Why Your Small Business Needs Cyber Liability Insurance
Learn why your small business needs Cyber Liability Insurance and what is covered in your cyber insurance policy.
It’s becoming more common to hear stories on the news about large corporations getting hacked or class action lawsuits because of data breaches. As a small business owner, it’s understandable to hope you don’t have to worry about that. Regrettably, that isn’t the case. In fact, 73% of small businesses reported some type of cyber attack in 2023. The truth is, you need to be prepared for the worst-case scenario. That’s where cyber liability insurance comes in.
Cyber Liability Insurance Definition
The definition of cyber liability insurance is a policy that helps cover your business’ liability in the instance of a data breach of sensitive customer information like social security numbers, payment information, and health records. You may also hear it called cyber risk insurance or cyber security insurance.
Who Needs Cyber Insurance
As a small business owner, it’s easy to tell yourself that only large companies that do national or even global business are at risk for data breaches and cyber-attacks. However, around 90% of cyber attacks occur on small businesses, not large corporations. There are several reasons for that, but it’s often because larger businesses have more resources at their disposal to mitigate risks. Unfortunately, cyber-attacks are no longer something that you hear about but never experience. Realistically, it’s a matter of when, not if, a cyber attack could happen to you. There are resources to help strengthen your small business against attacks, but it is equally important to protect yourself in case it happens.
How Much Does Cyber Insurance Cost?
Cyber Insurance policies tend to be relatively low-cost, but that depends on several factors, including your business size and industry, type and amount of data, annual revenue, security measures, and policy terms. A larger business with many employees in a tech or banking industry that makes six figures a year will have a higher premium than a small business with one or two employees that makes less than $100,000 annually. In 2019, the average cost for cyber insurance was $1,500 annually for a million-dollar policy with a $10,000 deductible.
Cyber Risk Insurance Coverage
You understand why cyber risk insurance is important and how much it could cost, so let’s dive into coverage. A cyber policy directly covers digital accidents, cyber attacks, and data breaches, unlike general liability which only covers things like theft, negligence, and property damage. Cyber liability covers legal expenses related to cyber attacks in addition to costs associated with notifying customers of a breach, restoring impacted identities, recovering compromised data, and repairing vulnerable computer systems.
Types of Cyber Insurance
There are two types of cyber risk insurance: first-party and third-party. First-party policies protect your company if you deal with electronic data or sensitive information. Third-party cyber insurance is geared toward businesses that offer professional services to other businesses that deal with data or information often targeted in cyber attacks. Think of first-party coverage as general liability for cyber assets and third party as professional liability.
As your local insurance expert, I will help you evaluate your risks and pick the right cyber liability policy so your business is covered from all sides. Reach out to me today to get a comprehensive quote for your Cyber Insurance needs.
Have additional questions? Call us at 503-912-8839 or email me at mspivey@orrandassociates.com