Cyber Insurance for Small Business: What You Need to Know

Cyber insurance is a must-have for small businesses in today's digital age, with 71% of cyber attacks targeting small and medium-sized businesses.

Small businesses are particularly vulnerable to cyber attacks, with 45% of attacks being carried out by insiders, often unintentionally.

Cyber insurance can help protect your business from the financial fallout of a cyber attack, covering costs such as data recovery and business interruption.

In fact, a single cyber attack can cost a small business an average of $200,000, making cyber insurance a vital investment for any small business owner.

Small businesses are a prime target for cyber attacks, with 85% of ransomware attacks targeting them. This is alarming, especially since many small businesses may not feel like they are a cybercriminal's ideal target.

Ransomware attacks can be devastating, with victims often paying a ransom demand as a last-ditch effort to regain their data. In fact, according to Veeam's 2023 Data Protection Trends Report, many small businesses report paying a ransom demand.

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Cyber attacks can also lead to significant financial losses, including the costs of investigating the incident, restoring data, and recovering from business interruption. In fact, the average cost of a cyber claim rose along with the revenue of the victim, with the smallest tier businesses ($50M and under in revenue) having the most severe claims on a relative basis (as a percentage of revenue).

Small businesses often collect and store sensitive customer information, making them vulnerable to data breaches. In the event of a breach, cyber liability insurance can cover the costs associated with notifying affected individuals, providing credit monitoring services, and managing public relations to protect the business's reputation.

Standard business insurance typically covers physical damages to property, liability claims, and some aspects of employee-related incidents. However, it may not fully cover losses or damages related to cyber incidents, making cyber insurance a necessary addition.

Here are some key reasons why small businesses need cyber insurance:

By having cyber insurance, small businesses can better protect themselves against the growing threat of cyber attacks and minimize the financial impact of a breach.

Cyber insurance for small businesses can be a lifesaver in the event of a cyberattack or data breach. Protection against costs related to cyber extortion, such as ransom payments and expenses associated with dealing with threats to release sensitive information, is often included in cyber insurance policies.

Cyber insurance can cover a range of cyber threats, including phishing attacks, malware infections, ransomware attacks, and data breaches. This can include expenses for investigative services, data recovery, identity recovery, and repairing damaged systems.

Some cyber insurance policies also cover business interruption losses resulting from a cyber-attack. This can include lost income or revenue due to a cyberattack, as well as damages to customers or partners, including potential legal costs.

Cyber liability insurance can help cover costs your business incurs as a result of data breaches and cyberattacks. This can include expenses for investigative services, data recovery, identity recovery, and repairing damaged systems.

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A standalone cyber policy can provide additional coverages, including social engineering, bricking, and reputational loss. This can be especially useful for businesses in industries that may be most at risk for these types of attacks.

Here's a breakdown of some common coverages included in cyber insurance policies:

These coverages can help protect your business from the financial and reputational consequences of a cyberattack or data breach. By understanding what's included in a cyber insurance policy, you can make an informed decision about how to protect your business.

Choosing the right cyber insurance policy can be overwhelming, especially for small businesses. Cyber insurance policies vary depending on the insurer, but most cover expenses related to data breaches, including notification costs, credit monitoring for affected individuals, and defense costs in the event of a lawsuit.

One common type of coverage is cyber extortion, which protects against payments made to ransomware attackers or other criminals who demand money in exchange for not releasing sensitive data or crippling systems.

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Other types of coverage include business interruption, which reimburses lost revenue due to a cyberattack that renders a network unusable, and liability, which covers legal costs and damages awarded to third parties in cases where the company is found to be at fault for a cyber incident.

There are two main types of cyber insurance: first-party and third-party. First-party cyber insurance covers the insured organization for damages incurred as a result of a cyber attack, while third-party cyber insurance covers the insured organization for damages incurred as a result of a cyber attack against another organization.

Here are the main types of cyber insurance policies:

First-party cyber insurance is typically more comprehensive than third-party cyber insurance, covering not only damages to the organization's computer systems and data, but also business interruption losses, intellectual property theft, and extortion.

Cyber insurance can provide protection against a range of cyber threats, including phishing attacks, malware infections, ransomware attacks, and data breaches. This can help cover costs such as investigative services, data recovery, and repairing damaged systems.

First-party coverages, which are often excluded in a standard cyber extension to a BOP, can be included in a Corvus standalone cyber policy. This can provide protection for costs such as ransom negotiations, forensics, legal expenses, and business interruption.

Here are some additional coverages that may be included in a standalone cyber policy:

These coverages can help protect against emerging cyber risks and provide support from cyber-specific underwriters who are knowledgeable about market trends.

