Did you know that 60% of small businesses that go through a cyber attack are out of business within six months?
It is not at all surprising, considering that the financial fallout from a single data breach is in the hundreds of thousands of dollars. NetDiligence reported that incident cost in 2017 was $394 on average. What else will make the cost go up?
- most breaches can go undetected for weeks or even months increasing the volume of affected records
- the cost of lost reputation and loss of customer trust can bring your business to a screeching halt
What type of small businesses need cyber insurance coverage?
What most people don’t realize is that 90% of attacks target small businesses. Giants like Verizon and Apple anticipate the attacks and try to protect their sensitive data. Of course, even these massive companies are not immune. For example, the notorious Equifax’s 2017 data breach scandal where personal data of 143 million of Americans have been compromised.
Whether you are a tech startup or a service organization, if you store any personally identifiable information (PII) or provide any IT services your business is at risk.
Does your business –
- Collect customer information?
- Collect payment information?
- Collect healthcare information?
If any of the above applies to you than you are at a high risk to be affected by one of the hundreds of breaches that happen every year according to ITRC 1,579 data breaches occurred in 2017 alone.
Let’s look at one of the tools that can very well keep your business afloat in a case of a breach – cyber insurance.
The cyber insurance market has grown from 1 billion to 2.5 billion in the last two years alone and is predicted to grow exponentially as more and more businesses realize that they need this coverage.
What coverages are typically included?
Cyber liability coverage can be divided into two main sections –
Third-party coverage – is designed to protect the people allegedly responsible for allowing the data loss breach. For example, the IT consultant that recommended the antivirus software, or the app developer that didn’t encrypt the sensitive data. The coverage will pay for lawsuits when your business is allegedly responsible for a data breach. It may include judgments awarded to your customers, settlements, lawyer fees and court orders.
First party coverage – deals with the financial fallout of that cyber security breach to your business and helps pay for business interruption expenses. This may cover hiring a PR firm to deal with the bad press, notifying the customers of the breach, payouts to cyber extortionists, loss of income while getting back to your feet, regulatory costs and credit monitoring services to your customers.
Is cyber endorsement enough for my business?
A cyber endorsement is a popular choice for small business owners. It is cost effective and can be easily added to your existing policy with little or no additional underwriting.
However (and that’s a big one) it lacks in coverage, big time. A few critical coverages are typically excluded under these endorsements. The most concerning difference is limit of liability. Most endorsements have an aggregate limit of $50,000 with smaller sub-limits (forensic investigation, business income, etc.). Since the average cost of an incident is $394,000, that limit evaporates quickly leaving you to deal with the rest. A full cyber liability policy typically starts with a $500,000 limit and additional limits can be purchased.
Other differences include the endorsement’s lack of coverage for extortion, communications and media liability and more.
A few coverage specifics to pay attention to
Cyber insurance will not cover costs associated with physical damage and bodily injury, infringement of intellectual property, or intentional wrongdoing by the policyholder.
So, now what?
You might believe that you do not have the funds to purchase a cyber Insurance policy nor invest into countermeasures to protect your data. But do you have $394,000+ to spend on recovering your assets while attempting to operate business as usual?
Cyber liability can be the lifeline you need if the breach happens. Protect yourself, your customers and your livelihood. Cyberdot offers cyber insurance for your small business.
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