As technology has become increasingly integrated into people’s lives, the risks that sensitive personal data could be compromised, including Social Security numbers and bank and credit card information, have continued to rise. The theft of personal data can have severe financial consequences, with cybercrimes affecting individuals costing them over $4,000 on average.
What is Personal Cyber Insurance?
One way to protect yourself financially against the risks involved with cybercrime is adding a personal cyber insurance policy, part of a growing insurance market for cyber protection, to your insurance portfolio. For now, this market is in its infancy, but there are already some options for homeowners to add personal cyber insurance to their home insurance policies.
Broadly speaking, a personal cyber insurance policy will provide financial reimbursement for the costs associated with the theft of digital information and assets up to your policy’s limits, but there are a variety of ways cyber-attacks can result in a monetary loss, ranging from the theft of bank account funds to payments made after extortion through an anonymous online threat. No two personal cyber insurance policies are exactly alike, but most will generally cover expenses fitting under three categorizations: personal and home protection, extortion, and financial loss from fraud.
Have I Been the Victim of Cybercrime?
There’s little doubt the enormous role that technology plays in our everyday lives. From smartphones to programmable thermostats, laptops, iPad, and virtual assistants like Amazon’s Alexa, our lives and homes are more connected than ever. Personal Cyber Insurance added onto your existing home or renters insurance policy can provide peace of mind that you are covered if you fall victim to cybercrime.
Imagine for a second that one of your friends receives an email from their granddaughter, who is currently traveling the country with her roommate. The granddaughter says she caused a car accident and needs money for a lawyer immediately. She is afraid to tell her parents or ask them for the money because they will be disappointed. Your friend then later receives another email from what appears to be her granddaughter’s lawyer which includes, a copy of the accident report and details the injuries of the victim.
The victim will apparently accept $4,000 for his medical expenses and will sign a release, dropping all charges upon receipt of the money. Your friend sends the money as instructed, only to call their granddaughter and discover the story was untrue, and they had become a victim of fraud.
More frequently cybercriminals are going after individual homeowners and renters, as they are easier targets than businesses with more sophisticated security measures. The White House Council of Economic Advisers recently reported that “the FBI’s Internet Crime Complaint Center received almost 300,000 individual complaints of cyber-crimes, with a total estimated cost of $1.3 billion in 2016.” That comes out to an average cost of over $4,000 per cyber-crime.
What Does Personal Cyber Insurance Cover?
Personal Cyber Insurance can also protect the policyholder against the financial consequences of personal online attacks, also called cyberbullying, or attacks against the integrity of your home systems. For example, if cyberbullying results in the wrongful loss of your job, this feature of the policy would cover lost salary up to the policy limits.
1. Cyber Attack
In theory, a cyber-attack doesn’t only refer to an attack on your computer or smartphone. Cyberattacks could involve hacking into your smart doorbell or home security monitoring system, the coverage will ensure you’re reimbursed for the costs associated with resolving the event.
2. Cyber Extortion
Cyber Extortion sounds like it would only occur in a sci-fi thriller, but the fact is, ransomware viruses are the most popular type of malware. These viruses infect your computer and block you from accessing your data. To regain control, you must pay a fee, or you risk losing all the data (photos, documents, software) now encrypted on your computer. While this would send most people into a panic, policyholders with Personal Cyber Insurance can calmly take action.
- Professional Assistance: Subject matter experts can guide you through the realities of the threat by phone and guide you in how best to respond. In some cases, they may recognize the specific attack and help you regain access to your files without ever making any payments.
- Reimbursement: If approved by the subject matter professional, the ransom paid would be reimbursed, minus the deductible.
The Cyber Extortion coverage of your Cyber Insurance Policy would reimburse you for the direct costs of the ransom paid, minus the deductible.
3. Online Fraud Coverage
Are you thinking that you’re too savvy to be a victim of online fraud? Sure, you might know better than to send money to the prince of a foreign land emailing you for assistance, but are you 100% certain that awesome vacation rental you’re about to book exists?
Online Fraud Coverage is there to help when online fraud results in a direct financial loss to you, as a policyholder. Some examples of online fraud include identity theft, the unauthorized use of financial information, or, the intentional and criminal deception of an insured to part voluntarily with something of value. Online Fraud Coverage would reimburse the direct costs incurred by the fraud, minus the deductible.
