At one time or another you have likely received an email informing you that you will need to change your password for one of the websites you visit. The trigger for these advisories is often a data breach, a nightmare scenario in which a hacker gains access to consumer data, which could include personal information such as credit card numbers, social security numbers and addresses.
Consumers are understandably upset when this occurs, and are often victimized once the hackers sell the information they have gathered to individuals who can run up their credit cards or otherwise wreak financial havoc. The consequences for a company whose data has been breached are often dire. Since hackers often steal data that belongs to thousands of customers, the expenses can run into the millions of dollars. Medical databases are not the only targets, however. Anyone suspected of storing customer financial information can become a victim.
Data breach insurance protects against a company’s losses in the event a breach of data security occurs.
If you decide to purchase it, make sure that your policy covers fines levied by the state, as otherwise you could be left without the amount of financial protection you need. Note that some data breach policies include access to professional assistance to help you comply with regulations and implement practices that can further protect your company.
Many policies provide protection against lawsuits arising from stolen data.
Since the victims cannot sue the hackers who sold the data, they will often look at the next best option – your company. Since a data breach could result in multiple lawsuits, the peace of mind is likely worth the premiums you will pay. Your policy may also offer assurance that forensic services will be paid for in the event you need to gather data to protect yourself in a lawsuit.
Some policies also provide reimbursement for money your company has lost due to the inevitable interruption in business that data breach events cause.
If customer data is stolen during the holiday season, for example, and your business sells smoked turkeys, the financial loss you will experience during that time could be an amount equivalent to your entire profits for the year. While you struggle to reestablish your company’s reputation and deal with notifications, your financial needs will be taken care of if you choose a policy that has this provision.
Insuring your company against data theft is not the only step you can take to protect yourself, however.
Evaluate your data security practices (have you updated your passwords recently?), ensuring that current anti-virus and malware software is installed on all computers, that a network firewall is in place, and data is encrypted. These steps can go a long way toward protecting your organization against financial loss and can help to reduce your liability in the event that a customer initiates legal action.