In 2024, cyber threats are no longer just a big-business problem. In fact, large corporations with deep pockets are not the primary target for most cybercriminals. Less well-defended small and medium-sized businesses are increasingly at risk, with the average cost of a data breach now totaling over $4 million (IBM). For many smaller businesses, an incident like this could be devastating. This is where cyber insurance comes in. Not only does it help cover the financial fallout of a cyber-attack, but it's also a safeguard to help your business recover quickly and keep moving forward in the event of an attack.
Let's break down what
cyber insurance is, whether you need it, and what requirements you'll need to
meet to get a policy.
What Is Cyber Insurance?
Cyber insurance is a
policy that helps cover the costs related to a cyber incident, such as a data
breach or ransomware attack. For small businesses, this can be an essential
safety net. If a breach happens, cyber insurance can help cover:
●Notification Costs: Informing your
customers about a data breach.
●Data Recovery: Paying for IT
support to recover lost or compromised data, such as restoring computer
systems.
●Legal Fees: Handling potential
lawsuits or compliance fines if you're sued because of an attack.
●Business Interruption: Replacing
lost income if your business shuts down temporarily.
●Reputation Management: Assisting
with PR and customer outreach after an attack.
●Credit Monitoring Services:
Assisting customers impacted by the breach.
●Ransom Payments: Depending on your
policy, cyber insurance will cover payouts in some cases of ransomware or cyber
extortion.
These policies are
typically divided into first-party and third-party coverage.
●First-party coverage addresses
losses to your company directly, such as system repair, recovery, and incident
response costs.
●Third-party coverage covers claims
made against your business by partners, customers, or even vendors who are
affected by the cyber incident.
Think of cyber
insurance as your backup plan for when cyber risks turn into real-world
problems.
Do You Really Need Cyber Insurance?
Is cyber insurance
legally required? No. But, given the rising costs of cyber incidents, it's
becoming an essential safeguard for businesses of all sizes. Let's look at a
couple of specific risks small businesses face:
●Phishing Scams: Phishing is a common attack targeting employees, tricking them into
revealing passwords or other sensitive data. You would be shocked at how often
we do phishing tests in organizations and multiple people fail. Your employees
cannot keep your business safe if they don't know how.
●Ransomware: Hackers lock your files and demand a ransom to release them. For a
small business, paying the ransom or dealing with the fallout can be
financially devastating. Not to mention, in most cases, once the payment is
received, the data is deleted anyway.
●Regulatory Fines: If you handle customer data and don't secure it properly, you could
face fines or legal actions from regulators, especially in sectors like health care
and finance.
While having strong cybersecurity
practices is critical, cyber insurance acts as a financial safety net if those
measures fall short.
The Requirements For Cyber Insurance
Now that you know why
cyber insurance is a smart move, let's talk about what's required to qualify.
Insurers want to make sure you're taking cybersecurity seriously before they
issue a policy, so they'll likely ask about these key areas:
Security
Baseline Requirements
Insurers will check that you have
basic security measures like firewalls, antivirus software, and multifactor
authentication (MFA) in place. These are foundational tools to reduce the
likelihood of an attack and show that your business is actively working to
protect its data. Without them, insurers may refuse coverage or deny claims.
Employee Cybersecurity
Training
Believe it or not, employee errors
are a major cause of cyber incidents. Insurers know this and often require
proof of cybersecurity training. Teaching employees how to recognize phishing e-mails,
create strong passwords and follow best practices goes a long way toward
minimizing risk.
Incident Response And
Data Recovery Plan
Insurers love to see that you have
a plan for handling cyber incidents if they occur. An incident response plan
includes steps for containing the breach, notifying customers and restoring
operations quickly. This preparedness not only helps you recover faster but
also signals to insurers that you're serious about managing risks.
Routine Security Audits
Regularly auditing your
cybersecurity defenses and conducting vulnerability assessments help ensure
your systems stay secure. Insurers may require that you perform these
assessments at least annually to catch potential weaknesses before they become
big problems.
Identify Access
Management (IAM) Tools
Insurers will want to know that
you're monitoring who is accessing your data. IAM tools provide real-time
monitoring and role-based access controls to make sure that only select people
have access to the data they specifically need when they need it. They'll also
check that you have strict authentication processes like MFA to enforce this.
Documented Cybersecurity
Policies
Insurers will want to see that you
have formalized policies around data protection, password management, and access
control. These policies set clear guidelines for employees and create a culture
of security within your business.
This is only the tip
of the iceberg. They'll also consider if you have data backups, enforce data
classification and more.
Conclusion: Protect Your
Business With Confidence
As a responsible
business owner, the question to ask yourself isn't if your business will face cyber threats - it's when. Cyber insurance is a critical tool that can help you
protect your business financially when those threats become real. Whether
you're renewing an existing policy or applying for the first time, meeting
these requirements will help you qualify for the right coverage.
If you have questions
or want to make sure you're fully prepared for cyber insurance, reach out to
our team for a FREE Security Risk
Assessment. We'll evaluate your current cybersecurity setup, identify any
gaps, and help you get everything in place to protect your business. Contact us today!
We also offer a free Cyber Insurance Readiness Checklist. Click the link here to download!
