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How Cyber Liability Insurance Protects Your Small Business

Do you head a company that handles customer or client data?

You may already have general liability insurance, but what would happen if your business suffered a data breach? Have you considered cyber liability insurance?

In a recent cybersecurity article, Entrepreneur suggests that by 2025, cybercrime could total $10.5 trillion per year! Cited reports show that it’s the small and medium companies that face a larger-risk. This is especially the case during the pandemic, and a single attack could cost more than $2.5 million!

If you want to protect your business from the high costs of cybercrime, you need cyber insurance. We’re going to explain what it is, why you need it, and what it covers. Read on!

What Is Cyber Insurance?

Businesses of all sizes and industries are vulnerable to cyber-attacks. Therefore adequate cyber protection is a must.

Coronavirus offers digital criminals an opportunity. By exploiting fear, they can expose weaknesses in a business’ cyber defense. Cyber insurance is now essential coverage for any company that wants to safeguard its financial future.

However, there are a lot of misunderstandings surrounding what it is and what is covered by cyber insurance.

General liability insurance rarely covers cyber attacks. This type of policy focuses on normal operational claims. Likewise, business liability insurance usually covers bodily injury and medical payments.

Cyber insurance steps in to protect one of the biggest areas of risk that companies face.

Data privacy (which could also expose clients to risk) should be one of a companies’ major concerns. Overall, security matters that result in a hack highlight the urgent need for cyber insurance.

Why Do I Need Cyber Insurance?

In particular, small businesses are an attractive target for cyber thieves. This is because they often have underdeveloped security policies.

Businesses involved with confidential data have an even higher need for online cyber protection. This includes, but is not limited to the storing of customer or client financial information.

For this reason, commercial businesses are at a particularly elevated risk. This is because they handle valuable data that is susceptible to fraudulent use or black market sale.

Remember that it’s not only financial information that has value on the dark web. Social security numbers and sensitive client data can be used for fraud, so they may also be stolen and sold.

Consider that if a data incident does occur or your systems grind to a halt, productivity may cease entirely. The daily costs of zero profit can put a company out of business quickly.

You must examine the terms and conditions of your current insurance policies and ensure that it covers you for any changes you make to the way you work. Taking on an increased risk during the pandemic is unwise if these changes fall outside your existing policy scope.

What Does Cyber Insurance Cover?

Cyber liability insurance protects a company from the enormous financial risk of cyber attacks. This is especially important when the attack results in data being compromised.

Indirect costs associated with the aftermath of an attack are also often covered, which can be significant.

Clients and customers will need to be contacted and, most times, provided with a service to monitor their credit. Legal costs are also likely to arise from a notification failure, and it may impose large fines. Clients and customers may also need help restoring their credit, which is usually covered by a cyber policy.

These are just some high unforeseen costs that may arise in the event of a cyber attack.

Cyber online insurance will often cover the costs of identifying weaknesses in cyber defenses. It may also pay for strengthening your system. If your business’ brand is hurt by the attack, this type of insurance can also step in to fund the rebuilding of your reputation.

Cyber liability insurance may also help with IT system repair bills and the costs of recovering stolen data.

While first-party coverage protects your business directly, third-party coverage will also protect your legal liability towards clients or customers. Additionally, “Errors and Omissions” (E&O) covers a business that cannot fulfill its contract with a client or customer.

When Should I Get Cyber Insurance?

Before you apply for online protection insurance, you’ll want to ensure you are already doing everything you can to limit your risk exposure. The FBI provides excellent advice on what you should know about protecting yourself from common cybercrimes.

Having a backup system that operates in two places (one offsite and another in the cloud) will greatly reduce your data loss chances. This will also prevent your business from being extorted by captive data in a ransomware attack.

Due to the high number of remote employees, the coronavirus has brought about some recent changes and challenges. Companies that had previously kept all their employees behind strict cyber defense protocols now have to adapt.

Transferring data on non-secure home Wi-Fi networks with home computers is inherent with danger.

While adapting to new or informal communication methods, the risk of social engineering has increased. In this kind of attack, criminals research a company and target individual employees. By pretending to be someone within the company (or a client), they can exploit a bond of trust and bypass defenses.

In all the confusion of setting up new workflows under pressure, cybercriminals have taken advantage and got the upper hand. In all these cases above, cyber insurance can prove invaluable to a business’ survival during an already tough climate.

Cyber Liability Insurance

We’ve shown that cyber liability insurance is essential coverage that can reduce your cyber risk exposure. Don’t let one data breach destroy the financial health of your company.

If you’re a business owner looking for commercial insurance, we can help. We are an insurance agency based in New Jersey, and we provide cyber liability coverage. We’ve served the needs of businesses since 1955, and we are licensed in nearly 40 states.

Contact us today to request a quote.