A recent Investment News article highlighted a burgeoning market for financial advisors looking to protect their practices; namely, data breach insurance. Although such insurance seems like a great idea, you need to exercise due care when purchasing such insurance.
According to the article, more and more firms are buying this insurance to supplement any gaps that may exist in regular D&O insurance. After all, the typical D&O insurance policy either does not cover or provides little coverage for the harm caused by a data breach.
Although this may make it seem as though data breach insurance is the easy answer, it may not be. For one, this insurance has historically been fairly expensive when compared to D&O insurance. In addition, data breach insurance often has many exclusions that can limit the coverage your purchase. So what should you look for in such insurance.
According to the article, you want a policy that covers as many of the following business expense as possible:
- Lost data restoration.
- Repairing or replacing damaged software or hardware.
- Hiring public relations firms to address reputational damage.
- Compensating clients for credit monitoring services.
- Forensic investigators to investigate the incident.
- Civil lawsuits, regulatory fines and penalties.
- Lost profits caused by fraudulent wire transfers.
This list runs the spectrum, but are things you should consider before leaping into a cybersecurity insurance policy. Otherwise, you may not get what you pay for.