What is Cyber Insurance and Why Your Small Business Needs It
Recent statistics show a rise in data breaches affecting small and medium-sized businesses (SMBs). The Allianz Risk Barometer reports that businesses worldwide are more concerned about cyber risks than the pandemic. So, how can businesses safeguard their assets against cyber attacks and data breaches? Cyber insurance is the answer. Here’s everything you need to know to protect your business.
What is Cyber Insurance?
Cyber insurance policies protect SMBs from cyber liability related to data breaches where sensitive information like credit card numbers is hacked and stolen. They also help recover from data loss and repair computer systems after cyber attacks, which can cost a significant amount. Public relations costs can soar after a cyber event, which is why insurance companies notify customers of breaches.
Why Cyber Insurance for Small Business is Important
Coverage for Stolen or Lost Devices: Cyber liability insurance covers theft or loss of devices like tablets, phones, and laptops, not just from malware but also from theft and loss.
Forensics: Network security coverage helps determine the severity of a breach. Forensic services can uncover cyber incidents caused by employees or insiders.
Protection From Hacking and Virus Damage: Business interruption coverage can cover lost income due to cyber incidents. Modern businesses need this coverage for compromised data.
Theft and Data Corruption Coverage: Data recovery after a hack is crucial, especially when company data or customer information is involved.
- PR Help: Good insurance policies can help rebuild a brand, another crucial aspect for businesses.
What is Covered by a Cyber Insurance Policy?
In today’s digital landscape, cyber threats pose a significant risk to businesses. A cyber insurance policy acts as a protective shield against these risks. While coverage may vary, here are five key areas that are typically included:
Privacy Liability Coverage: Protects businesses from lawsuits arising from data breaches due to unauthorized access and misuse of consumer data.
Network Security From a Cyber Attack: Covers the aftermath of network security failures caused by cyberattacks like ransomware or data breaches.
Media Liability: Protects businesses from claims arising from online content, especially in cases of unintentional intellectual property infringement.
Network Business Interruption Coverage: Provides financial assistance to recover from operational disruptions due to cyber incidents.
- Errors and Omissions: Protects businesses from legal and financial implications of unintentional breaches of commitments and contracts.
Comparison of Cyber Insurance Coverage
Here’s a comparison of what is typically covered and what is not covered by cyber insurance:
| Covered by Cyber Insurance | Not Covered by Cyber Insurance |
|---|---|
| Privacy Liability Coverage | Loss of Future Profits |
| Network Security From a Cyber Attack | Loss of Value |
| Media Liability | Upgrades |
| Network Business Interruption Coverage | Reputational Damage Costs |
| Errors and Omissions | Intentional Acts & Internal Misconduct |
How Much Cyber Insurance Cover Should Small Businesses Have?
Small businesses should have enough cyber insurance coverage to protect against cyber exposures if they store sensitive data, use point-of-sale systems, provide hardware or software services, or store data on computers or in the cloud. Many small businesses opt for around $1 million in coverage, considering different types of business insurance available.
How to Choose the Right Cyber Insurance for Your Business
When choosing a cyber insurance provider, consider the following tips:
- Understand third-party risk and the provider’s handling of supply chain vulnerabilities.
- Ask about coverage details, including first-party and third-party coverage, regulatory investigation support, and exclusions.
- Inquire about response times in the event of a breach.
How to Get Cyber Risk Insurance for Your Small Business
Getting cyber insurance involves following certain steps to ensure you have the right coverage and are prepared for cyber threats. Look for silent cyber clauses in traditional policies and consider policy components like forensic expenses, legal expenses, ID theft repair, credit monitoring expenses, and liability costs.
Evaluating the Return on Investment (ROI) of Cyber Insurance
Investing in cyber insurance requires a thorough evaluation of costs versus benefits. Consider direct financial benefits like cost avoidance and business continuity, as well as indirect benefits like reputational protection and compliance advantages. Long-term considerations include adaptability to emerging threats and cybersecurity improvement incentives.
Is data breach insurance the same as cyber insurance?
No, there is a difference between data breach insurance and cyber insurance. While data breach insurance covers damage to data, cyber insurance covers both first-party and third-party cyber risks.
In conclusion, cyber insurance is crucial for small businesses to protect against cyber threats and data breaches in today’s digital age. By understanding the importance of cyber insurance and choosing the right policy, businesses can safeguard their assets and mitigate financial and reputational risks.
