Cyber attacks on small businesses grow more common and costly with each passing year. Many small- and medium-sized businesses (SMBs) are not adequately prepared to defend against or respond to a cyber attack or data breach, and businesses that do have strong protections and recovery plans in place still face enduring threats from persistent cyber criminals. In response to these trends—and the seeming inevitability of attacks on small businesses—insurance providers are responding by offering more options in cyber security and data breach insurance for small business.
What You Should Know about Data Breach Insurance for Small Business
Most general insurance policies do not include cyber security coverage. If you think your current business insurance will cover your losses—and those incurred by third parties, like clients or customers—in the case of a cyber security incident, it is critical that you check in with your insurance agent on the topic.
It is likely that growing demand for cyber security and data breach insurance coverage will continue to drive the development of new kinds of policies to better meet the needs (and budgets) of SMBs. Sorting through the options might seem overwhelming, but putting it off could be disastrous. To understand what kind of coverage your company needs, you should evaluate the risks your company faces and the cyber breach remediation that will be required if an incident occurs. Then you can identify possible insurance offerings that are a good fit for your specific business situation.
The Risks of Not Having Cyber Security and Data Breach Insurance for Small Business
A quick Internet search of small business data breach statistics results in a lot of information that should worry any small business owner or manager. Here are three statistics that illustrate the dire situation in which SMBs find themselves:
- Forty-three percent of data breaches in 2019 involved small business victims, according to Verizon.
- Nearly half of SMBs experienced breaches in 2018 and 2019, according to Kaspersky.
- Sixty percent of small businesses that experience a cyber attack go out of business within six months, according to National Cyber Security Alliance.
Clearly, the level of risk to SMBs is high, and the consequences of a cyber attack or data breach are serious. Good security measures are crucial, of course, but it also makes sense that many small businesses are considering insurance as part of their cyber security and data breach recovery plans.
The Costs of Cyber Breach Remediation
Along with the frequency of attacks, the costs of cyber crime continue to rise. Business losses related to cyber attacks and data breach recovery can involve the following, among other costs:
- Investigation costs;
- Business continuity and downtime losses;
- Loss of data and records;
- Regulatory fines;
- Physical damages to computer hardware;
- Software and systems damages;
- Recovery and restoration costs; and
- Client/customer notification and cyber breach remediation.
Evaluating Cyber Insurance Benefits for Your Business
The ideal policy for your business will offer cyber insurance benefits that cover the potential losses listed above. Good coverage will include protections that are not limited by the cause of the incident, so you will be covered whether the harm stems from a malicious external cyber attack, an internal accident, or something that falls in between.
Lawsuits can arise when a business is the target of cyber crime, especially if your company’s IT security measures or cyber breach remediation methods are lax or ineffective. Though not a replacement for thorough data breach prevention, business owners and managers should consider cyber insurance benefits that cover third-party losses, like those associated with compromised personal or credit information of clients.
Before you approach potential insurers, perform some research and have a general idea of your company’s specific risks and needs. An IT security audit can be a useful tool for identifying these.
Finding the right cyber security and data breach insurance for small business, or any business, might seem like a task that can wait another day, but statistics argue otherwise. When combined with a thorough cyber security and data breach recovery plan, cyber insurance benefits just might offer the life raft your company needs when the worst-case scenario happens.