The Cyber Insurance Tail: A Guide to Costs and Comparison

The cost of cyber insurance can be a significant burden for businesses, with premiums ranging from 1% to 5% of total IT expenditures.

Cyber insurance tail policies can be more affordable, with some providers offering premiums as low as 0.5% of total IT expenditures.

The average cost of a cyber insurance policy can vary significantly depending on the provider and the specific coverage options chosen.

For example, a policy with basic coverage might cost around $5,000 to $10,000 per year, while a more comprehensive policy could cost upwards of $50,000 per year.

Tail coverage for cyber insurance is an endorsement that allows you to file a claim against your policy after it expired or was canceled.

It's designed for claims-made policies, which means your coverage is limited to incidents that occurred during the policy period, even if you canceled your policy later.

You don't need tail protection for occurrence-based policies, as coverage is available as long as the insurable event occurred during the policy period.

Tail coverage is different from nose coverage, which provides protection back to the first date of continuously maintained insurance coverage.

In the context of cyber insurance, tail coverage can be crucial in protecting your business from cyber attacks that occur after your policy has expired or been canceled.

You can expect the cost of a cyber insurance tail to be substantial, with a three-year option costing between 130% to 200% of your annual premium.

The cost of a three-year tail can add up quickly, for example, if you're paying $20,000 a year for a cyber insurance policy, the three-year tail will cost you anywhere between $26,000 to $40,000.

In some cases, you may need to negotiate a 6-year tail with your insurer, which can be even more expensive.

A 3-year tail coverage can cost anywhere from 130% to 200% of the expiring policy's annual premium.

For instance, if you're paying $20,000 a year for an E&O policy, the 3-year tail will cost you between $26,000 to $40,000.

Negotiating a 6-year tail with your insurer can be a challenging task, as most claims-made policies don't include pricing options for this extended period.

In some cases, you may need to pay a premium for a 6-year tail, so it's essential to discuss pricing with your broker beforehand.

Tail coverage costs can add up quickly, so it's crucial to factor this into your overall budget for your E&O policy.

In comparing occurrence and claims-made policies, it's clear that occurrence policies offer more flexibility and convenience. You'll have unlimited time to discover and report a claim, even if the policy that was in effect at the time of the occurrence has long expired.

One key difference between the two is the timing of the occurrence and reporting. With an occurrence policy, you're covered as long as the activity or event occurred while your policy was active, regardless of when you discover and report the claim.

If you have a claims-made policy, however, you'll only be covered if both the occurrence and reporting happened while the policy was active. This means it's crucial to renew claims-made policies on time to avoid gaps in coverage.

Some common insurance policies written on a claims-made basis include Errors & Omissions (Professional Liability) Insurance, Directors & Officers Insurance, Employment Practices Liability Insurance, and Commercial Crime Insurance. These policies often require tail coverage to ensure continuous protection.

If you're unsure about the type of policy you need, it's essential to consider the specific requirements of your business and the potential risks you face.

Risk Management and Long-Tail Events are crucial aspects of cyber insurance. Long-tail events can take years to manifest, causing significant financial losses for businesses.

Cyber attacks can have a long-tail effect, with some events taking up to 5 years to come to light. This makes it difficult for businesses to predict and prepare for potential losses.

Businesses can mitigate long-tail risks by implementing robust incident response plans and conducting regular security audits. This helps identify vulnerabilities before they are exploited.

Cyber insurance policies can provide coverage for long-tail events, but they often come with high premiums and limited coverage.