Through IdentityTheft.gov, the Federal Trade Commission has received 1.1 million reports of identity theft. In addition, 2.4 million fraud reports were received, with the most frequently reported category being “Fraud by Scammers”, closely followed by “Online Shopping Fraud”.
A report published by Statista shows that between 2001 and 2022, there was a significant increase in financial loss from cybercrime reported to the United States Internet Crime Complaint Center (IC3). In 2022, the annual loss amounted to an impressive $10.3 billion, a significant increase from the $6.9 billion reported the previous year. This trend demonstrates the growing impact and severity of cybercrime.
In this blog, we look at personal cyber insurance and how it is an important line of defense in our increasingly digital world. I draw on my experience of over 26 years in the insurance industry and tens of thousands of clients. I aim to give you an overview of this insurance option. Additionally, I will explain why this form of coverage is not only beneficial but essential for you in the digital age.
What is Personal Cyber Insurance
Personal cyber insurance, or cyberattack insurance, is a type of insurance that protects you against cyber risks. It is usually added to a homeowners policy. It provides coverage for financial loss, identity theft, and other cyber-related attacks such as cyber extortion, and protection against online fraud. So, if you have been a victim of cyber disruption like hacking or online phishing, personal cyber protection will help. It provides you with the assistance and financial reimbursement you need for the cost of restoring your identity and credit information.
Who Needs Personal Cyber Insurance?
Personal cyber insurance is an essential tool for people whose personal data is at risk from cyber threats due to their everyday digital activities. This includes anyone who owns devices such as smartphones, tablets or connected home devices, and those who make frequent online transactions and purchases.
Importance of Personal Cyber Insurance
The importance of this insurance goes beyond the general use of devices. If you have fallen victim to phishing schemes and suffer financial consequences, you might find particular value in personal insurance. Not only does it help mitigate financial losses, but it also provides critical assistance in resolving the consequences of computer attacks.
In addition, it offers significant benefits to tenants, homeowners, and condominium owners. Homeowner’s insurance policies may not fully cover cyberattacks or the consequences that come with them. Personal cyber insurance fills this gap. It provides coverage for property damage caused by cyber incidents, such as damage to network systems and personal electronic devices.
What Does Personal Cyber Insurance Cover?
1- Protection from Identity Fraud
This kind of insurance covers online fraud and provides identity theft protection. This includes legal expenses, and lost wages due to time taken off work to recover your identity. It can also cover costs associated with repairing your social media accounts and credit accounts.
2- Cyber extortion coverage
Cyber extortion occurs when online criminals use coercive tactics. They start by threatening to release your sensitive personal data or block your access to your own tech devices. Often, they demand a ransom in return for withholding or restoring your data. In these scenarios, personal cyber insurance gives crucial financial protection. Additionally, it provides reimbursement for cyber extortion ransom payments made by pressured victims.
3- Cyber bullying Protection
This offers legal assistance and compensation for expenses incurred as a result of cyber bullying. It provides resources such as psychological counseling and psychiatric services, and compensation for lost wages if time off work is required.
4- Financial Loss Due to Cyber crimes
If a hacker illegally accesses your bank account, makes unauthorized credit card transfers, or makes fraudulent charges to your debit card, your personal cyber insurance works by offering reimbursement for the stolen funds. The policy aims to mitigate the financial impact of such incidents and protect your assets from the increasingly sophisticated and frequent threats in the digital landscape.
5- System Restoration
This covers costs associated with restoring your computer systems and data if they are damaged or lost due to a cybercrime. This could be something like a virus or ransomware. So, if you own a tablet, smartphone, laptop, or other smart device, this can be covered by your personal cyber policy.
6- Data Breach Notification Costs
If your personal data is breached and you’re legally required to notify affected parties, this insurance can cover the associated costs.
7- Property Damage
This insurance provides financial protection against home systems attacks and physical damage to your electronic devices and other connected technology that may result from cyber incidents. If a cyber attack, such as a malware infection or hacking attempt, results in material damage to your technology or property, this insurance will step in and provide compensation. This aspect of the policy ensures that you are not financially burdened with the costs of repairing or replacing damaged items and that the integrity of your digital and physical assets is maintained in the face of cyber threats.
