Cyber liability insurance is designed to help protect small businesses from the financial consequences of a malicious data breach or software attack. A cyber liability policy covers a businesses expenses that result from cyber attacks such as customer notification, credit monitoring, legal fees, and fines.
Cyberattacks are on the rise and data breaches are expensive and extremely disruptive. Frequently, small businesses often have a weak cybersecurity firewall, making them an attractive and lucrative target.
Small business owners need to take cyberattacks seriously. An attach isn’t just a mere inconvenience, a data breach can put you out of business. In fact, according to Inc. Magazine, 60% of small businesses who suffer a cyberattack close shop within 6-months of the attack.
A cyber liability policy helps by providing coverage for your business to recover from the often severe financial losses caused by cyberattacks and data breaches. It can pay for credit monitoring, attorney’s fees, fines, and other costly expenses.
Hackers and online thugs typically target retailers, healthcare operations, and financial services providers because they handle credit card data, work in an e-commerce, or operate in a cloud-based cyber environment.
But any business who handles personal, credit card, or financial data on their clients or customers is a potential victim.
If you think cyberattacks are expensive, think again, they are very expensive. In fact, an IBM study puts the average cost of a data breach at $3.86 million. They also take a long time to resolve, with the same study concluding that it takes up to 280 days to identify and resolve a data breach. Sure, larger companies will cost more to resolve, but these attacks are all relative and regardless of the amount, it’s going to be expensive and time consuming for your business.
Cyber insurance coverage helps provide:
Cyber liability insurance is offered in two forms and each is designed to help provide coverage for different affected areas of your business. Below are a quick summary of the two types of cyber liability protection:
First-party coverage is for your business. I helps provide protection against the expenses that directly impact your business after an attack. It will also help to cover expenses when your network or database is hacked or your data is breached. Additionally, first party coverage can help pay for the costs of mandatory customer notification and credit monitoring services.
For smaller businesses with little exposure this type of coverage can sometimes be added by endorsement to a general liability insurance policy. However, for retailers and other professionals who collect customer credit card information it is highly recommended they purchase a dedicated standalone policy.
The following are some of the things the first-party cyber liability covers:
When you suffer a cyberattack, you are exposed to your customers suing you for their damages. Third-party coverage is designed to protect you from these forms of lawsuits. It provides liability coverage if a client blames you for failing to prevent a data breach or cyberattack. This could include the cost of legal defense and settlements.
If your business is cybersecurity, this form of cyber liability is highly recommended. It can help provide protection if the software or hardware your company recommends is determined to be responsible for a client’s data breach.
Below are some of the things third-party cyber liability insurance can cover:
If you’re an IT, software, or cybersecurity professional, third-party cyber liability insurance can sometimes be bundled with your errors and omissions policy sometimes referred to as a technology errors and omissions insurance, or tech E&O.
Cyber liability insurance can be an affordable insurance coverage for a small business. Like other forms of business insurance, it depends on the amount of coverage you purchase and your class of operation. Here are some of the factors that affect cyber liability premiums:
Verizon conducted an investigation in 2021 of data breaches, and their report discovered that 28% of data breaches involved small businesses. How are those breaches happening? According to the report, the primary causes were:
Here is some food for thought. With nearly a third of data breaches in 2020 involved small businesses, only about half of small businesses have any form of cybersecurity defense plan. Despite cyberattacks being on the rise, only 16% of small businesses think they are at risk.
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