The Basics of Cyber Liability Insurance in New Jersey

Written By: Julian Conner, Commercial Account Executive, Mints Insurance Agency

Insurance has a reputation of being boring. That’s fair; it often is.

Even though I grew up the son of an insurance agent, the term “insurance agency” still triggers vague images of the movie “Office Space” or maybe even the famous ‘Bueller’ scene from “Ferris Bueller’s Day Off.”

However, the concept of insurance agents as dull paper-pushers isn’t necessarily true, and our industry isn’t necessarily an old-fashioned one either.

In fact, one of my favorite parts of being in this field is keeping up with the newer coverages that business owners don’t necessarily think about needing until something happens.

One of these relatively new coverages is called Cyber Liability Insurance. Basically, Cyber Liability Insurance in NJ (or Cyber, for short) protects you if your business suffers a data breach or a malicious software attack, and jumps in to cover the expenses that result from such an attack.

Real-Life Example: Target

If you’re looking for an example, one of the largest attacks against a major retailer was back in 2013, when hackers gained access to Target’s systems through a heating and air-conditioning contractor working with the company.

Almost 110 million customers were impacted, and the company lost more than $160 million due to the breach.

They were faced with a class-action lawsuit and were forced to provide free credit monitoring, hire an independent expert to conduct a security assessment, employ an executive responsible for developing and implementing an IT security program and more.

This was pretty devastating for Target, but sometimes it’s easy to dismiss stories like these about larger companies because we think of them as having enough resources to easily handle issues like these.

However, according to a 2018 report, more than two-thirds of companies with fewer than 1,000 employees have experienced a cyber attack.

I trust that the Targets and Walmarts of the world will eventually come out of a cyber attack fine; I can’t say the same about many of the small business owners I interact with every day.

Who Needs Cyber Coverage?

So who needs this coverage then? To keep it simple, any business that processes or stores any personal information should probably have Cyber Liability Insurance in NJ.

Think of a doctor’s office that keeps patient information, an accountant who does taxes for her clients, or a florist who keeps credit card information on file for customers’ who order flowers monthly.

The rise of working from home during the Coronavirus pandemic is also highlighting a serious need for this coverage.

Between the heightened number of employees working from a home office, utilizing their own laptops and phones, to the increasing volume of people ordering food and services online, there has never been a greater vulnerability to businesses when it comes to cyber threats.

So how does having Cyber Liability Insurance coverage help you? Let’s break it into two pieces; first-party vs third-party coverage.

First-party cyber insurance covers expenses when your data is hacked or information is stolen. Third-party, on the other hand, offers protection when a client sues your company for failing to protect their information.

First-Party Cyber Coverage

A simpler way to imagine it; first-party coverage is like property insurance, in that it protects your company’s own damages from cyber losses.

For example, first-party jumps in if a new employee accidentally destroys a database, or a hacker maliciously jumps in and plants spyware on your computer system.

When you need to pay to notify your clients’ about the breach, hire a PR firm to mitigate the damage and potentially pay for credit monitoring for affected persons, first-party coverage jumps in.

Third-Party Cyber Coverage

Third-party, on the other hand, is more like general liability insurance. This includes the legal aspects of a data breach; think legal fees, settlement costs and judgements that result from a court case.

I think we all have an inkling of how quickly court costs can add up, and cyber suits are no different; in fact, the average financial toll of a cyberattack on a business in 2019 was $200,000!

Cost of Coverage

The average cost of Cuber Liability Insurance in NJ can vary, depending on your industry, but certain small businesses can add this coverage to their current General Liability policies for less than $100/month.

The average 2019 cost of Cyber coverage in America was $1,500, but can often be much more affordable depending on your type of business and how you utilize technology in your daily operations.

To bring this all back around to the beginning and my “Office Space” nod, a quick note on the movie; three of the main characters actually utilized a semi-successful hack against their own office’s systems, which ended up funneling over $300,000 out of the business in only a few days.

I won’t spoil the ending for you, but they probably could have used Cyber Liability Insurance. Have questions about cyber coverage for your business? Contact us at Mints Insurance Agency.