Cyber Liability Insurance

Did you know that more than 80% of people with connected devices either have no insurance coverage that protects them from cyber fraud or aren’t sure if their current policy covers that liability?

With the rise of smart home tech and all the security risks it brings, it’s surprising how many of us aren’t fully protected against potential threats.

Your homeowners insurance protects you financially from damages and losses to your home by a covered event, but does it cover cyber fraud?

The answer is usually “no.”

Unfortunately, cybercrime is on the rise, with reports showing a noticeable increase in online scams targeting both individuals and businesses. This surge is largely fueled by cybercriminals using advanced technologies like AI to make their tactics more effective.

Key trends include:

More frequent attacks, like phishing, malware, and ransomware
Sophisticated scams, including deepfakes and personalized phishing
Fraud on e-commerce sites

Additionally, social engineering scams like phishing (email), smishing (text) , and vishing (voice) are becoming harder to spot. This escalation in cyber fraud is leading to significant financial losses and affecting both consumers and businesses across the board.

Let’s learn about how you can protect your digital home or business with cyber liability insurance.

Topics Covered

What Is Cyber Fraud — and Why Should You Care?
Does Home or Business Insurance Cover Cyber Fraud?
Privacy and Security Concerns in Smart Homes: What You Need to Know
What Does the Increasing Use of Smart Technologies Mean for Homeowners?
How Does Smart Home Technology Affect Homeowners Insurance?
10 Ways to Stay Secure with Smart Technologies
Other Homeowners Insurance Resources

What Is Cyber Fraud — and Why Should You Care?

Cyber fraud is a type of online crime where scammers use computers to steal personal and financial information. In today’s digital age, it’s become the most common kind of fraud, impacting both individuals and businesses. And with more of our lives and data online, protecting yourself from cyber criminals is more important than ever.

At its core, cyber fraud happens when a scammer intercepts or accesses sensitive information—like your credit card details or personal identity documents—without permission. This breach of privacy can create a ripple effect of issues, from unauthorized purchases to full-blown identity theft.

It’s essential to be vigilant and take steps to secure your data. Simple actions like using strong, unique passwords, enabling two-factor authentication, and regularly monitoring your accounts can go a long way in helping you stay safe online.

Does Home or Business Insurance Cover Cyber Fraud?

If you’re hacked, you might assume your home or business insurance has you covered—but often that’s not the case unless you have specific cyber liability insurance.

Unfortunately, cyber fraud coverage isn’t a standard feature in most home or business insurance policies. Four out of five people with connected devices lack coverage for cyber-related incidents or aren’t sure if they’re covered at all.

Why the confusion?

Cyber coverage varies widely across insurance providers, and not all are eager to cover it. Some policies might offer “cyber theft coverage” as an add-on, which usually helps with the legal and administrative costs of restoring your identity after a breach. However, it may not reimburse you for stolen funds or other direct financial losses.

To avoid any surprises, check in with your insurance agent about what your policy includes. If cyber coverage isn’t already part of your plan, ask about endorsements like home network security or cyber liability to protect your digital assets.

Remember, when it comes to cyber fraud, it’s better to be safe than sorry. Reviewing your policy now can help you avoid financial and emotional headaches later!

Privacy and Security Concerns in Smart Homes: What You Need to Know

Smart home devices bring amazing convenience, but they also come with risks. Key concerns include cybersecurity vulnerabilities, privacy issues, and the misuse of personal data. Without proper security, hackers can access sensitive information like your location, daily routines, and even financial details. This can lead to unauthorized access, data breaches, and targeted attacks—all due to the often weak security features in these devices. From the devices themselves to the massive amount of data they collect, there are risks at every level. Here’s a closer look:

Lack of Standards and Oversight

Surprisingly, there are no universal standards for the design, manufacturing, or performance of most smart devices. Agencies like Underwriters Laboratories (UL), a non-profit organization that tests and certifies products and components for safety, are only now beginning to evaluate them. This means there’s no single set of guidelines for how safe and secure these products need to be.

A Messy Legal Landscape

The few laws and regulations pertaining to smart devices vary widely, creating a patchwork of rules across different agencies. Without consistent direction, it’s hard to know who’s liable if something goes wrong, and there’s little legal precedent to guide consumers or businesses.

Design and Durability Issues

Many smart devices aren’t designed or tested to last. There’s often no clear information on how long they’ll work reliably, and without independent testing, unknown failure points can go undetected. This could mean anything from annoying glitches to major security vulnerabilities down the road.

Uncertain Software Support

Unlike smartphones or computers, many smart devices don’t receive regular software updates. These updates are essential for security, but often, there’s no commitment from the manufacturer to patch vulnerabilities. Many consumers aren’t even informed about how to install updates, which can leave devices—and homes—open to cyber risks.

Poor Security Design

Some devices, like baby monitors or smart TVs, are designed without strong security measures, making them easy targets for hackers. This means that without adequate protection, seemingly harmless devices could be hijacked for malicious purposes.

Installation Challenges

Installing smart devices can be tricky, and with few quality controls for installation, problems are common. Homeowners often try setup themselves, with limited guidance, which can lead to improperly installed devices and open up further security risks.

Privacy Invasion

Many smart devices constantly collect data on your activities, like movement patterns and voice commands. This info can be used by hackers or even companies to build detailed profiles about you, often without your consent. Some devices collect more information than necessary, which can raise concerns about how your data is used.

