When it comes to cyber insurance coverage, one critical element of your policy you should consider is business interruption insurance (or business income insurance).
Business interruption insurance protects your business from the financial losses you could incur if you cannot continue operating normally following a cyber attack.
We explore what business income insurance covers, how it works and whether this component of a cyber insurance policy is a worthwhile business investment for you.
What does business interruption insurance cover you for?
The business interruption insurance element of your cyber insurance coverage protects you from any financial losses your business suffers if it is unable to operate as usual because of a cyber attack.
These attacks can include DDoS (distributed denial-of-service) attacks, ransomware, data breaches and other forms of cyber-criminal activity.
An example of a business interruption insurance claim
In December 2023, hackers attacked roughly 70% of Iran’s petrol stations, effectively disabling all the fuel pumps. Although operations were restored the following day, payment issues affected the retailers for several days.
In cases like this, business interruption insurance would cover the lost revenue for the period of downtime when the pumps were non-operational, as well as any ongoing expenses like salaries and utilities. This ensured the financial survival of multiple businesses until normal business operations could be resumed.
How does interruption insurance work for businesses?
Business interruption insurance coverage generally works as part of a general cyber insurance policy.
While the cyber insurance policy covers all the associated costs of recovering from and investigating a cyber attack or data breach, the business interruption element of the policy covers any financial losses incurred by your business as a result of disruption to your usual business operations.
When you file a claim for business interruption insurance, your insurance provider will assess the financial impact of the disruption to your normal business operation. This might include an analysis of your company financial records to work out your average income and expenditure, as well as the income you would have earned if the cyber attack and consequent interruption had not occurred.
When your claim is approved, the insurance provider will compensate you for any lost income and expenses you incur for the duration of the interruption, up to your policy limits.
Types of business interruption insurance
There are several different types of business interruption insurance coverage available within a cyber insurance policy, including:
Gross revenue coverage
This type of business interruption insurance covers you for loss of income due to the disruption to your business operations following a cyber attack.
Profits coverage
This coverage is designed to protect your business from the loss of net income following an interruption to your business operations after a cyber attack once you’ve deducted any ongoing expenses.
Extra expense coverage
An extra expense policy covers any additional expenses incurred by your business to minimise the effects of disruption to your usual operations caused by a cyber attack. This could include hiring IT expert contractors to restore your network and systems, launching a PR campaign to reassure your customers, or even renting temporary equipment.
Is business interruption insurance worth it?
Whether business interruption insurance within a cyber insurance policy is worth the extra cost depends on the nature of your business and the risks you face from cybercriminals.
If your business relies heavily on an online presence to generate income, for example, an e-commerce website or online service provider, any significant online disruption could be financially devastating. In this case, business interruption insurance gives you invaluable protection against such risks, keeping your business running even following an unexpected cyber attack.
Who would need business interruption insurance?
Business interruption coverage within a cyber insurance policy is especially important for those businesses that rely heavily on an online presence to generate income.
That could be through an e-commerce website, affiliated marketing, social media activity, or service provision.
That said, this form of insurance can also be essential for companies that mostly operate offline since a cyber attack can still have a significant financial impact on your business if it prevents your normal operations.
Business Interruption Cover with Stanmore Insurance
Cyber-attacks are becoming an increasingly common form of criminal activity, and the financial consequences can be catastrophic for businesses of all sizes.
The business interruption insurance component within cyber insurance policies ensures that your operation can function normally with minimal disruption to your customers and your cash flow in the wake of a cyber attack. If you don’t already have business interruption coverage, call our professional team of experienced advisors here at Stanmore Insurance to learn more.