Table of Contents
What is Cyber Liability Insurance?
Cyber insurance is designed to help protect businesses from online risks and other digital security threats. It is a relatively new form of insurance that has emerged in response to the growing number of cyber attacks and data breaches that have occurred in recent years.
While some cyber liability coverages might be provided as add-ons or endorsements on general liability or professional liability (or E&O) insurance policies, stand-alone cyber insurance policies are quickly become standard.
Why do Real Firearms Businesses Need Cyber Insurance?
Many small business owners, gun shops and other firearms businesses, commonly believe that cyber criminals only target large national or international companies.
While it is true household brands end up in the news regularly because of data breaches or cyber attacks, small businesses are one of the favorite targets of bad-actors in the cyber space! They typically have less robust security, and real estate is a particularly lucrative industry to cyber criminals.
What Does Cyber Insurance Cover?
Cyber insurance is generally divided into two categories: first party and third party losses. Let’s explain these terms along with some common claim examples from each type of claim.
1st Party Cyber Coverages
1st party coverage is designed to protect the policyholder (the first party) directly from losses that result from a cyber incident. This type of coverage is often referred to as “direct” coverage.
Examples of 1st party coverage include:
Business interruption: covers lost income and extra expenses incurred due to a cyber event that disrupts business operations.
Data breach response: covers the costs of responding to a data breach, including notification, credit monitoring, and forensic investigation expenses.
Cyber extortion: covers the costs associated with a ransomware or other cyber extortion event, including the cost of the ransom payment and expenses related to negotiating with the cybercriminal.
3rd Party Cyber Coverages
3rd party coverage is designed to protect the policyholder (the first party) from liability arising from a cyber incident that results in harm to a third party. This type of coverage is often referred to as “indirect” coverage.
Examples of 3rd party coverage include:
Network security and privacy liability: covers damages and defense costs associated with claims by third parties for a breach of their data or a failure to secure their data.
Media liability: covers damages and defense costs associated with claims of libel, slander, copyright infringement, or other media-related liability arising from content published by the policyholder online.
Cyber Coverages Many FFLs and Firearms Businesses are Missing
Cyber insurance, unlike other types of standard insurance, is not yet standardized. Policies differ dramatically in terms of what coverages they provide. Let’s look at a few areas where FFLs might be missing critical coverages in their cyber policy.
Reimbursement vs. Pay on Behalf of
Reimbursement and payment on behalf of are two different ways in which a cyber insurance policy can cover the costs of a cyber claim.
For example, if an FFL or firearms business owner has cyber insurance that covers ransomware attacks, they may be able to file a claim to cover the costs associated with the attack. The insurance company may either reimburse the policyholder for the costs incurred or pay the costs on behalf of the policyholder.
Reimbursement means that the policyholder pays the costs upfront and then submits a claim to the insurance company for reimbursement. The insurance company will review the claim and, if approved, will reimburse the policyholder for the costs that are covered under the policy.
On the other hand, payment on behalf of means that the insurance company pays the costs directly to the service providers, such as the forensic investigator, data recovery specialist, or ransomware negotiator.
While this might seem like a trivial difference, most FFLs and firearms businesses do not have the cash (let alone cryptocurrency) on hand to pay an expensive ransom. Also keep in mind, it could be criminal to pay these criminal organizations in some cases. So firearms businesses are much better off letting an experienced cyber insurance company handle any necessary payments.
Independent Contractors Endorsement
This is a small but important addition to your real estate insurance policy. Most real 07/02 FFLs are independent contractors.
However, not all cyber insurance policies include “independent contractors” in the definition of the insured. An insurance broker experienced in firearms businesses cyber insurance will know to add an independent contractors endorsement if the cyber policy does not automatically include “independent contractors” in the policy’s definition of “insured.”
What is a Cyber Risk Assessment?
A cyber risk assessment is an evaluation of an organization’s cyber risk exposure and potential vulnerabilities.
A good assessment will identify potential vulnerabilities and threats, evaluate current security measures, and help you or an IT professional develop a plan to mitigate risks.
The assessment typically includes a review of an organization’s network architecture, software and hardware configurations, and employee security practices.
By conducting a cyber risk assessment, organizations can gain a better understanding of their cybersecurity risks and develop a plan to prevent or mitigate potential cyber attacks.
Cyber Insurance Applications for Firearms Businesses
There are several different ways you can apply for and purchase cyber liability insurance for your firearms businesses.
Our team is comprised of independent insurance agents, which means we work with and have contracts with most of the insurance companies & insurance brokers that write firearms businesses cyber insurance.
An independent insurance agent/agency can go to the market and gather multiple options from multiple companies from one simple application.
At 2aFBI, our clients use a form that allows us to go the leading cyber insurance companies for firearms businesses to gather multiple options.
If you aren’t into digital forms, we also have companies that can work from a simple PDF application. Fill out our quick “request a quote” form and we’ll be in touch.
Generally, cyber insurance applications will ask questions about your revenue, description of operations, cyber claims history, and will likely have specific questions about your firearms businesses current cybersecurity measures.
