Your business faces many risks, but an ever-present threat is cyberattacks. UK firms are uniquely positioned because the UK reported the highest rate of cyberattacks of any European nation.
For this reason, cyber insurance is a must-have for any business serious about its security. This guide discusses waiting periods in cyber insurance and how these policies protect you against business disruption.
How do cyberattacks cause business interruption?
Cyberattacks can have serious consequences for businesses, yet many entrepreneurs underestimate the risks they face.
So, what type of business interruptions can result from a successful cyber attack against your company?
Downtime – Attacks such as Distributed Denial of Service (DDoS) can take your network offline, halting operations that rely on critical systems.
Data Breaches – When cybercriminals access your organisation’s data, you may face lawsuits, regulatory investigations, and time-consuming customer service issues.
Productivity Loss – Employees, including IT teams, must focus on managing the attack’s aftermath instead of their normal duties, reducing overall productivity.
Financial Impact – Cyberattacks can lead to stolen funds, legal costs, recovery expenses, and fines, which can strain cash flow and limit investment opportunities.
Reputational Damage – High-profile incidents can erode consumer confidence. Lost contracts, clients, or public trust can disrupt business operations long after the attack.
These examples of business interruption only begin to show the potential impact of a cyberattack. Studies indicate that a significant proportion of small businesses are forced to close within months of a serious cyber incident. Given the scale of risk and disruption, every UK business should consider a comprehensive cyber insurance policy to help protect operations, support recovery, and ensure claims are handled efficiently.
What is a waiting period in cyber insurance?
Waiting periods in cyber insurance are the time frames that must pass after purchasing your policy before you can make a claim. Any cyber incidents occurring during this period are typically not covered.
Insurers include waiting periods to ensure businesses are responsible for the initial period of downtime, so short-term disruptions do not automatically trigger a claim.
The length of the waiting period is set by the insurer and can vary depending on the policy. Commonly, waiting periods range from 8 to 12 hours, but it’s important to check with your insurer for the exact terms, especially for specific types of claims
What is the indemnity period for cyber insurance?
The indemnity period is the period from which the business interruption first occurs to the point it ends. Similar to the above this is set by the insurers and can vary from policy to policy.
The most common indemnity period we see on cyber insurance policies is 12 months. What this means is that any interruption to the business occurring after this period would not be included in any claim. It is important to consider how long it would take your business to recover from a cyber incident when assessing the indemnity period.
Some factors that can help minimise any business interruption can include:
Risk Management – Insurers have indemnity periods to control their risk exposure. It allows them to assess potential payouts and provide accurate and affordable policy quotes for all.
Timely Reporting – Unpicking complex historical claims is notoriously time-consuming. Indemnity periods encourage timely reporting whilst the incident is fresh and easily assessed.
Business Continuity – Cyber incidents are unique because they have short-term and long-term effects on businesses. The indemnity period is designed to cover losses during a recovering business’s most vulnerable period, which is immediately after an attack.
Speak to an insurer about your indemnity period so that you can enter it into your incident response plan.
Does cyber insurance cover business interruptions?
Generally, cyber insurance will cover business interruptions. However, the key is that the interruption must originate from a covered incident.
For example, some insurers exclude coverage for disruption caused by social engineering fraud, such as spear phishing. Instead, they either don’t offer this coverage or make it available as an add-on.
Within the context of cyber insurance, some of the scenarios whereby your insurance would cover your losses caused by business interruptions include:
Ransomware Attacks – If your data becomes encrypted because of a ransomware attack, cyber insurance will typically cover all your losses during your recovery period.
DDoS Attacks – These attacks can overwhelm your servers and bring down your network, leaving your firm offline and helpless. Thankfully, your cyber insurance coverage can cover any loss of income whilst your business remains unavailable.
System Outages – Data breaches or infrastructure-based cyber attacks can also result in interruptions. Cyber insurance can provide you with a lifeline whilst your systems remain down.
How to protect your business against interruptions due to cyber attacks
Protecting your business against interruptions means initiating an action plan for prevention. With so many attack vectors, you require a multi-layered approach to cybersecurity, which may involve discussions with a security consultant.
Here are some top tips for reducing the chances of business interruption:
- Install cybersecurity solutions like firewalls, intrusion detection systems and encryption tools.
- Train employees to boost their awareness of common threats, such as phishing.
- Create an incident response plan and test it via simulated exercises.
- Back up data offline and maintain it in a separate location.
- Use multi-factor authentication and Virtual Private Networks (VPNs) to allow secure remote access to your network.
- Continuously monitor network activity and act against suspicious activity.
Above all, ensure that you hold a relevant cyber insurance policy. At Stanmore Insurance, we are proud to support UK businesses in finding the right cyber insurance for them. To learn more or get a quote, contact the Stanmore Insurance team today.