Cyberattacks are on the rise across the United States, and small businesses aren’t immune to this problem. In fact, small businesses are often more vulnerable to hackers since they lack the resources larger companies have to deal with these threats. Fortunately, cyber insurance can protect your company from the fallout of a cyberattack.
[Read more: Does Your Business Need Cyber Insurance?]
Why do businesses need cyber insurance?
Businesses of all sizes need cyber insurance as the risk of cyberattacks against organizations and individuals continues to grow. Cyberattacks on large corporations like Target and Home Depot tend to attract the most media attention, but small businesses are often victims of cyber attacks as well.
According to Nationwide, 25% of small businesses have been targeted by an AI-driven scam in the past year. Many small business owners underestimate how much a cyberattack will cost and the recovery time needed.
The Nationwide study found that most business owners believe a cyberattack will cost them under $5,000, while the average cyber insurance claim ranges between $18,000 and $21,000. And 22% of business owners believe they’ll be up and running within 30 days, but the reality is that it can take businesses up to 75 days to recover.
How does cyber insurance work?
Cyber insurance provides financial protection to businesses affected by a cyberattack. An insurance company will work with you to find a policy that meets your business’s needs based on its size, industry, and level of risk. Once you’ve found the right policy, you’ll pay either a monthly or an annual premium.
Hopefully, you’ll never have to use your cyber insurance. But if your business is the victim of a cyberattack, you’ll file a claim with your insurer and detail the incident, any damages, and the costs incurred. Your insurance company will investigate the claim and determine what your business is eligible to be reimbursed for.
[Read more: How to Choose Cyber Insurance]
Customers can sue your business if their personal information is exposed during a cyberattack. Cyber insurance can cover the resulting legal fees and any regulatory fines imposed.
What risks are covered by cyber insurance?
The exact coverage details will vary depending on your insurer and the type of business you run. It’s important to read your policy details so you understand what is and isn’t covered. But here are some risks covered by many cyber insurance policies:
- Data breaches: If your company is the victim of a data breach, cyber insurance may cover the cost of notifying customers about the breach, managing the damage to your company’s reputation, and providing credit monitoring services to all affected customers.
- Data recovery: A cyber policy may help you recover any data that was compromised during the breach.
- Ransomware: In a ransomware attack, hackers will prevent users from accessing their files and systems unless a payment is made. Cyber insurance may cover the cost of meeting ransomware demands.
- Business interruption: Your company may be out of commission for several months following a cyberattack. Cyber insurance may cover the loss of income and additional expenses incurred during this time.
- Legal costs: Customers can sue your business if their personal information is exposed during a cyberattack. Cyber insurance can cover the resulting legal fees and any regulatory fines imposed.
- System repair: Cyber insurance may also cover the costs involved in repairing your computer systems after the attack.
What isn’t covered by cyber insurance?
Cyber insurance is fairly comprehensive, but it doesn’t cover everything. For instance, your insurer may not cover your claim if your company fails to take proper measures to prevent the breach from occurring in the first place. And it’s unlikely to cover intentional cyberattacks carried out by one of your employees.
Additionally, while cyber insurance may reimburse you for your company’s immediate loss of income due to the attack, it won’t cover a potential loss of future profits. Businesses can take years to fully recover from cyberattacks, but these losses aren’t directly tied to the breach.
Businesses should continue to strengthen their cybersecurity measures to safeguard against an attack. It’s also a good idea to do regular risk assessments to detect any new vulnerabilities. Purchasing supplemental insurance riders can help bridge any gaps in your coverage.
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