8- Reputation Management
Reputation Management covers expenses related to managing and restoring your reputation if it’s damaged due to identity fraud or cyberbullying. This may include legal advice, public relations, and other measures necessary to restore your public image and personal standing.
A proactive feature of this insurance is the inclusion of identity monitoring services for all members of your household. This benefit is available regardless of whether a claim has been made.
The policy provides access to a range of specialists who can help deal with the complexities following cyber-related attacks. These include cyber extortion experts who can advise you on dealing with ransom demands, legal advisors who can help you manage legal implications and potential liabilities, and IT specialists who can help you with system recovery and securing your digital presence against future attacks. In addition, the policy also covers the costs of hiring a crisis management firm in cases where a cybercrime significantly affects your reputation. These companies specialize in mitigating the impact of the incident on your public image and implementing strategies to manage and remediate reputational damage.
Pro Tip: You should always review the specifics of any policy. You need to understand the exact coverages, limitations, and exclusions. Policies can differ widely in terms of what they cover and under what conditions.
How Do I Get A Personal Cyber Insurance
However, if you are seeking more dedicated protection, a stand-alone policy is also available. Insurance agencies such as Veritas represent insurance carriers who specialize in this type of coverage. This allows you to tailor your cyber protection according to your specific needs and concerns.
What is the Process of Claiming Personal Cyber Insurance
The process of claiming on personal insurance typically involves a series of steps designed to ensure that the claim is valid and to assess the extent of the loss or damage incurred. While the exact process can vary depending on the insurance provider and the policy, it generally follows this framework:
1. Immediate Action Post-Incident
As soon as you learn of a cyber incident (e.g. identity fraud, cyber extortion demands, cyber financial loss, ransomware attack, or online scam), it’s important to act quickly. This may include changing passwords, notifying affected parties, and taking steps to secure your systems.
2. Report the Incident to relevant authorities
You should notify the police or relevant authorities if you experience a cyber attack. Then, obtain a police report or an official document that acknowledges the incident, as this may be required by your insurance company.
3. Contact Your Insurance Provider as soon as possible
Inform your insurance company and your insurance broker about the incident as soon as possible. Many personal cyber insurance policies have time limits for reporting incidents. Use the contact details provided in your policy document to report the claim. Some insurers may offer a 24/7 hotline for reporting.
4. Gather all relevant documentation
Gather all relevant documentation such as police reports, records of communication with banks or other institutions affected by the incident, receipts for expenses incurred due to the incident, and any other evidence that supports your claim. Document any steps you have taken in response to the incident, such as hiring IT specialists or legal consultants.
5. Complete your insurance claim forms
Work with your agent to fill out any claim forms provided by your insurance provider and provide accurate and detailed information about the incident and your losses.
6. Claims Assessment by your insurance company
Your insurance company will review your claim and your policy’s cyber attack coverage. This process may involve an investigation into the incident, which could include interviews, an examination of the evidence provided, and consultation with cyber security experts.
7. Adjustment and resolution of your claim
Your insurer will determine the validity of your claim and assess the extent of your coverage based on your coverage limit or policy. The claims adjuster will calculate the compensation amount based on the policy’s terms and the extent of the damages or losses incurred.
8. Payment or rejection of your claim
If your claim is approved, your insurer will issue payment for the covered losses up to the coverage limit. On the other hand, if the claim is denied, your insurer will provide reasons for the rejection. If you disagree with the decision, you can appeal or seek legal advice.
Pro Tip: Throughout the process, you should maintain open communication with your insurance provider and provide any additional information or documentation they request. It’s also important to understand your policy’s coverage and exclusions. This will allow you to have a clear expectation of what is covered.
What isn’t covered by personal cyber coverage?
Personal cyber insurance does not cover property damage that is not related to cybercrime, such as damage caused by natural disasters or accidents.
