Who Needs Cyber Insurance to Mitigate Business Risks

If you're a small business owner, you might be wondering if cyber insurance is really necessary for your company. The truth is, any business that deals with sensitive customer information or has a significant online presence is at risk of a cyber attack.

According to the article, 60% of small businesses go out of business within six months of a cyber attack, making cyber insurance a crucial investment.

As a business owner, you're likely already aware of the importance of protecting your company's assets, but cyber insurance can provide an added layer of protection against data breaches and other cyber-related risks.

Cyber attacks can be devastating, with the average cost of a data breach being $1.1 million, a figure that's only expected to rise in the coming years.

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Cyber liability insurance helps businesses reduce the risk of financial loss in the event of a security breach. This type of insurance has been around since it was originally part of errors and omissions (E&O) insurance.

Cyber insurance began growing in popularity in 2005, with the total value of premiums forecasted to reach $7.5 billion by 2020. About one-third of U.S. companies purchase cyber liability insurance.

Cyber liability insurance is a type of small business insurance for cyber threats or breaches involving computer systems and data. This can include sensitive customer information, such as credit card numbers, Social Security numbers, account numbers, health records, and driver’s license numbers.

Cyber liability insurance is also known as cybersecurity insurance or cyber risk insurance.

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Cyber insurance is a must-have for small businesses that handle sensitive information. It can help cover the costs of data recovery, regulatory fines, and lawsuits in the event of a cyberattack.

Compensating for business downtime is one of the key benefits of cyber insurance. This can include lost revenue and associated expenses, such as the cost of hiring temporary staff to keep operations running.

Regulatory fines can be a significant financial burden for small businesses that experience a data breach. Cyber insurance can help cover these costs, as well as legal defense costs.

Small businesses that store sensitive customer information, such as credit card numbers or Social Security numbers, are required by law to notify their customers in the event of a data breach. Cyber insurance can help cover the costs of customer notifications and other compliance-related expenses.

Recovering compromised data can be a costly and time-consuming process. Cyber insurance can help recoup these costs, which can include the cost of hiring specialized technical experts to recover data.

Replacing damaged equipment is another potential cost associated with a cyberattack. Cyber insurance can help cover the cost of repairing or replacing damaged hardware, such as servers or computers.

In extreme cases, cyber insurance can even help cover the cost of paying a ransom to restore access to data. This can be a difficult decision for small business owners, but having cyber insurance can provide peace of mind and financial protection.

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Any business that stores or processes sensitive information should consider cyber liability insurance. You're likely a target if you're conducting business, especially small and medium-sized businesses that pay less attention to security.

Most small businesses don't have the funds to withstand a cyberattack, so it's worth mitigating the risk with cyber liability insurance. According to a survey from Embroker, 50% of venture capital-backed startup founders said their board requires cyber liability insurance and 48% said their investors require it.

Consider coverage if you store data such as customer names and addresses, Social Security numbers, medical records, and financial information like credit card information. Here are examples of businesses that could benefit from a cyber liability insurance policy:

If you're unsure if your small business needs cyber liability insurance, ask yourself these questions: Does your company collect, store, send or receive personally identifiable information or personal health information? Is your company in an industry with rules about customer information, such as education, finance or healthcare?

Mitigating client risk is a top priority for any business. Cyber liability insurance can help protect against costly data breaches and cyber attacks.

The risk of cyber attacks is higher than you think, with about half of all attacks targeting small businesses. In fact, almost 40% of victims spend $50,000 or more responding to an attack.

Consider your business's online footprint and whether you store sensitive information such as health records, credit card numbers, or Social Security numbers. If so, cyber liability insurance is a must-have.

Cyber insurance can help cover the costs of investigating an incident, notifying clients of a breach, and assisting clients after a breach. It can also cover the costs of restoring compromised data and business downtime.

To determine your business's cyber insurance needs, evaluate your existing cyber risks and the type of threats most relevant to your business. Consider factors such as the type of data you handle, your business's reliance on confidentiality, and your employees' use of personal devices.

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Here are some common reimbursable expenses that cyber insurance can cover:

The amount of cyber insurance you need will depend on your business's specific risks and exposures. Consider factors such as your business's revenue, industry, and type of data you handle.

Tech errors and omissions insurance protects technology designers, manufacturers, or installers from claims resulting from errors or mistakes they make when making or designing their products or providing their services.

This type of insurance covers damages caused by errors in technology products and services, such as a software unintentionally causing a system outage, resulting in lost sales for clients.

Some common reimbursable expenses under tech errors and omissions insurance include claims regarding mistakes made in technology products and services.

