We’ve discussed the use of strong passwords. We’ve covered the many different cyberattacks that target businesses. Armed with this knowledge, it makes sense to seek out additional ways to prevent financial loss from the damage cyberattacks can cause.
Your small business isn’t safe from cybersecurity hacks. In fact, hackers often target smaller companies because they lack the robust security of larger enterprises. It’s important to recognize the many areas of opportunity for hackers to access your systems and information. With so many employees bringing their own devices to work, ransomware on the rise, and phishing email campaigns, it’s wise to cover all your bases.
Cybersecurity insurance is an option available for businesses to purchase. The plans vary in coverage and cost, but are they worth the expense?
Cybersecurity Insurance Benefits
They can help recoup some of the costs associated with an attack.
A cyberattack or data breach varies in cost depending on the size and scope of the attack, how much data is lost, the sensitivity of the information that was potentially exposed, etc.
To oversimplify the coverage options:
- First Party Coverage = Financial protection from being a victim of a breach.
- Third Party Coverage = Financial assistance when you’re the cause of a breach or if you pass along a virus unknowingly that leads to a breach within another company.
They point out areas of exposure to tighten security.
When preparing to implement a cybersecurity insurance policy, a risk assessment of your business takes place. This often reveals gaps in security that are easily addressed and fixed, which improves your preventative practices.
It provides an opportunity to reassess your current strategies, make improvements, and implement better overall practices. Limiting exposure limits risk, and prevention over recovery is the ideal when it comes to cybersecurity.
There are all kinds of costs that come with a data breach. From notifying the affected parties to fines and penalties, lost business to legal costs and new security implementation, a breach adds up quickly and can put a tremendous – and potentially unrecoverable — strain on a business. Cybersecurity insurance can alleviate some of these costs.
Cybersecurity Insurance Drawbacks
They won’t prevent the attack from happening.
As mentioned above, insurance is something you purchase to help in the recovery process after a traumatic event occurs. This doesn’t stop hackers from breaking into your systems, it doesn’t protect your business from the reputational fall-out of a breach, and it won’t negate the responsibility you have to protect sensitive information from ever being accessed. Insurance is simply to help you bounce back from the costs associated with a security disaster.
Coverage varies greatly.
As with all types of insurance, the coverage varies by provider and plan type. There’s coverage that protects you from litigation. There’s coverage that specifically relates to data breaches, etc.
The type of coverage depends on the type of business you have. When shopping around, it’s good to make notes of what plans look like from provider to provider, but ultimately, we highly recommend proceeding with a lawyer. Policies involve legal jargon that quickly becomes overwhelming, and what you think a word means may not actually be how the law uses it.
Don’t base your shopping on cost; base it on your need. Your cost should align with the level of risk your business has to a cyberattack. Ideally, if you’re exercising best practices, these risks should be relatively low. Granted, the more sensitive, personal information your business collects, the wiser it is to have stronger coverage.
How confident do you feel about the preventative measures your business utilizes? Are you training your employees frequently? They tend to be the #1 source for a data breach.
So Do You Need Cybersecurity Insurance?
We’ve listed a few benefits and drawbacks of investing in this type of insurance, but the only person who can decide what’s right for your business is you. Here are our key takeaways:
- Use a lawyer familiar with cybersecurity insurance policies.
- General liability insurance coverage doesn’t cover cybersecurity breaches.
- Get the right coverage. Understand what that coverage provides your business.
- Exercise exceptional cybersecurity hygiene to stop problems before they start.
- Insurance covers the loss. It doesn’t prevent loss from happening.
With so many risks out there, protection only goes so far. Your tea kettle or smart fridge can get hacked (IoT link). Your employees can expose your business to hacks that would otherwise be easily thwarted. Everyone’s opinion on cybersecurity insurance varies. One business owner discussed the benefits in an interview with NPR. If cybersecurity insurance seems right for your business, research your provider options. Sites like Embroker, who are cybersecurity insurance providers, also have a wealth of knowledge on their site and can guide you in the right direction.
Do your research. Protect yourself. Create a cybersecurity recovery plan.
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