Do Small Businesses Need Cyber Insurance?
March 29, 2023
Courtesy of RiskAssure
No matter the size of your business, cybersecurity events are inevitable. It’s no longer a matter of if something will happen, but when.
Moreover, what was once largely a fear for enterprise-level corporations is now a growing concern for small and medium-sized businesses (SMBs). With the attack surface increasing daily, and bad actors continually inventing new tactics, protecting your small business from cyber threats is a top priority in 2023 and beyond.
Understanding the limits of your current insurance policy
Even if your business has a great insurance policy, chances are, you aren’t covered. Many company leaders don’t realize that general insurance policies don’t always cover cybersecurity events such as cyber attacks and data leaks. General Liability Policies typically only cover bodily injuries and property damage resulting from products, services, or operations. When cyber insurance is included in general business insurance policies it contains many fine-print contingencies and is no replacement for cyber insurance that is tailored to a company’s complex needs (these add-ons generally amount to little more than business interruption insurance). This is why it’s critical for business owners to seek cyber insurance policies, which exist separately to help cover the business in the wake of a related incident.
Yes, small businesses need cyber insurance too
All businesses carry some amount of cyber risk due to the volume of sensitive information they need in order to operate, and should therefore have a cyber insurance policy in place. Some businesses are at a greater risk than others, including those in the healthcare, government, and financial sectors. That’s because these entities often carry a higher volume of personally identifiable information (PII) and personal health information (PHI), which makes them elevated targets for bad actors.
According to Nationwide Insurance, 55% of small businesses have experienced a data breach and that 53% have had multiple breaches. What’s worse, Forbes notes that 83% of small and medium-sized businesses are not financially prepared to recover from a cyber attack. This is due to the myriad of costs associated with an attack including, but not limited to, data restoration, legal liability, and customer trust. While cyber insurance policies can be expensive, not having one in place can end up costing you more in the long run. To help manage the cost of your cyber insurance policy, tools like RiskAware measure the financial value of your sensitive information, which makes it easier for you to set realistic expectations around what you might need to pay a provider. Other factors that can affect your policy rates include the size of your business, total annual revenue, aligning IT policies and procedures with current industry best practices, and your exposure to risk. In order to make sure you’re fully protected with the right size coverage, it’s imperative to use tools that don’t just focus on your cyber risk, but also your cyber-risk monetary value.
There’s no perfect solution to defending your business against a cyber attack, it takes a small army of resources and protocols to provide the highest level of protection. Start by implementing cybersecurity best practices across the entire business (if you haven’t already), provide employee awareness training, and understand the total value of your cyber information so that you can obtain an affordable cyber insurance policy.