Does My Business Need Cyber Insurance?

Cybercrime: A Trillion-Dollar Problem

Cybercrime is a type of criminal activity that didn’t exist 30 years ago. If you were running your small business back then, you wouldn’t have been worried about hacking, data breaches, phishing, malware, or spyware.

Today, cybercrime is a global concern for businesses of all sizes in virtually every industry. This relatively new but very costly category of crime is already a multi-trillion-dollar problem worldwide. Because of their stealthy nature, it’s difficult to know precisely how many cyberattacks happen each year, but it’s safe to assume the number is in the millions.

Devastating Financial Effects

Thankfully, most cyberattacks are unsuccessful, but the successful ones cause outsized damage. Consider that the average cost of a data breach in the United States in 2023 was $9.48 million per breach. And money isn’t the only cost. A single hacking incident can severely damage your company’s reputation and hinder customer trust. On average, a serious data breach takes 197 days to find and repair. If you were to suffer such an attack and found yourself unprepared, the cost to productivity could be devastating to your bottom line.

Small Business Is Targeted

Modern cybercrime is of particular concern to small businesspeople. A cybercrime investigative report produced in 2023 by the information technology firm Verizon Communications, Inc. suggests that cybercriminals target small businesses because they believe smaller companies are less prepared and have fewer defenses than their larger counterparts. It’s estimated that 43% of cyberattacks target small businesses.

Are You Prepared?

Unfortunately, the criminals who are targeting you may have a point. Small businesses need to take cybercrime more seriously. Most small companies rely on inexpensive, off-the-shelf, consumer-grade cybersecurity software. Despite the risks, less than a quarter of small businesses carry a stand-alone cyber insurance policy. For a problem of this magnitude, this is inadequate.

Are you prepared for the very real possibility of a cyberattack? Are your clients safe when they do business with you? Is your company and your livelihood protected? If you can’t confidently answer “yes” to these questions, you need to take immediate steps to address any shortfalls in cybersecurity, including considering cyber insurance.

What Is Cyber Insurance?

Cyber insurance — also called cybersecurity insurance or cyber risk insurance — is specialty insurance coverage that protects businesses and/or individuals against liability and financial losses that might occur in the event of a covered cyber incident or cybercrime. Such incidents can include data theft due to hacking, ransomware blackmail attacks, losses due to malicious computer viruses like spyware or malware, and, depending on the policy you choose and coverages you opt for, network outages caused by digital vandalism.

What Does Cyber Insurance Cover?

Your specific coverage will depend on the policy you purchase and the coverage options you choose. But here are some items that a comprehensive cyber insurance policy might cover:

Cybercrime Response Costs: Expenses related to investigating and responding to a cybersecurity breach. Response costs can include the cost to find and fix problems, costs to notify parties affected, public relations costs, and additional security or monitoring.
Legal and Regulatory Costs: Legal fees, settlement costs, and fines and penalties that might result from lawsuits and government or regulatory actions.
Business Interruption Costs: Lost revenue and unforeseen expenses incurred while dealing with a temporary shutdown due to a cyber incident.
Cyber-Extortion Costs: Ransomware payments and/or costs related to cyber-extortion threats.
Third-Party Liability: The cost of damage or liability claims made by third parties, such as customers, partners or members of the public who were harmed by a cyberattack.