Ransomware insurance

There are many types of cyber threats. In a ransom attack, criminals infiltrate your network using malicious software, or malware, and then encrypt your files or lock your devices, preventing you from gaining access to them. In order to release the hostage data, the threat actors demand an extortion payment.

There are several ways attackers breach systems:

• Phishing emails: When a user clicks on a seemingly harmless link or attachment, they unknowingly download malware that infects their computer. This often looks like fake emails mimicking in-house communications with harmful links masquerading as business correspondence.
• Exploit kits: Also known as “malware kits,” these programs search for vulnerabilities in systems and then dispatch code to take advantage of the security flaws.
• Remote Desktop Protocol (RDP) attacks: Criminals gain access into a network by hacking into an RDP and then logging in as a user or administrator. This has become more common with the recent surge in remote work.
• Fake software updates: Pop-up ads prompt would-be victims to download an essential update to their computer, browser, or some other form of software. In reality, what they’re downloading is malware.
• Malicious websites and ads: Compromised websites, such as fake cryptocurrency sites, contain malicious code that starts downloading as soon as a user visits the page.

Ransomware attacks are an especially damaging cyber threat because essentially the only ways to recover from one are to:

• Pay the ransom demand
• Recover lost data from backup files
• Build your data back from scratch

Cyber coverage and ransomware insurance are different names for the same policy. They both cover ransom-related extortion costs, including:

• Ransom payment: This covers the price if you choose to pay the ransom.
• Recovery: This reimburses for money spent in bringing your damaged computer hardware or database back to its original working condition.
• Related expenses: This can include the hiring of a negotiator to deal with the hackers and lower the ransomware payment amount, or a consultant to mediate an attack. It could also involve a public relations expert to deal with any reputational damage suffered during the ransomware event.

Cyber or ransomware insurance will also cover incident response costs that include notifying customers of any data breach. This is important because state laws dictate exactly how these notifications need to be handled and often require you to provide consumer credit and fraud monitoring services, which can add up quickly.

Additionally, if your work has to be paused due to cyber events, ransomware insurance can help cover business interruption expenses during the downtime until your company can re-open.

Just because you experienced a data loss does not mean it will be covered by ransomware insurance. Here are a couple of noteworthy exclusions:

• Accidental damage: If your system is not targeted in an attack and is simply ruined by physical damage, then ransomware insurance will not cover the loss. To be protected from accidental damage, you would need an electronic data liability policy.
• Natural occurrences: Your insurance company will refuse your ransomware claim if the data was lost due to fire, floods, power surges, and other natural disasters. In this case, electronic data processing (EDP) insurance would be your best bet.

Both of these policies are purchased as riders, or endorsements, to your general liability or business owner’s policy (BOP).

Be mindful, too, that ransomware insurance specifically covers attacks on your own business. It does not offer third-party benefits. So if you’re a cybersecurity consultant and your clients become victims of cyber extortion, your ransomware policy would not extend to them.

For tech professionals who are responsible for safeguarding customers’ sensitive information, we recommend purchasing third-party cyber insurance. This type of policy covers your legal costs if a client involved in a ransomware attack sues you for negligence.