8 Reasons Why Every Business Needs a Cyber Insurance Policy

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8 Reasons Why Every Business Needs a Cyber Insurance Policy

From phishing emails to password attacks, businesses large and small are losing clients’ sensitive data to cybercriminals. The number of reported cyberattack incidents targeting both individuals and businesses increased significantly during the COVDI-19 pandemic, thanks to the mass adoption of telework, which, in turn, opened a pathway for cybercriminals to cast their nets farther and wider. If your business stores or transmits data digitally, you should consider purchasing the right cyber insurance policy. Here are some of the reasons why every business needs a cyber insurance policy.

Protection of Clients’ Confidential Information

The right cyber insurance policy can help protect your clients’ sensitive information from cybercriminals pursuing it. According to the Federal Trade Commission (FTC), about 9 million Americans fall victim to identity theft every year. Specifically, cybercriminals steal personal information such as Social Security Numbers, credit card numbers, and dates of birth, and use it for fraudulent and criminal activities. It is worth noting that by carrying suitable cyber insurance coverage and complying with HIPAA regulations, you can keep clients’ confidential information secure.

Business Continuity after a Data Breach

A study at the University of Maryland revealed that every 39 seconds, a hacker attempts to attack a computer with internet access. This indicates that provided your digital device is connected to the internet, there’s a likelihood of a cyberattack happening any minute. In fact, according to data security experts, data breaches are inevitable, one more reason that should compel you to buy cyber insurance coverage. It is worth noting that regardless of the security measures in place, you may still suffer a data breach at some point. The right cyber insurance policy ensures that in case of a cyberattack, your business will be able to bounce back more easily. 

Cyberattacks are Generally Expensive

On average, small businesses in the US lose about $200,000 to cyberattacks. Even worse, more than 50% of the affected businesses collapse within 6 months. This is particularly due to the huge financial ramifications of cyberattacks. In general, the costs associated with a cyberattack include, among others, legal fees, investigative fees, and notification costs. Additionally, you may incur business-related losses such as data loss and business interruption. These costs can easily cause financial problems in your business. The good news is that if you have adequate cyber insurance coverage, your insurer will cover a large portion, if not all, of the financial expenses resulting from a cyberattack.

To Fill Gaps in Business Insurance

A standard business liability insurance policy protects your business from lawsuits and third-party claims related to bodily injuries and property damage. Depending on the size of this coverage as well as your arrangement with the insurance provider, business liability insurance can cover a small portion of your cyber liability costs. This means that without a separate cyber insurance policy, you will have to pay for the remaining costs out of pocket, something that will likely jeopardize your finances. Therefore, ensure you purchase adequate cyber insurance coverage to avoid gaps in your business insurance.

To Avoid Lawsuits and Potentially Large Claims

If your business suffers a data breach, your customers and vendors can sue your business for negligence. Take note that cybercriminals can use your customers’ and vendors’ information to commit identity theft. If this happens, your business will likely attract public as well as legal scrutiny, things that will further damage its reputation. Expensive lawsuits and large claims can potentially put you out of business. With the right cyber insurance policy, however, you can protect your business finances from third-party claims and other liability costs.

For Effective Risk Management

The business work is rife with risks, from natural disasters to lawsuits to cyberattacks. Therefore, your risk management strategy should not only highlight all potential risks facing your business, but also include the necessary risk mitigation measures. For instance, to prepare your business for possible data breaches and other forms of cyberattacks, be sure to purchase the right cyber insurance policy.

Cyber Insurance is Relatively Affordable

Compared to the cost of a cyberattack, the cost of cyber insurance is relatively low. Specifically, the average cost of a cyber insurance policy is $124 per month. On the other hand, the average cost of a cyberattack is $200,000. Take note that you can lower your cyber insurance costs further by mitigating cyber risks in your business.

Tips to Increase Cyber Resilience in Your Business

Purchasing cyber insurance is just one way of protecting your business from cyberattacks. You can also make your business more cyber-resilient by doing the following:

  • Training your employees – According to statistics, about 95% of data breaches occur because of human error. For instance, employees can endanger your network system if they use weak passwords, log into malicious websites, click on phishing links, or access your system through unsecured public networks. You should therefore train your employees on how to access the business network safely and avoid habits that may create loopholes for cybercriminals to attack.
  • Securing your devices – Always ensure that your networks and digital devices are well-secured using firewalls and strong passwords. You can also use multi-factor authentication to improve security. Additionally, keep updating the passwords regularly to enhance safety.
  • Updating your systems regularly – Your networks and security tools need regular updates to keep up with the evolving security needs. Cybercriminals are always devising new ways of attacking networks, and hence, updating your devices regularly can help keep up with the security needs. Additionally, be sure to stay updated with the latest technologies that can enhance your cybersecurity. 
  • Consult a cybersecurity provider – If you’re not in a position to provide the right cybersecurity for your business, you can outsource the task to a reputable cybersecurity company. 

Conclusion

A cyber insurance policy can benefit a benefit a business in numerous ways, including the ways discussed in this article. Remember, mitigating cyber risks in your business will not only lower your cyber insurance costs, but also reduce the possibility of cyberattacks. To get the right cyber insurance coverage for your needs, consult a cyber insurance expert.

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