data Breach Insurance?

It’s easy to confuse cyber liability insurance and Data Breach Insurance, as many insurers may use these terms interchangeably when referencing their cyber insurance products. The distinction between the two insurance types does vary depending on the insurer, but generally, Data Breach Insurance is considered to be a more limited set of coverage than cyber liability insurance.

Data Breach Insurance typically covers only first-party losses that your business directly incurs due to a data security breach. This type of insurance is commonly purchased by smaller businesses who don’t often need the broader coverage provided by cyber liability insurance.

Cyber liability insurance typically covers first-party losses in addition to third-party liability related to data breaches. Third-party coverage provides protection when a customer, vendor, partner, or other party sues you for allowing a data breach to happen.

How much does Data Breach Insurance cost?

The average cost of cyber insurance, which includes Data Breach Insurance, is $1,485 per year in the U.S. The costs of insuring your business against data breaches and hacking attacks varies based upon the nature and size of your business, as well as the state in which your business is located. Below, we list the average cost of cyber insurance in each state, along with the difference between the state average and the national average.

StateAverage Cost of Cyber InsuranceDifference from National Average
Alaska$1,532.89 3.23%
Alabama$1,539.40 3.67%
Arkansas$1,646.50 10.88%
Arizona$1,581.50 6.50%
California$1,430.18 -3.69%
Colorado$1,521.67 2.47%
Connecticut$1,593.62 7.32%
District of Columbia$1,539.25 3.66%
Delaware$1,446.47 -2.59%
Florida$1,529.82 3.02%
Georgia$1,450.54 -2.32%
Hawaii$1,519.46 2.32%
Iowa$1,505.73 1.40%
Idaho$1,483.70 -0.08%
Illinois$1,434.59 -3.39%
Indiana$1,484.06 -0.06%
Kansas$1,501.38 1.11%
Kentucky$1,587.10 6.88%
Louisiana$1,623.94 9.36%
Massachusetts$1,380.59 -7.03%
Maryland$1,471.18 -0.93%
Maine$1,467.39 -1.18%
Michigan$1,339.33 -9.81%
Minnesota$1,708.11 15.03%
Missouri$1,509.00 1.62%
Mississippi$1,472.55 -0.84%
Montana$1,478.29 -0.45%
North Carolina$1,421.49 -4.27%
North Dakota$1,464.42 -1.38%
Nebraska$1,485.64 0.05%
New Hampshire$1,431.99 -3.57%
New Jersey$1,615.25 8.77%
New Mexico$1,355.36 -8.73%
Nevada$1,507.55 1.52%
New York$1,616.70 8.87%
Ohio$1,553.68 4.63%
Oklahoma$1,513.03 1.89%
Oregon$1,462.50 -1.51%
Pennsylvania$1,466.49 -1.24%
Rhode Island$1,541.58 3.81%
South Carolina$1,398.83 -5.80%
South Dakota$1,489.45 0.30%
Tennessee$1,500.20 1.03%
Texas$1,459.22 -1.73%
Utah$1,515.10 2.03%
Virginia$1,467.83 -1.15%
Vermont$1,457.70 -1.83%
Washington$1,449.80 -2.37%
Wisconsin$1,523.03 2.56%
West Virginia$1,629.64 9.74%
Wyoming$1,426.89 -3.91%

Besides the location of your business, a number of other factors can greatly affect the premiums that you pay for cyber insurance. Insurance companies will take into account the nature of your business, the number of sensitive employee and customer records you store, whether your business stores credit card and banking information on your customers, and the types of security defenses your company has undertaken. Additionally, if your company has a history of cyber insurance claims or if it has been attacked or hacked in the past, your premiums may be higher.

In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer cyber policies:

ProviderCyber LiabilityGeneral LiabilityCommercial Crime

Final Word

As technology in business becomes more prevalent, data breaches, hacks, and other cyberattacks are increasing in frequency, impacting small and large businesses alike. In order to better protect your company from the financial burden of recovering and responding to a data security breach, consider Data Breach Insurance. This coverage can help provide your business with the financial support necessary to address a data breach once it has occurred, notify your customers and provide them with identity theft protection services, and ensure that your business is compliant with any related regulations or laws.

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