A good policy can keep a small business afloat and help it recover after a successful cyber-attack
Key takeaways
- Cyber-attacks are a significant risk for businesses of all sizes and can compromise consumer and company data and operations.
- The company must cover expenses related to the breach and may have legal liabilities.
- Investing in adequate cyber insurance protects against first-party costs, third-party claims, and business interruption costs.
Hackers are getting more sophisticated by the day and developing new ways to infiltrate data centers, networks, and devices. The result is data compromises that allow certain information to fall into the wrong hands or for criminals to hold it hostage, doing immense damage to businesses around the globe.
In addition to remediation costs after an attack, companies that fail to protect the data they store could be liable for other damages a breach causes. They may also encounter business interruption as they attempt to remedy the situations and restore their devices and networks.
You never want to end up in this situation, but having an adequate cyber insurance plan helps cover financial losses and claims against your organization.
Here’s a closer look at the importance of cyber insurance and information on how to choose a plan that works for your business.
What is cyber insurance?
Cyber insurance is a policy that can cover your business’s direct and indirect costs if you experience ransomware or a data breach that releases sensitive customer information. This information could include credit card numbers, health records, Social Security numbers, contact information, and account numbers, depending on the type of business you’re operating.
This form of insurance is in addition to a business’s general liability policy, as many of those policies don’t cover cybercrimes.
Cyber insurance plans can cover legal fees you encounter in the aftermath of an attack. The policy you select could also assist with expenses related to notifying customers of the breach, restoring customers’ personal identities, recovering compromised data, and replacing or repairing damaged office computer systems.
Cyber insurance has become essential coverage in today’s threat climate. Your business shouldn’t be without an adequate policy if you handle sensitive data at any time or rely on technology for day-to-day operations.
Why cyber insurance is crucial
Almost every company is vulnerable without cyber insurance. Even small businesses are now significant targets of cyber-attacks, as Forbes reports that 43% of them target smaller companies. In addition, 66% of businesses have experienced at least one cyber-attack in the last 12 months. These incidents are becoming more targeted against organizations that don’t have the resources to defend themselves.
The expenses associated with cyber-attacks are increasing, too. The average small business pays $10,000 in professional services following an attack, in addition to $5,000 in lost business opportunities and $23,000 in downtime costs.
Small firms can’t eat these costs and expect to remain profitable — but a cyber insurance plan helps offset many of the expenses.
Types of cyber insurance
Looking at various cyber insurance plans and figuring out the best one to meet your company’s needs is vital. Taking the time to learn about the risks and protections available ensures you make the right decision.
First, you’ll want to consider first-party expenses your company could be on the hook for paying. These costs include the recovery of lost data, business interruption coverage, and investigation services necessary to determine the cause of an attack.
In addition, your company should look at third-party coverage. A plan with third-party coverage will handle damages customers or partners might encounter because of data compromises and pays settlement costs, liabilities, and legal fees.
Ideally, you’ll select a cyber insurance plan offering both first-party and third-party coverage that specifies reimbursement for a sufficient range of threats and impacts. It’s wise to speak with an insurance professional to determine the level of coverage required.
Selecting a cyber insurance plan
Choosing a cyber insurance policy to meet your company’s needs begins by assessing your risks. Your reliance on technology makes up a significant part of your exposure, as do factors like remote employees, security training, and data storage policies. You could also have business-to-business contracts in place that outline the consequences if your company is found responsible for a data breach.
A crucial factor to consider when choosing between cyber insurance plans is how vulnerable you are to an attack. Look at how much your firm invests in cybersecurity platforms and solutions because companies that pay for state-of-the-art technology to prevent breaches are less likely to become victims. Nevertheless, even strong cybersecurity doesn’t offer immunity, and insurance providers often require a high level of protection before issuing a policy.
Consider all the components you could include in your plan before making a selection. For example, you might opt for a policy that provides for credit monitoring and public relations assistance if a breach is likely to expose customer data. In contrast, a policy covering loss of income and network extortion might be necessary if you’re more worried about how significant downtime would hinder business operations.
There could also be exclusions to consider as you invest in a cyber insurance plan. These exclusions might not provide coverage for vendors or in certain geographical regions. They could even limit your policy if the breach results from employee error resulting from social-engineering hacks. In that scenario, you might not have coverage if an employee falls victim to a phishing scheme on a company computer, especially if the organization lacked inadequate cybersecurity training.
Knowing what’s included in your insurance plan is crucial before any agreement. Speaking with an insurance professional ensures you know what you’re signing up for, so there aren’t any surprises.
Get the right cyber insurance coverage for your business
Learning your risks and figuring out a cyber insurance plan that meets your needs is essential as hackers target more businesses and do more damage with each attack. Of course, you’ll need to put a policy in place before a breach occurs to ensure you have protection.
NICRIS Insurance can assist as you determine the cyber insurance policy necessary to keep your company safe. Our agents will help you select a plan that addresses your individual risks and situation. Contact us today to learn more about the importance of cyber insurance and how to choose a plan.