As the cyber threats faced by small businesses continue to grow, taking out cybersecurity insurance is a worthwhile investment. Many small business owners mistakenly assume that their company is too small to be at risk of cyber attack. However, almost all organizations are now susceptible, and the costs of recovery can be significant enough to put you out of business.
Cybersecurity insurance provides a safety net to help you deal with the financial repercussions of an attack, and return to normal operations as quickly as possible. Keep reading for everything you need to know about cybersecurity insurance, including what it covers and who needs it.
What Is Cybersecurity Insurance?
Also known as cyber insurance or cyber liability insurance, cybersecurity insurance is a policy that protects organizations in the event of high cost data breaches and cyber-related crimes.
With cybersecurity insurance coverage, you can reduce business disruption during and after cyber attacks, and cover some or all of the financial implications of an attack. With the evolution in cyber threats, this coverage is vital for small businesses that record their employees’ and customers’ personally identifiable information (PII).
Who Needs Cybersecurity Insurance?
Any business that stores or processes confidential data should have cybersecurity insurance in place. If you handle data such as names, addresses, financial information, medical records, social security numbers, etc., cybersecurity coverage is essential.
Regardless of your company size, you will find value in cybersecurity insurance. When it comes to coverage, you have two different options: first-party coverage and third-party coverage. A business that stores financial and customer data should at least have first-party coverage. In the case of a ransomware attack, for example, the insurer can step in to cover some or all of the ransom payment.
Businesses that store more sensitive customer data like social security numbers should also consider third-party coverage. This kind of information has more significant consequences for your customers if it is stolen, since it can lead to identity theft. Third-party insurance covers the legal fees and judgments if you are sued for damages resulting from a cyber attack. This is also a viable option for small business insurance for companies that work with the data of other companies.
What is Covered by Cybersecurity Insurance Policies?
It is worth noting that a cybersecurity insurance policy does not cover every potential eventuality related to cyber threats. However, good cybersecurity insurance should support the recovery basics from cyber attacks. The following are the key elements to look out for when seeking cybersecurity coverage for your business.
Legal representation is vital in the event of a significant breach, especially if a suit is filed against your organization. Check that your cybersecurity insurance policy covers the applicable legal costs in this scenario.
Cyber insurance will sometimes cover financial payments and response costs associated with ransom demands. Currently, network-based extortion demands are on the rise following the proliferation of ransomware and anonymous currencies. Cyber extortion coverage is crucial if you experience an attack that threatens to divulge sensitive information or shut down a system if a ransom is not paid.
In the event that you discover sensitive data has been compromised, you will need to dig deeper into what information was accessed and how it happened. Cyber insurance should cover the expenses of hiring a forensic team from outside your organization to carry out the investigation.
Businesses that rely heavily on technology for their day-to-day operations should seek a policy with a business interruption provision. Such a policy protects your business when a cyber attack affects daily operations through tech failures, viruses, hacking, and more.
Public Relations Expenses
The way in which a data breach is reported to the media is critical for reputational restoration for your company. You will also need to focus on maintaining relationships with your business associates, vendors, clients, and partners. To achieve this in a cost-effective manner, look for a policy that will cover public relations expenses following an attack.
Cyber insurance should cover the replacement, restoration, and repair costs for any damaged data or software. It may also cover the cost of defending and resolving claims regarding the handling of confidential personal and corporate data.
Cybersecurity insurance should cover any costs for defending and resolving claims related to online content such as trademark or copyright infringement, defamation, privacy invasion, unfair practices, etc. Any cost of settling claims made against you in your media activities, including in social media, will ideally be covered.
Cybersecurity Business Insurance Requirements
Cybersecurity insurance providers will typically require you to have certain security measures in place in order to be eligible for coverage. These requirements vary from provider to provider, but the steps outlined below are a good place to start when seeking cybersecurity insurance:
- Enforce Multi-Factor Authentication (MFA) for employees who access email through web apps or non-corporate devices.
- Implement an Endpoint Detection and Response (EDR) product throughout your enterprise.
- Implement business-wide Endpoint Protection Platform (EPP) software.
- Encrypt your company’s backups.
- Enforce MFA for protection of privileged user accounts.
- Ensure your backups are detached from your network (offline) or in a cloud service
For more in-depth preparation, download Electric’s Cybersecurity Checklist!
Protect your Business from Cyber Attack
The process of taking out cybersecurity insurance that adequately protects your business starts with analyzing your needs and risks. At Electric, we provide small businesses with the support and solutions you need to reduce the risk of data breaches and cyber attacks. Contact us today to learn more about implementing a robust cybersecurity strategy in your organization.