Data breaches, malware attacks, and ransomware threats are no longer reserved for corporate giants. In today’s digital landscape, small businesses are also prime targets for cybercriminals, and a single incident can throw a wrench in operations, damage your reputation, and cost you a fortune. 

So, how do you stay protected? While you should ensure your business follows best practices to keep your data safe and secure, cyber insurance can provide another layer of protection. 

How Cyber Insurance Can Help Protect Your Business

Like other types of insurance, cyber insurance offers a financial safety net for businesses impacted by a cyber incident. According to AmTrust Financial, a data breach can cost businesses an average of up to $200,000. Cyber insurance can help alleviate this huge expense so your business can focus more on recovery and mitigation. 

Types of Cyber Insurance for Small Businesses

The type of cyber insurance policy you choose will dictate what it can cover:

• Cyber Liability – Cyber liability insurance typically helps pay for damages or losses from a cyber incident from outside your business, such as vendors. According to the LA Times, typical liability policies can include coverage for cyber extortion, lost revenue, investigation and legal fees, expenses for notifying customers of data breaches, and regulatory fines.
• Data Breach Insurance – As the name suggests, this covers the costs associated with data breaches, particularly if sensitive information gets exposed. However, this coverage is exclusive to data breach incidents. 
• Technology Errors and Omissions Insurance – According to Forbes, this insurance is “a type of professional liability coverage that will cover damages caused by errors in your company’s technology products and services.” 

You’ll also need to determine whether your business needs first- and third-party cyber coverage.

First-Party Cyber Coverage

According to the Federal Trade Commission, first-party cyber coverage covers cybersecurity incidents that affect your business’ data, such as employee and customer information. Costs covered may include:

• Legal counsel
• Recovery and replacement of lost data
• Customer notification services
• Loss of revenue from business interruption 
• PR and crisis management 
• Cyber extortion and fraud
• Cyber incident investigations
• Other consequential fees, fines, and penalties 

Third-Party Cyber Coverage

Third-party coverage protects you from liability if claims are against you because of a cybersecurity incident. The costs covered include:

• Remitted payments to customers impacted by a breach
• Settlements, litigation, and other legal expenses
• Defamation, copyright, or trademark losses

Is Cyber Insurance Right for Your Business? 

Not all small businesses have the resources to invest in cyber insurance immediately, so you may wonder if it’s something you can live without. Here are some considerations to determine whether cyber insurance should be a priority:

• Type of Business Operations –If you do most of your business online, you are more at risk for cyber threats. Additionally, according to the Schumacher Insurance Agency, industries that typically manage or store personal or financial information, such as healthcare, e-commerce, or retail, should prioritize cyber insurance. 
• Type of Data Stored—If your business stores sensitive data, such as personal identifiable information (PII), you should consider a cyber insurance policy to keep you protected in case a cybercriminal targets you. 
• Level of Exposure – Do you work with remote employees or independent contractors with sensitive data access? If so, your risk for cyber threats increases, as does the need for cyber insurance. 
• Business Insurance Policies – Even if you already have standard business owners’ insurance, it’s important to note that not all policies cover cyber incidents. However, depending on the provider, you may be able to add cyber liability coverage to a pre-existing policy. 

Remember: The best defense against cyberattacks is to be proactive! If you need guidance assessing your business’ vulnerability to cyber threats, setting up cybersecurity policies to protect your business, or determining your cyber insurance needs, contact our IT and cybersecurity specialist today.