Here's a key difference between tech errors and omissions insurance and cyber insurance: tech E&O protects technology professionals, while cyber insurance covers businesses that use technology.

If this caught your attention, see: How Much Errors and Omissions Insurance Do I Need

Cyber insurance, on the other hand, covers businesses that use technology, protecting them from financial losses caused by damage or theft of their computer data.

Cyber insurance typically covers expenses related to first parties as well as claims by third parties.

Cyber insurance can help cover the costs of investigating an incident, notifying clients of a breach, assisting clients after a breach, restoring compromised data, and business downtime.

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Cyber insurance policies can be complex, but understanding the different types of coverage can help you make an informed decision. There are two main types of coverage: first-party coverage and third-party coverage.

First-party coverage pays for your direct costs to recover from a data breach or other cyberattack, such as notifying customers, providing credit card monitoring, and restoring lost or damaged data. This type of coverage can also cover additional expenses like crisis management services and payments to cyber extortionists.

First-party coverage can be broken down into several subcategories, including:

Third-party coverage, on the other hand, covers the cost of defending and settling lawsuits against your business by people whose information has been compromised in a data breach. This type of coverage can also apply to fines or penalties levied against you by a regulatory agency, such as the Federal Trade Commission.

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Some examples of claims covered by cyber insurance include a disgruntled former employee hacking into your computer system, a denial of service attack forcing you to shut down your business, and a hacker taking control of your computer system using ransomware.

Here's a summary of the different types of coverage:

It's essential to understand the different types of coverage and choose a policy that meets your business's specific needs.

Cyber insurance can provide financial protection against a range of cyber-related risks. A disgruntled former employee hacking into your computer system and corrupting employee and customer records is just one example of a covered claim.

Data breaches can lead to lawsuits, and several customers may sue your business for failing to protect their sensitive data adequately. This can result in significant financial losses.

A denial of service attack can force you to shut down your business for an extended period, causing you to lose income. In this scenario, cyber insurance can help cover the lost revenue.

Ransomware attacks can be particularly devastating, with hackers taking control of your computer system and demanding payment to release your files. In one scenario, a hacker demanded $25,000 to release files.

Here are some examples of claims covered by cyber insurance:

Cyber insurance premiums can begin from as low as $2,000 a year, depending on your needs and your willingness to pay.

The median cost of cyber liability insurance for small business owners is $145 a month, according to Insureon. This cost can vary based on several factors, including your company's exposure to cyber risk and your claims history.

Here are some examples of how much cyber insurance can cost:

Cyber insurance isn't required by state or federal laws, even for banks and other financial institutions. However, businesses that design, make, or install technology may need to buy tech E&O insurance to comply with the terms of a contract.

Business funding needs are a crucial aspect to consider when it comes to cyber insurance. You need to assess your risk exposure by evaluating the type and volume of sensitive data you store.

Businesses handling large amounts of sensitive data may need more specialized coverage. This can help you choose the right policy type and coverage to protect your business against cyber threats.

Investing in cybersecurity can yield more affordable insurance rates. Providers often reward proactive risk management, making it a worthwhile investment.

If you are conducting business, you are a target. Small and medium-sized businesses are often more attractive targets because the bad guys know they pay less attention to security than larger corporations.

Here are some costs that cyber insurance can help cover:

Cyber security insurance premiums can begin from as low as $2,000 a year.

The median cost of cyber liability insurance for small business owners is $145 a month, according to Insureon. This is a relatively affordable option for many small businesses.

Your costs will depend on several factors, including your company's exposure to cyber risk, the amount of insurance coverage you need, your company's revenue, and your network security.

A small cyber liability insurance policy could be added to a business owners policy, while a larger cyber liability policy with higher limits would merit its own standalone policy.

The premium your company will pay for a policy also depends on the size and nature of your business, the amount of sensitive data you handle, and the security measures you have in place.

Many small businesses can buy cyber insurance for about $1,740 per year.

Here are some possible annual costs of cyber insurance:

Your premium is also affected by the coverages and limits you choose, as well as your loss history.

Cyber insurance isn't required by state or federal laws, even for banks and other financial institutions.

Most businesses can choose whether or not to buy cyber insurance, but there are some exceptions. Businesses that design, make, or install technology may need to buy tech E&O insurance to comply with the terms of a contract.

For instance, if A-1 University hires Tip-Top Tech to overhaul the university's computer system, Tip-Top must produce a certificate of insurance showing it has bought tech E&O insurance with the coverages and limits specified in the contract.