In today’s digital age, small businesses are increasingly vulnerable to cyberattacks. In fact, according to a recent report from Verizon, 43% of cyberattacks target small and medium-sized businesses. And, the average cost of a data breach for a small business with fewer than 500 employees is nearly $2.98 million, according to research from IBM.
Cyberattacks can result in stolen data, financial losses, damage to a business’s reputation, and even legal action. That’s why cyber liability insurance is more important than ever for small businesses. In this article, we’ll explore the importance of cyber liability insurance, the ways it can protect your business, and some key points to know before purchasing a policy.
Understanding Cyber Liability Insurance
Cyber liability insurance is a type of insurance that helps protect businesses from the financial losses associated with cyberattacks and cyber risks. Cyber risks are associated with using technology and the internet and can include data breaches, hacking, viruses, and other cyberattacks. Small businesses may be particularly vulnerable to these risks because they often lack the resources to implement robust cybersecurity measures.
Cyber liability insurance can cover a wide range of losses associated with cyber risks and can provide both first-party and third-party coverage. First-party coverage refers to coverage for losses sustained by the insured business, while third-party coverage refers to coverage for losses sustained by others as a result of the insured business’s actions.
Like other types of insurance, cyber liability insurance policies have limits and deductibles. The limit is the maximum amount the insurance company will pay for a covered loss, while the deductible is the amount the insured business must pay before the insurance policy begins to cover the costs of the loss.
Protecting Your Business With Cyber Liability Insurance
Now that we’ve covered the basics of cyber liability insurance, let’s explore how it can help protect your business. Policies can typically assist with recovering financially from the following types of events:
- Data Breaches: Data breaches can be a costly and damaging event for small businesses. Cyber liability insurance can help cover costs associated with investigating and mitigating a data breach, as well as notifying affected individuals and providing credit monitoring services.
- Business Interruption: A cyberattack can disrupt business operations, resulting in lost income and extra expenses. Cyber liability insurance can help cover these costs, allowing your business to recover from the attack faster.
- Cyber Extortion: Cyber extortion threats, such as ransomware attacks, can be a significant threat to small businesses. Cyber liability insurance can help cover the costs associated with responding to these threats, including paying the ransom if necessary.
- Privacy and Media Liability: Small businesses can be vulnerable to privacy and media liability claims, especially if they handle sensitive customer data or engage in online marketing. Cyber liability insurance can help cover the costs associated with defending against these claims and paying any damages awarded.
What You Need to Know Before Purchasing Cyber Liability Insurance
Before purchasing cyber liability insurance, it’s essential to understand what to look for in a policy and how to assess your business’s cyber risk. Consider the following tips as you begin researching policies.
Examine Policy Coverage
When shopping for cyber liability insurance, review the policy coverage and make sure it includes the types of coverage your business needs. This can include coverage for data breaches, business interruption, cyber extortion, privacy liability, and media liability. Make sure to read the policy fine print to understand any exclusions or limitations.
Review Policy Limits and Deductibles
Choose a policy with a limit that will adequately cover your business’s potential losses in the event of a cyberattack. It’s also important to choose a deductible that your business can afford to pay.
Assess Your Business’s Cyber Risk
To determine the appropriate level of coverage for your business, it can be helpful to assess your business’s cyber risk. This can include identifying the types of data your business collects and stores, the security measures you have in place to protect that data, and any potential vulnerabilities in your cybersecurity practices. You may want to work with an IT consultant or cybersecurity professional to conduct a risk assessment, which may help you choose the right coverage.
Compare Policies
When shopping for cyber liability insurance, compare policies from multiple providers to find the best coverage and pricing for your business. Consider working with an independent insurance agent who can help you analyze policies and make an informed decision.
Cyber liability insurance can be a critical investment for small businesses in today’s digital age. Cyberattacks have the potential to be costly and damaging, but cyber liability insurance can help protect your business from the financial losses associated with these attacks. Before purchasing a policy, make sure to understand the coverage, limits, and deductibles; assess your business’s cyber risk; and compare policies from multiple providers. With the right cyber liability insurance coverage, you can protect your business and enjoy peace of mind knowing that you’re prepared for the unexpected.
Resource Links
Aurora: Zero Trust Security for Small and Medium-Sized Businesses: What You Need to Know
Business News Daily: Worried About a Cyberattack? What It Could Cost Your Small Business
Nationwide: What Is Cyber Insurance?
Federal Trade Commission: Cyber Insurance