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, has continued to rise. And the theft of personal data can have financial consequences, with cybercrimes affecting individuals costing over $4,000 on average.
One way to protect yourself financially against these risks is by buying a personal cyber insurance policy, part of a growing insurance market for cyber protection. But for now, this market is in its infancy, without any real options for standalone personal cyber insurance policies. Individuals looking for personal cyber protection will have to obtain it as an add-on to high-value homeowners insurance policies from insurers like AIG, Chubb and PURE. These endorsements currently range in price from a few hundred dollars per year to over a thousand, giving some indication of how cyber insurance policies may be priced once they become more widespread.
Should Individuals Buy Personal Cyber Insurance?
Given the rise in frequency and cost of cybercrimes, individuals should definitely consider purchasing some level of personal cyber insurance once policy availability becomes more widespread. A recent report by the White House Council of Economic Advisers reported that the FBI's Internet Crime Complaint Center received almost 300,000 individual complaints of cybercrimes, with a total estimated cost of $1.3 billion in 2016. That comes out to an average cost of over $4,000 per cybercrime.
Currently, the only major insurers to offer cyber insurance to individuals and their families are high-value home insurers who offer the coverage as an add-on feature to home insurance policies. However, assuming the personal cyber insurance market continues to expand, cyber policies with reasonable limits could be an affordable supplement to individuals' insurance coverage for this rising threat. For example, Chubb's personal cyber insurance endorsement covering $25,000 in damages can be purchased by current Chubb home insurance customers for $127 per year, approximately $11 per month. This would provide individuals with more than enough protection for the average cybercrime cost at an affordable price.
How Does Personal Cyber Insurance Work?
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 cyberattacks can result in a monetary loss, 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.
Cyber Personal and Home Protection Coverage
This coverage protects 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 their job, this feature would cover lost salary up to policy limits.
If a cyberattack results in people being unable to access their home or needing to replace an electronic device, the coverage will ensure they're reimbursed for the costs associated with resolving the event.
Cyber Extortion Coverage
Cyber extortion is when online criminals threaten the release of sensitive personal data or prevent individuals' access to their technology devices in return for a ransom. A personal cyber insurance policy reimburses individuals for payments they made under the duress of an extortion threat. Not only that, but it may also cover the costs of conducting an investigation to diagnose the cause of the event and help prevent such an occurrence in the future.
Cyber Financial Loss from Fraud Coverage
Coverage for financial loss or fraud as a result of a cyber event can refer to a wide range of scenarios. These include identity theft, stolen bank funds or fraudulent use of credit cards or checks. Traditionally, this type of protection has been available as part of a standalone identity-theft coverage policy, an identity-theft endorsement for a homeowners insurance policy or identity-theft resolution assistance through a credit card company. But identity-theft coverage alone does not protect against the wider range of risks posed by cybersecurity threats.
Which Insurance Companies Sell Personal Cyber Insurance?
Although cyber insurance is a growing market, standalone personal cyber insurance policies have yet to gain traction. Currently, personal cyber insurance is only available as add-on coverage from a select group of major insurers who sell high-value home insurance; in other words, insurance for those who have homes approaching $1 million in value or more.
Personal Cyber Insurance Comparison: Chubb, AIG and PURE
Three notable insurers, AIG, Chubb and the Privilege Underwriters Reciprocal Exchange (PURE), offer varying degrees of personal cyber insurance coverage as add-ons to their high-value homeowners policies. The costs of these endorsements are wide ranging and can be priced from as little as $127 per year to over $1,500, depending on the amount and type of coverage selected.
Given that cyber insurance may be offered to a broader base of customers in the coming years, it's instructive to look at the price of these endorsements to get an idea of how insurers will charge for this protection.
|Insurer||Cyber damage coverage types offered||Annual premium|
|Chubb||Extortion, financial loss and personal protection||$577|
|AIG||Extortion, data restoration, crisis management and cyberbullying||$1,626|
|PURE||Extortion, fraud and attacks||$625|
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.
Chubb Cyber Insurance: Broad Protection with Some Scope to Customize
Chubb cyber insurance, available as an add-on to the Chubb Masterpiece homeowners 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 personal 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||Premium|
Chubb 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, cause 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, cyber bullying 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, Chubb will cover policyholders for the consequences of the event and not just the event itself. For example, if cyber bullying 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.
AIG Cyber Insurance: Cyber Coverage Customized to Your Needs
AIG offers cyber insurance as an add-on to homeowners insurance through the AIG Private Client Group, the company arm focused on high-end properties. The add-on is called Family CyberEdge and offers four types of cyber protection, with coverage limits adjustable within each category to either $50,000, $100,000 or $250,000. AIG 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|
Home insurance policyholders with the AIG 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 Family CyberEdge is made up by data restoration and crisis management coverages, which combine to make up almost 90% of customer premiums if limits are held consistent across coverage types.
AIG 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 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.
PURE Cyber Insurance: Extra High Limits for High Net-Worth Homeowners Concerned About Cyber Threats
All homeowners and renters insurance policyholders sold by PURE, an insurer catering to high-value clients, will be able to add a personal cyber insurance endorsement, called PURE Starling, to their policies. Coverage under this endorsement is split into three categorizations: cyberattack, cyber extortion and fraud.
But coverage levels for these individual categorizations can't be customized. With PURE, 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.
|Cyber coverage limit||Cyberattack sub-limit||Deductible||Premium|
The maximum $1 million dollar limit, quadruple of the maximum for Chubb or AIG, makes PURE Starling 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.
PURE 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 PURE) in response to a threat.
- Cyberattack: Costs of restoring data and systems following unauthorized use, access or perpetration of 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.