Cyber liability insurance likely isn’t among even the top ten things that most small business owners think about when launching their business. But, it is an important piece of protection! In this article we explore why you need cyber liability insurance and the types of coverage available.
Why do small businesses need cyber liability insurance?
Cybercrime is a growing business and increasingly common. And dealing with a data breach or software attack is an expensive proposition! However, many small businesses lack cybersecurity protections and protocols, which makes them an enticing and easy target for cybercriminals.
A data breach isn’t just an annoyance – it can literally wipe out your business! In fact, industry experts estimate that 60% of small businesses close within six months of a cyberattack. WOW, right???
Cyber liability insurance coverage helps your business recover from financial losses and reputational damage caused by cyberattacks and data breaches. It pays for things like credit monitoring, attorney’s fees, fines, and other costly expenses.
Do you collect sensitive information?
If you collect information in one or more of these categories, then you should seriously consider a cyber liability policy:
- customer names, email addresses, phone numbers, mailing addresses;
- Social security or driver’s license numbers;
- Medical information; or
- Credit card or bank account information.
What kind of cyber liability insurance do you need?
There are two types of cyber liability coverage:
First-party coverage pays for the costs that directly impact your business. Sometimes this coverage can be added to your general liability insurance. As always, check with your insurance agent. And this coverage is recommended for any business that collects credit card information. If you are storing credit card information, it’s essential!
First party coverage pays for:
- Notifying your customers/clients/patients of the data breach. In fact, failure to provide legally required notification may result in expensive fines and penalties.
- Hiring an expert to investigate the breach, repair any security holes in your system, and assist you with regulatory compliance.
- Providing credit monitoring services to your affected customers/clients/patients.
- Hiring a public relations firm to manage damage to your business reputation.
- Business interruption expenses, including hiring additional staff, purchasing services, and lost revenue from missed or canceled business opportunities.
- Cyber extortion or ransom payments.
Third-party coverage is for claims and lawsuits made against your business by affected customers/clients/patients. While this coverage only comes into play if the affected party is blaming your business for the security breach, it sure is nice to have in that event!
Third-party coverage pays for:
- Attorneys’ fees to defend you against legal claims.
- Court costs and other costs of defense.
- Settlements to resolve claims.
- Judgments against you as a result of the data breach.
Cyber liability insurance can be purchased as a stand-alone policy or bundled with your errors and omissions or malpractice policies.
Don’t become a cyber liability statistic!
Protecting your business against cyber criminals is a multi-step process. In addition, it requires continuous monitoring and vigilance. Start with the PROTECT Protocol™. And then add cyber liability insurance. If everything else fails to stop cyber criminals from targeting your business, you’ll have the coverage necessary to respond to a security breach. Most importantly, this coverage will likely save your business from being a regrettable statistic – one of the 60% that close after a security breach!
If you are a small business owner in Pennsylvania or Maryland and would like to be able to discuss data breach and many other small business concerns with a small business attorney for a flat monthly rate, check out our Business Counsel Membership.