4. Data Breach Coverage
The phrase, “Bad things happen to good people,” applies most to Data Breach Coverage. That’s because, in the majority of cases, a person that has sensitive identifying or financial information in their possession is volunteering their time and energy to a good cause. Someone selling tickets to a fundraising event may have credit card information on a computer file from the fundraiser ticket holders, or a youth soccer coach may have an excel spreadsheet of names, birthdays, and addresses for the kids on their team and their parents.
Anyone who has sensitive identifying or financial information of someone else stored on their computer could be a victim of a data breach that affects someone else. Data Breach Coverage notifies and pays for services to affected individuals if private personal data entrusted to a household resident is breached. Data Breach Coverage would pay for the costs (minus your deductible) to meet with an attorney to evaluate your risk and determine the next steps, and to notify other affected parties of the breach.
Unfortunately, cyberbullying is now a terrifying threat for any modern parent and their child. In a recent study by Pew, 59% of teens say they have been the victim of cyberbullying, a statistic that seems likely to rise as children grow up in an increasingly connected world.
Should such a terrible event occur in your household, the Cyberbullying Coverage of a Personal Cyber Insurance policy would pay for the costs an individual may incur being the victim of a cyberbullying attack, including, but not limited to, temporary relocation expenses, temporary private tutoring, lost wages, or legal expenses. For an event to qualify for this coverage, it must consist of two or more related acts, and the police must be contacted regarding the event. Cyberbullying Coverage would reimburse you for the costs of temporary private tutoring, plus enrollment fees at a new school, minus the deductible.
Personal Cyber Risks
The Internet has taken us from the physical world, where fire, flood, and earthquakes are the typical causes of catastrophic damage, into the digital world, where identity theft, ransomware, and computer viruses have the potential to be just as destructive. It is no longer sufficient to simply lock your doors and turn on the alarm system. Today, your personal information is at risk from criminals who can attack at any time. This means your information needs to be protected, locked up, and secured with an alarm—just like your home. Personal Cyber Insurance covers all electronic appliances in your house again from any form of data breach or cyber-attack.
How Affordable is Personal Cyber Insurance?
The costs of these endorsements are wide-ranging and can be priced from as little as $127 per year to over $1,500 per year, depending on the amount and type of coverage selected. Here we will compare three Insurers already offering Personal Cyber Insurance policies.
|Insurer||Cyber damage coverage types offered||Annual premium|
|Insurer A||Extortion, financial loss, and personal protection||$577|
|Insurer B||Extortion, data restoration, crisis management and cyberbullying||$1,626|
|Insurer C||Extortion, fraud, and attacks||$625|
Premiums are based on company state filings for the endorsements, including $250,000 in total personal cyber threat coverage. Insurers define their coverage in different ways, so these add-ons are not directly comparable. However, we’ve elaborated on the exact type of coverage offered by the insurers below.
Insurer A Cyber Insurance: Broad Protection with Some Scope to Customize
Insurer A’s cyber insurance, available as an add-on to its homeowner’s insurance policy, offers protection for three categorizations of cyber events at five different levels of limits, allowing its policyholders to adjust coverage as they see fit. The customizability gives homeowners the option to pay as little as $127 per year for coverage of up to $25,000 in damages. Conversely, more conservative homeowners concerned about the vulnerability of their data can get covered up to $250,000 in damages for $577 per year.
|Cyber extortion coverage limit||Cyber financial loss coverage limit||Cyber personal protection coverage limit||Max limit for all covered events per policy period
Insurer A defines the coverage provided by its three categorizations of cyber threats as follows:
- Cyber extortion: Covers the cost of cyberattacks involving threats to release personal information, causes failure to personal computer networks, or restrict access to personal data.
- Cyber financial loss: Reimburses policyholders for stolen account funds, fraudulent charges, or lost salary while resolving your claim and attorney fees.
- Cyber personal protection: Covers breaches of privacy, cyberbullying and cyber disruption, the latter referring to events that prevent you from accessing your home or interrupting a small business you run from your home.