Crime Coverage is a crucial aspect of cyber insurance that helps protect your business from various types of cyber crimes. Cyber Crime Coverage can cover financial losses resulting from various cyber crimes, such as fraudulent funds transfer, social engineering, and other electronic crimes.

Cyber insurance can provide coverage for a range of cyber threats, including phishing attacks, malware infections, ransomware attacks, and data breaches. Policies can also provide coverage for business interruption losses resulting from a cyber-attack.

Some cyber liability insurance policies offer resources for employee training and education on cybersecurity best practices, helping to reduce the risk of human error leading to a cyber incident. This can include investigative services, data recovery, identity recovery, and repairing damaged systems.

Cyber liability insurance can cover lost income due to a cyberattack, as well as damages to customers or partners, including potential legal costs. In some cases, cyber liability insurance can also cover ransom payments needed to recover your data and regulatory fines.

Here are some examples of cyber crimes that may be covered under a cyber insurance policy:

It's essential to note that the availability and coverage of cyber insurance policies may vary by location and industry, so it's recommended to compare policies and coverage options from multiple providers before making a decision.

Cyber insurance coverage isn't a one-size-fits-all solution. There may be exclusions or limitations to your policy, depending on the provider.

Some policies may not cover losses resulting from social engineering attacks, which can be a sneaky way for hackers to trick employees into divulging sensitive information.

Intentional acts by employees are also often excluded from coverage, which means if an employee intentionally causes a cyber breach, you might not be protected.

Losses from attacks launched by a foreign nation are another potential exclusion, and these attacks can be particularly devastating due to their scope and sophistication.

Cyber insurance typically doesn't cover intentional harm, which can include malicious acts by employees or outsiders.

Illegal activities, property damage, and sometimes even loss of future profits are also often excluded from coverage.

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Cyber insurance can provide protection against a range of cyber threats, including phishing attacks, malware infections, ransomware attacks, and data breaches. This can help cover costs such as legal fees, notification expenses, public relations costs, and lost income or revenue.

Specific cyber insurance coverages can include protection against social engineering, bricking, and reputational loss. These coverages can be included in a standalone cyber policy, which is more likely to have cyber-specific underwriters who are knowledgeable about market trends.

Some examples of specific risks covered by cyber insurance include third-party liability, cyber extortion, and cyber crime. These coverages can help protect against lawsuits, ransom payments, and financial losses resulting from cyber crimes.

Third-Party Protection is a crucial aspect of cyber insurance. It shields your business from lawsuits and financial burdens resulting from data breaches or cyber incidents that affect your customers, clients, or partners.

Third-party liability covers costs related to regulatory fines, penalties, legal representation, settlements, and court-ordered damages. Most Business Owners Policies (BOPs) with a cyber extension handle these costs.

Cyber insurance can provide coverage for business interruption losses resulting from a cyber-attack, including lost income or revenue. It's essential to note that coverage options may vary by location and industry.

Cyber liability insurance can help cover expenses for investigative services, data recovery, identity recovery, and repairing damaged systems. In some cases, it can also cover ransom payments needed to recover your data.

Regulatory bodies may impose fines and penalties for failing to comply with data protection regulations. Cyber insurance can reimburse your business for these costs.

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Social engineering is a type of cyber threat that can catch businesses off guard. It involves tricking employees into divulging sensitive information or performing certain actions that compromise the security of the organization.

Social engineering attacks can be devastating, as seen in the case of a small business that fell victim to a business email compromise (BEC) attack in 2023. The attack resulted in a breach of employee email accounts, which allowed the attacker to gain access to sensitive information.

The median incurred loss for businesses under $30M due to business email compromise is $8M USD, highlighting the significant financial risks associated with social engineering attacks.

A standalone cyber policy can provide more comprehensive coverage for social engineering attacks, including breach response and remediation expenses. This can help businesses recover from the financial and reputational impacts of such attacks.

Some common coverages included in a standalone cyber policy include:

It's essential for businesses to have a proactive approach to preventing social engineering attacks, such as implementing preventive measures and training employees on how to identify and report suspicious activity.

Ransomware protection is often covered as part of cyber liability insurance. Specifics can vary significantly depending on the cyber insurer.

Many insurers are increasingly offering standalone coverage that may be especially useful to businesses in industries that may be most at risk for this type of attack. This type of coverage is typically included in a Corvus standalone cyber policy under the category of cyber extortion and ransomware.

Some examples of costs that may be covered under a cyber insurance policy that includes ransomware protection include:

Keep in mind that the availability and coverage of cyber insurance policies may vary by location and industry, so it's recommended to compare policies and coverage options from multiple providers before making a decision.