In many ways, the internet has made it easier than ever for businesses to grow and reach new customers. But with those advantages do come certain drawbacks and risks. For instance, businesses are now much more likely to become victims of a cyber breach. In fact, 80 percent of businesses have already been victims of a cyber breach but are unaware of it.
Damages from cyber crime are expected to hit $6 trillion by 2021. Yet, many brick-and-mortar businesses don’t think they need cyber insurance. And only two percent of small businesses view a cyber attack as a critical issue they face. The truth is, any business that stores customer information, processes payments, or uses the cloud should consider cyber insurance.
Why is Cyber Insurance Necessary?
One of the worst decisions a business owner can make is to ignore potential business risks, hoping it will never happen to them. Here are four reasons why all businesses need cyber insurance:
1. Small businesses are at risk for cyber attacks
Many small business owners make the mistake of assuming that only large corporations like Target or Wal-Mart are at risk for a cyber attack. The truth is, many hackers will target small businesses over big companies.
Many large companies have entire risk management teams whose only job is to analyze potential risks the company could face. Small businesses often don’t have the resources to put in the same kind of quality cyber security protection.
According to the 2016 State of SMB Cybersecurity Report, 50 percent of all small businesses were breached by hackers in 2016. And 60 percent of smaller companies will go out of business within six months of a cyber attack. Yet, these facts are not usually well publicized because it seems more newsworthy when target is the victim of a cyber breach.
2. You store sensitive customer data
If your company stores sensitive customer data then you should seriously look into getting cyber insurance. Why? Because having that information makes you a target for data breaches. And legally, your company is responsible for protecting that data.
“Sensitive customer data” can refer to a variety of things. It does refer to payment information but also includes customer names, phone numbers, and email addresses.
And generally speaking, you aren’t off the hook if you use a third party to host the data. If it is your customer data then you will likely be found liable if that information gets out.
3. Your general liability policy probably won’t cover a cyber attack
General liability is meant to cover third-party lawsuits over bodily injuries, property damage, or libel. Many people assume that the term “property” includes customer data and other digital property. However, most general liability policies will only cover physical property, thus excluding cyber breaches.
Of course, every policy is different so you should research the specifics of your current insurance policies. But typically, a general liability policy will exclude most losses due to cybersecurity and the Internet.
4. It can reimburse many costs associated with a breach
Many businesses don’t understand how financially devastating the fallout from a cyber breach can be. In the event of a cyber attack, you will need immediate funds to identify the source of the leak, lessen the damage, and notify your customers.
You will also need help covering any expenses associated with a lawsuit and damages resulting from that lawsuit.
Ultimately, there is no insurance policy that can eliminate the possibility of a cyber breach. It is up to you to put in place the security measures that will keep your data safe and reduce your chances of a cyber breach. But even the best security measures can fail so it is good to have insurance to help minimize the potential fallout.
Of course, every cyber insurance policy is different and some may not be right for your specific insurance needs. You should work with an insurance broker to make sure you give yourself coverage in as many different scenarios as possible.
Make sure you find a broker who understands your industry and the specific risks you face. They can check your existing coverage and help you fill in any gaps in coverage.