As with other cyber insurance policies, Insurer A will cover policyholders for the consequences of the event and not just the event itself. For example, if cyberbullying results in your wrongful termination from work or a false arrest, you’ll be covered for related expenses, such as foregone salary or costs of being held in custody, up to policy limits.
Insurer B Cyber Insurance: Cyber Coverage Customized to Your Needs
Insurer B offers cyber insurance as an add-on to homeowners insurance through their Private Client Group, the company is focused on high-end properties. The add-on offers four types of cyber protection, with coverage limits adjustable within each category to either $50,000, $100,000 or $250,000. Insurer B also includes identity monitoring services for a flat fee of $80 per person.
|Coverage type||Premium with $50,000 limit||Premium with $100,000 limit||Premium with $250,000 limit|
|Identity monitoring services||$80||$80||$80|
All premiums are for coverage with a $1,000 deductible.
Home insurance policyholders with Insurer B’s Private Client Group can opt for the lowest coverage limits of $50,000 within each category and pay as low as $433 per year. But they can also select different limits for each category to balance coverage and price, and their final cyber insurance premium will be a sum of their coverage for each category. Selecting maximum limits of $250,000 in each category would result in an annual premium of $1,546.
The bulk of the cost of Insurer B’s policy is made up of data restoration and crisis management coverages, which combine to make up almost 90% of customer premiums if limits are held consistent across coverage types.
Insurer B defines the coverage provided by its four categorizations of cyber threats as follows:
- Cyber extortion: Reimbursement for money paid to terminate or end an extortion threat and for an investigation into its cause.
- Cyberbullying: Expenses incurred from cyberbullying, ranging from psychiatric services to lost salary from wrongful termination.
- Crisis management: Expenses incurred by a service provider to minimize the damage to the covered policyholder’s reputation after a cyberattack or extortion.
- Data restoration: Expenses incurred by a service provider in recovering lost data after a cyberattack or extortion.
Insurer C’s Cyber Insurance: Extra High Limits for Extra High Net-Worth Homeowners Concerned About Cyber Threats
All homeowners and renters insurance policyholders sold by Insurer C, an insurer catering to high-value clients, will be able to add a personal cyber insurance endorsement to their policies. Coverage under this endorsement is split into three categorizations: cyberattack, cyber extortion, and fraud.
Coverage levels for these individual categorizations can’t be customized. With Insurer C, policyholders simply select between three overall limits: $100,000, $250,000 and $1 million. And cyber-attack events will only ever be covered up to a $100,000 sub-limit.
|Cyber coverage limit||Cyber-attack sub-limit||Deductible||Premium|
Again, coverage levels for these individual categorizations can’t be customized. With Insurer C, policyholders simply select between three overall limits: $100,000, $250,000 and $1 million. And cyberattack events will only ever be covered up to a $100,000 sub-limit.
Deductibles are fixed for each associated coverage limit.
The maximum 1 million dollar limit, quadruple of the maximum for Insurer A or Insurer B, makes Insurer C unique among personal cyber insurance policies and a good fit for wealthy individuals who believe they are at risk of a major cybersecurity threat. But coverage at that level does require some actions to be taken by the policyholder. Those who select the highest limit will have to maintain an active cybersecurity monitoring service for their devices. This includes continuous monitoring of data exchange on the insured’s smartphones, tablets, and computers to enhance the individual’s cybersecurity and preempt damaging cyber threats.
Insurer C defines the coverage provided by its three categorizations of cyber threats as follows:
- Cyber extortion: Professional assistance in handling an extortion threat and payments (with prior approval from the insurer) in response to a threat.
- Cyberattack: Costs of restoring data and systems following unauthorized use, access, or the perpetration of a malware attack on a qualifying electronic home device.
- Fraud: Costs of identity theft or unauthorized use of bank cards or checks perpetrated through a qualifying electronic home device.
The Future of Personal Cyber Insurance
Personal Cyber Insurance policies are still new products for the industry. While homeowner insurance policies may cover losses in the physical world, the digital landscape is constantly growing. Providing coverage for the costs associated with cyber attacks, cyber extortion, and other types of online theft of digital information will likely only become more common as policyholder’s digital assets become more valuable.