Cybersecurity Insurance: What is it & Does my Business need it?

As a small business owner, you are exposed to many forms of insurance. From property insurance to workers’ compensation insurance, there’s no shortage of ways you can protect your business from accidents and damage to your property and assets. 

However, you may still be left exposed to serious financial loss if you are not protecting the Internet side of your business from cyber risks. 

With the constant threat of cybercriminals, a single data breach can cost you tens of thousands of dollars (if not more). This is why it is so important to look further into what is known as business cyber insurance. 

It’s a new term, but with your growing reliance on the Internet, it is essential to properly educate yourself on business cyber insurance and how it can protect you and your business.

WHAT EXACTLY IS BUSINESS CYBER LIABILITY INSURANCE?

As with most other forms of insurance, cyber insurance is designed to help you with costs associated with damage and financial loss your business experiences. This particular kind of business insurance is specifically geared toward assisting with covering the loss of information connected to Internet-related issues and cyber risk.

For example, if your business has lost sensitive information due to any kind of data breach, ransomware, malware, or any other kind of cyber incident, your business can be covered with cyber insurance. It may even cover the theft of a computer system and the information stored on this computer.

Ransomware has been in the news a lot over the last several years. Everything from banks to oil pipelines has been hit by ransomware thieves. These thieves often request tens of millions of dollars from businesses. 

As a small business owner, you likely will not be hit with this kind of demand, as those conducting the ransomware know your business likely isn’t able to transfer this kind of money right away. 

Instead, they will choose a monetary amount they know you have access to and yet will still cause significant financial problems for your business (if not bankruptcy). Instead of worrying about ransomware attacks, business cyber insurance can help cover you in the event of financial loss associated with these attacks.

Business cyber insurance can also cover you in the event of other problems associated with data breaches. If your network has been breached, you might lose client information, including credit cards, passwords, and Social Security numbers. 

Losing this information isn’t just damaging to you; it is detrimental to your clients. In turn, clients might attempt to sue your business, and cyber business insurance can help cover legal costs in such a cyber incident.

IS CYBER INSURANCE COVERAGE NECESSARY?

Not all businesses need cyber insurance. However, if you’re reading this, there’s a good chance your business does fall under the category of needing this coverage.

For starters, you are exposed to cyber risk if your business stores customer data. To determine this, ask yourself these questions. 

Do you collect payment and bank account information? 

Do you store credit card data? 

Perhaps you have Social Security numbers stored or other sensitive information. If you keep and store sensitive customer information, you need to consider cyber liability insurance.

Cyber risk insurance cover isn’t just for customers who store sensitive information, though. You also need to consider the added protection if you accept payments via credit and debit cards. 

This can be done in person, through your website, or with a mobile device. If you accept any kind of digital payment, the client’s financial information will be recorded. This information can be stolen via a network hack or phishing scam. 

Again, losing customer financial records puts your customers in harm’s way (and you need to tell them about the data breach so they know to take action and monitor their cards/cancel them when needed). 

In the event of such a data breach, there is always the possibility of legal action, and a standalone business cyber insurance policy helps with this.

MANAGED SERVICE PROVIDER STANDARDS FOR CYBERSECURITY INSURANCE

A comprehensive cybersecurity insurance plan is a wise investment. Even though you may have an apparent level of technical protection, hackers can still penetrate your virtual walls. These hackers are very skilled at what they do, and a cybersecurity insurance plan can help you at least recover some of your losses and damages if the unthinkable happens.

When choosing a managed service provider (MSP) to support your cybersecurity insurance, you must be very selective. Your MSP can assist you with most of the information required to complete the many application forms for your cyber insurance policy cover. 

It is an excellent idea to inquire if a Managed Service Provider has the resources to help you find a trustworthy cybersecurity agent. You will find the right agent through their network of contacts. 

If you prefer, you can find an agent by yourself, but be cautious of scammers like fly-by-night firms that suddenly become unreachable when it is time to file a claim.

FIRST AND THIRD-PARTY INSURANCE COVERAGE

A cyber insurance policy is generally broken down into two categories: first and third-party insurance.

First-party coverage will typically cover the cost of obtaining credit monitoring services, the loss of income from a data breach, and replacing equipment damaged during a cyber attack. 

It might even be used to pay extortionists attempting to hold your network or data hostage (such as a ransomware attack). Even the costs attributed to marketing and public relationship campaigns following a data breach can be covered by first-party coverage.

On the flip side, third-party coverage can be used to help pay legal costs if there is a court judgment against you due to the loss of user data, in addition to settlement and attorney fees. 

Basically, if there are costs associated with legal fees and fines from a regulatory board or government agencies, third-party coverage will be used for this.

CAN YOUR BUSINESS BE DENIED CYBER INSURANCE? 

It is possible to be denied even if a business has been prequalified for cyber insurance. Even if you have had a cyber insurance policy before, it can still happen to you, and there are several reasons why this could happen.

POOR PLANS FOR BUSINESSES CONTINUITY AND DISASTER RECOVERY

Cyber insurance providers are looking for a return on their investment. And a cybersecurity insurance provider may decline your application if they believe your business can’t recover from a catastrophe. 

Disaster recovery doesn’t just mean having backups; it means you have a documented and tested recovery plan to survive and thrive after a cyber event.

POOR ACCOUNT SECURITY – MULTI-FACTOR AUTHENTICATION

Cyber insurance policies are often denied to businesses because of a lack of multi-factor authentication. Before they issue a policy, many providers place emphasis on account security.

And you shouldn’t be taking an unnecessary cyber risk by not having proper account security and data access restrictions in place. 

LOW CYBERSECURITY AWARENESS

For maintaining cybersecurity, it is vital to train employees on all the possible risks. Employee involvement is one of many weaker parts of business security, as different social hacking methods have become the most common form of cyberattacks.  

It is essential to train your employees, and this needs to be regularly updated as cyberattacks evolve daily.

INADEQUATE ENDPOINT SECURITY

Anti-virus software is not enough for many cybersecurity liability insurance policies. And that is often a major hurdle for small businesses as they believe that simply having the latest anti-virus service packs provides enough protection against attacks. 

Many insurance companies require their policyholders to have endpoint detection and response tools in place. These combine a variety of security measures to detect and prevent attacks. 

Even if you are not eligible for cyber insurance policies, an MSSP (Managed Security Service Provider) can help you achieve higher levels of protection. It’s a scary prospect to be denied cyber insurance. And it can make it even more difficult for a business to obtain a policy. 

But if you take a proactive approach to hiring an MSSP to create a robust security system, then you should be in a position to obtain a policy and even reduce your cyber insurance cost. 

CHOOSE THE RIGHT SERVICE PROVIDER TO DEAL WITH CYBER RISKS

Cybersecurity insurance protects your company against financial losses caused by cyber-attacks. This plan might include financial loss coverage due to data breaches, data thefts, ransomware, ransomware extortion payments, system and network takeovers, and equipment failure. 

If you keep sensitive data on a local server at your office, this coverage is even more critical. Hackers regularly attack these systems, making them easy targets, and you should look into cyber insurance cover to protect you from potential losses.

Let’s discuss how cyber insurance, security, and protection can assist your business’ growth and success over the next year. 

As one of the leading managed IT service providers in the Carolinas, we can work with you to ensure you have all the necessary systems in place to make you eligible for cybersecurity insurance coverage.

Call us today for a free consultation on what we can offer for your specific business needs.