For many small to medium-sized businesses, the Business Owners Policy (BOP) can be an economical solution to help meet the company’s insurance needs.  Business Owners Policies typically combine numerous lines of coverage, such as commercial general liability (CGL) insurance, property insurance, and commercial auto insurance, into one single policy.  The Business Owners Policy costs less than if the business bought the component policies separately.

Many business owners think that their data is protected under a commercial lines policy, whether it is a Business Owners Policy or some other form of business insurance.  But this is simply not the case.

Property insurance, for example, only covers tangible assets, such as computing equipment and office furniture.  Since one cannot touch or feel data, the data it is not tangible, and therefore a property policy will not cover it.  CGL policies also exclude lost or compromised data from items covered.

Thus, small business owners might think they have cyber liability insurance built into their Business Owners Policy, when in fact they do not.

Business Owners Policy Endorsement

Insurance carriers can add some level of cyber liability coverage to a Business Owners Policy by way of an endorsement for an extra fee, but this method is often inadequate for the true needs of the company.  Here’s why:  First, the coverage offered as an add-on to the Business Owners Policy typically is geared only towards third party claims.

So while it will probably cover legally mandated notification costs and attorney’s fees after a breach has occurred, it won’t pay a dime for many of the other, first party expenses the business will likely incur.

These first party costs can be numerous, and typically include data restoration by IT experts, lost revenue from business interruption during and after the breach, and crisis management services to protect and rebuild the business’s damaged reputation.

Second, there are usually very small limits of liability to the third party claims that would be covered by a Business Owners Policy’s cyber endorsement.  The typical claim limit ranges from $50,000 to $100,000.  But if a cyber liability claim is made, attorney’s fees and court costs can quickly soar well past these paltry amounts.

The same is true for notification costs.  Estimates vary on the true cost to notify an individual that their data has been compromised, but a price at the low end of the spectrum is about $50 per record.  Using this cost per record price, the typical Business Owners Policy endorsement would only pay for notifying 2,000 people.  And if the more traditional estimates of $150-200 per record cost are used, it’s easy to see how quickly the money evaporates.

Allen Cross, a senior risk consultant at INSUREtrust, summarizes the situation this way:  “The danger is that a cyber liability endorsement to a Business Owners Policy is narrow in scope and the limits are small.  Someone buys the endorsement and then they feel comfortable with it, but this is a false sense of security.  They feel protected, but in fact their protection is inadequate.”

Cyber liability claims can wreck a balance sheet, so it’s important to get comprehensive cyber coverage with ample limits.

We at INSUREtrust have been cyber liability insurance experts for over 15 years, and every day we help large and small businesses obtain the right policies for their particular needs.

Internet insurance doesn’t have to be expensive, but it is money well spent. The premium cost for a cyber insurance policy can be as little as $1000 for a $1 million policy limit.

Over the past ten years, INSUREtrust has written more than $100 million in premiums and paid more than $30 million in claims. Insurers are looking for business and we can find competitive pricing and terms for almost any risk.