Do You Need Cyber Insurance?

Proud-LockA lot of my client work involves working with online banking apps and managing financial reports that I share electronically with other professionals like CPAs, financial advisors and estate attorneys. I’m a stickler for security and was curious about cyber insurance and if it was something my clients should have.

What It Is

According to Wikipedia, cyber insurance is a product used to protect individuals and businesses from Internet-based risks. We’re all familiar with headlines related to data breaches. Cyber insurance typically covers liability related to data destruction, hacking, theft, etc.

Do Individuals Need Cyber Insurance?

According to Slate — a daily Web magazine — the simple answer is no. While the article’s author (Josephine Wolff) admits she’s new to the world of adulthood and the need for all types of insurance, she’s done some impressive digging. By the way, I learned that she is an assistant professor of public policy and computing security at Rochester’s Institute of Technology. Age aside, I think she’s a credible source.

Possible Exceptions for Individuals

So are there exceptions for individuals who may need cyber insurance? Of course. Again, talk with your insurance agent, especially if you employ household staff or pay contractors more than $600 per year. According to the IRS, you need to send them 1099s. And those documents contain sensitive and personal information — like their name, address, social security or TIN. Store those 1099s on your computer or in paper files? That’s a potential entry point for a breach. Locked cabinets, password-protection and other measures are common sense.

Small Business Considerations

If you’re a small business and store personal and confidential information (like names, addresses, credit cards), then I urge you to talk with your insurance agent. Intuit advises that any business that hosts a website that interacts with the public should have cyber liability insurance.

Travelers Insurance’s CyberFirst Essentials, a policy for small businesses, provides protection against data breach claims and lawsuits. They cite these common ways that security can be compromised within a small business:

  • Online hacking and theft of confidential data such as credit cards and social security numbers.
  • Accidental sharing of personal information
  • Loss of paper or electronic records from an office

Do you have cyber insurance? Is it worth the peace of mind?

Photo credit: Holly Victoria Norval

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