A cyber insurance policy, also called cybersecurity insurance, is a type of insurance that cushions the financial blow of data breaches and other types of cyberattacks. It protects businesses from having to pay costs associated with legal and regulatory claims, reputational damage, and loss of staff productivity.
For many small- and medium-sized businesses (SMBs), paying monthly or yearly cyber insurance policy premiums may seem like an unnecessary expense. However, it could be the only thing that saves your business from having to pay huge costs as a result of a cybersecurity incident.
If you’re still not convinced that a cyber insurance policy is necessary, these reasons might change your mind.
1. No business is completely safe
It’s no secret that multinational corporations are continuously being targeted by cyberattacks. Fortunately, many of these companies have the means to recover from attacks. SMBs may not be so lucky. Smaller businesses are targets too and are even more vulnerable than their bigger counterparts. As a small business owner, the price you pay for recovering from a single data breach will be way higher than the price of a cyber insurance policy.
2. Regular property insurance doesn’t cover data loss
Data is one of your company’s most precious assets and is probably worth more than any of your physical assets such as computers, servers, and various equipment. If you’ve obtained commercial property insurance but haven’t insured your data assets, it’s time to reexamine your business’s insurance policies.
A cyber insurance policy provides coverage for costs associated with data recovery, whereas regular property insurance does not. Put another way, you can afford to lose a laptop or a printer, but you cannot afford to lose critical business data.
Moreover, when a company device is lost or stolen, you won’t just spend money to replace the lost or stolen device, but you also have to shoulder costs in case of data compromise. Cyber insurance covers costs associated with lost or stolen devices. It may be a lot of hassle to recover lost or hacked devices and data, but cyber insurance makes it less so.
3. Downtime events are not covered by regular business interruption insurance
Losses incurred due to downtime events — which may be caused by a ransomware attack, viruses, and other cybercrimes — are typically not covered by business interruption insurance. Cyber insurance can cover profit loss from a variety of system breakdowns and downtime events caused by a cyberattack or any technical interruptions.
4. Losing third-party data entails huge costs
If your company experiences a breach, you’re not just liable for your data but also third-party data, i.e., those belonging to business suppliers and partners and, more importantly, your clients’ data. There are financial and legal ramifications for losing customer data, and the damages go beyond financial losses; repairing your hard-earned reputation is also at stake. The good news is that cyber insurance provides both first-party and third-party coverage.
5. Losing credit card data is rampant
It’s widely known that credit card and other financial-related crimes are rampant in this day and age. Cyber insurance protects retailers and similar enterprises against credit card-related theft, including costs on card re-issuance, fraud investigation, and other necessary expenses. Retailers must be vigilant in light of a finding that retail merchants are prone to losing their data, with one out of four retailers admitting they’ve lost critical business data.
6. Breach notification efforts require time and money
There are many ways your data can be compromised: cybercriminals can hack into your servers, your network or website could suffer from a Distributed Denial of Service (DDoS) attack, and disgruntled employees can steal and leak client business information. Regardless of how your data gets breached, you will need to take immediate action to notify individuals that their data has been compromised. And depending on the nature of your business, you might have to follow guidelines provided by authorities such as the Federal Trade Commission. All of these activities cost time and money, but with a cyber insurance policy, you are at least covered for the costs.
7. A single breach incident could cost you your reputation
It’s possible to recover from a data breach, and doing so may not even take that long. That said, it is too costly and time-consuming to repair a tarnished brand’s reputation. Based on a study, 80% of consumers will defect from a business if their data is compromised in a breach. In the digital age, it’ll be hard to control the negative word of mouth and get back into customers’ good graces. In the event that you lose customers and experience a sales decline, cyber insurance can pay for the cost of lost sales. It also covers costs incurred from hiring a firm that can handle your company’s image and crisis management efforts.
It’s more crucial than ever to protect your business from various cyberthreats. HERO Managed Services LLC’s team can assess your company’s security risks and create a comprehensive technology roadmap that will secure your business’s valuable assets while ensuring you maximize your IT resources. Get a FREE IT consultation today!