Cybersecurity Breaches

Smart devices with weak security are at risk of being hacked. This could allow attackers to control features like lighting, security systems, or surveillance cameras.

Data Theft

Hackers may gain access to sensitive information stored on smart devices, including login credentials, financial details, and contact info.

Physical Security Risks

If compromised, smart home devices can potentially monitor people in the home, giving intruders valuable insights.

Lack of User Awareness:

Many users aren’t fully aware of the security risks smart home devices bring, making them more vulnerable to threats.

What Does the Increasing Use of Smart Technologies Mean for Homeowners?

If you’re thinking about upgrading your home, you’re not alone! Two-thirds of consumers want a connected home, and in just a few years, around 43% of homeowners will likely have multiple smart devices in their homes.

Homes without smart tech may soon even be seen as less valuable than those decked out with the latest gadgets.

What’s driving this shift?

Consumers are looking for enhanced safety, security, and convenience, and smart home systems offer a cost-effective way to provide these benefits. As more homes incorporate connected devices, it’s crucial for homeowners to familiarize themselves with these technologies to reap the rewards of smart living while maintaining a safe and secure digital environment,

How Does Smart Home Technology Affect Homeowners Insurance?

Despite the risks, you might be surprised to learn that smart home technology can actually have a positive impact on your homeowners insurance. In fact, it may lead to lower premiums!

Smart devices can help detect issues early, preventing major damage from events like fires or water leaks, which means fewer costly claims for both you and your insurer. Many insurance companies now offer discounts for homes equipped with specific smart devices, such as:

Smart Smoke Detectors: These send immediate alerts to your phone if smoke is detected, giving you peace of mind.
Smart Water Leak Detectors: They monitor your pipes and can alert you to leaks before they cause serious damage.
Smart Security Cameras: These provide live video feeds and can deter potential break-ins.

Key Points About Smart Home Technology and Homeowners Insurance:

Reduced Risk: Smart devices can monitor your home for hazards like fires or leaks, allowing for faster response times and minimizing damage.
Insurance Discounts: Many insurers offer discounts to homeowners with specific types of smart devices.
Early Detection: Smart sensors can alert you to issues before they escalate, enabling prompt action.
Improved Security: Smart security systems can help deter break-ins and provide evidence in case of theft.

Important Considerations:

Check with Your Insurer: Not all insurance companies offer the same discounts for smart home technology, so it’s wise to check what your provider offers.
Device Compatibility: Make sure the smart devices you choose meet your insurer’s requirements.

As smart home technology continues to evolve, staying informed will help you make the most of these innovations in terms of convenience, security, and insurance coverage!

10 Ways to Stay Secure with Smart Technologies

Get Cyber Liability Insurance: The peace of mind of knowing you’re covered against cyber fraud and identity theft – not to mention the financial protection it brings – is more than worth the amount you’ll have to spend on paying out-of-pocket in the event of a breach.
Use Strong, Unique Passwords: Set unique passwords for each device, avoiding default passwords. Consider a password manager to help keep track.
Enable Two-Factor Authentication (2FA): If available, activate 2FA for an added layer of security. This makes it harder for hackers to access devices, even if they have your password.
Keep Software Updated: Regularly update device firmware to patch security vulnerabilities. Most updates address newly discovered security issues, so don’t skip them!
Secure Your Wi-Fi Network: Use a strong Wi-Fi password and ensure your router uses WPA3 encryption for better security.
Segment Your Network: Place smart devices on a separate network from computers and phones. This way, if a device is compromised, it won’t affect all your devices.
Disable Unused Features: Turn off any device features you don’t use, such as remote access or microphones, to minimize potential risks.
Review Privacy Settings: Adjust privacy settings to control data collection. Opt out of unnecessary data tracking if possible.
Monitor Your Devices: Regularly review device logs or app notifications for unusual activity. Many smart home devices let you view recent activity or login history.
Educate Yourself and Family Members: Make sure everyone in the household understands the basics of smart device security and knows what to do if they spot suspicious behavior.

By following these steps, you can enjoy the convenience of smart home tech while keeping your personal information safe and secure!

Other Homeowners Insurance Resources

Looking for more information on cyber security or homeowners insurance? Be sure to check out our other resources! We’ve got a variety of articles and tips to help you stay informed and protect your home and personal data.

Need to learn more about cyber insurance for your business?

Our agents are ready to help, so contact us to learn how we can customize your insurance policies to meet your needs.

*Disclaimer: We offer content for informational purposes; Co-operative Insurance Companies may not provide all the services or products listed here. Please get in touch with your local agent to learn how we can help with your insurance needs.

Sources

Aggetta Insurance. Will My Home Insurance Policy Cover Damages Caused by Cyber Frauds? https://aggettainsurance.com/will-my-home-insurance-policy-cover-damages-caused-by-cyber-frauds/

Insurance Information Institute. Facts + Statistics: Fraud. https://www.iii.org/fact-statistic/facts-and-statistics-insurance-fraud

Investopedia. What Does Homeowners Insurance Cover and Not Cover? https://www.investopedia.com/financial-edge/1211/what-is-and-isnt-covered-by-homeowners-insurance.aspx#

National Association of Home Builders. Overview of Smart Home Technology and the Legal Landscape.https://www.nahb.org/advocacy/legal-issues/smart-home-technology