Data recovery is not covered for data loss that is not due to a cyber attack. You should ensure that you have a system backup to protect against data loss not caused by a cyber attack.
It also does not cover legal fees for litigation due to intentional acts as well as those not the result of a cyber attack. Individuals should consult legal professionals for legal matters unrelated to cybercrime.
You should review your policy’s exclusions and coverage limits to understand exactly what is not covered by your cyber policy.
How Much Does Personal Cyber Coverage Cost?
The cost of cyber personal insurance varies depending on the amount of coverage and type of coverage selected. However, 3 general trends in pricing can be observed.
- First, when combined with an existing homeowners insurance policy or condo policy, this insurance can be quite affordable, often starting at less than $3 per month. This option offers a cost-effective way to add limited cyber protection to your existing insurance portfolio.
- Second, for a stand-alone policy, the average annual premium typically ranges from $300 to $1,200. This range reflects the differences in coverage amounts, coverage forms, and deductibles. Higher coverage amounts and lower deductibles generally result in higher premiums.
- Third, by comparison, small businesses typically pay higher premiums for cyber insurance, averaging around $145 per month or $1,740 annually. These higher costs reflect the greater risk and potential for loss that businesses face compared to individuals.
Pro Tip: The right level of coverage and deductible will depend on factors such as your online presence, the value of your digital assets, and risk tolerance. Consulting with insurance providers who offer personal cyber insurance can help you find a policy that offers the best protection for your situation at a competitive price. Remember that the cheapest option doesn’t always provide the most comprehensive coverage. it’s important to balance the cost with the level of protection.
Take these Essential Steps to Enhance Your Insurance Coverage Limits
To prevent cyber attacks, you must take important steps to protect your data on the Internet. By following these 4 steps, you can minimize cyber risks and increase your personal coverage limits.
- Regularly back up your data and create a system to help you recover faster from a cyber attack.
- Learn about cyber extortion, identity theft, malware, and online phishing so you can identify potential risks and take proactive steps to protect yourself online.
- Implement cyber security measures for your mobile devices, home network, and personal data, such as using strong, unique passwords, 2-factor authentication (2FA), updating devices regularly, and using security software to protect against malware and phishing.
- Work with a knowledgeable insurance broker like Veritas for cyber protection. Veritas offers personal cyber protection and can provide you with help and support in the event of a cyber attack.
What’s the difference between personal cyber insurance and identity theft insurance?
Personal insurance and identity theft insurance differ in the depth of coverage. While identity theft insurance focuses primarily on financial losses due to identity theft, personal cyber offers comprehensive protection against cyber risks such as identity theft, cyber-attacks, and online fraud. It’s important to understand the coverage limits, legal expenses, and protection that both types of insurance provide.
Does personal cyber insurance cover my stolen laptop?
Probably not! Home, Renters, and Condo insurance generally includes protection for property damage, loss, or theft of personal devices, such as laptops, smartphones, tablets, and home network devices. In addition, you might also have coverage in a robust cyber policy, but most do not include that coverage. In the event of a stolen laptop, individuals can seek financial reimbursement for expenses related to the theft, data restoration, and system recovery.
You should review your personal insurance policies to understand the limits, deductibles, and exclusions for property damage and theft of personal devices.
Personal cyber insurance is an important tool to protect yourself from the potential risks and damages caused by cyber threats. As technology continues to advance, the need for comprehensive cybersecurity measures is becoming increasingly important. This provides coverage for various types of cyber risks such as identity theft, data breaches, and cyber extortion. To make an informed decision, it is important to understand the coverage offered and the process for applying for personal cyber insurance. In addition, take cyber security measures alongside your personal insurance to further improve your protection against cyber attacks. By being proactive and investing in good coverage, you can protect your digital assets and have peace of mind in today’s connected world.
Andrew, with 26 years in insurance since 1997, founded his agency in 2009. He holds CBIA, CIC, CRM, and AAI certifications, focusing on strong client relationships and continuous learning. His website features in-depth industry insights, case studies, and expert recommendations, reflecting his commitment to tailored solutions and integrity.
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