Do you think your small business is too small to be hacked?
Think again. Cybercriminals are targeting small businesses like never before. 43% of all cyber attacks are aimed at small businesses. And if you aren’t properly protected, just one attack could end your business for good.
The problem is most small business owners don’t realize they need cyber insurance until it’s too late.
Cyber insurance isn’t just a “nice to have” anymore. It’s an essential safety net that can mean the difference between recovering from an attack and closing your doors forever.
In this article, you’ll learn:
- Why cyber insurance matters for small businesses
- What cyber insurance actually covers
- How to choose the right policy for your business
- Mistakes to avoid when getting coverage
Small Businesses Are Cyber Criminals’ Favorite Targets
Let me tell you why hackers are so attracted to small businesses…
Small businesses often have weaker security measures in place than larger companies. Plus, they have a lot of valuable data to target but fewer resources to devote to protecting it. This makes small businesses the perfect target for cybercriminals who want an easy score.
It’s only getting worse.
The cyber insurance market has seen explosive growth as businesses of all sizes have awakened to the threat of cyberattacks. According to Infrascale, the number of policies written has grown by more than 40% every year for the past decade.
Here’s the bottom line – small businesses are being attacked. And the majority are woefully unprepared to handle those attacks.
Some of the reasons why small businesses are at risk include:
- Limited budgets for cybersecurity
- Lack of dedicated IT security staff
- Outdated software and operating systems
- Employees who fall for phishing scams and other social engineering attacks
The worst part? Once hit by a cyber attack, 60% of small businesses go out of business within six months. And it’s not the attack itself that does them in. It’s the cost of recovery they can’t afford.
The Cost of Going Uninsured
If you’re wondering how much a cyber attack really costs, here are some eye-opening stats.
Small businesses can expect to pay anywhere from $120,000 to $1.24 million to respond and recover from a data breach. And this is just the direct costs.
But wait, there’s more… The biggest problem is these figures don’t even account for all the hidden expenses that go along with an attack.
Lost revenue while your systems are down. The cost to notify customers and business partners. Lawsuits, regulatory fines, and damage to your reputation. It all adds up quick.
The brutal reality is this:
Small businesses who go uninsured are on their own when it comes to paying for recovery. They’re stuck paying ransomware demands, hiring forensics experts, legal fees, system restoration, and more – all while hemorrhaging customers who no longer trust their business with their data.
Right now, only 17% of small businesses carry cyber insurance. The other 83% are rolling the dice with the future of their business every single day.
The Benefits of Cyber Insurance
So what does cyber insurance protection even look like?
Cyber insurance policies cover both first-party and third-party costs. First-party coverage is for your business directly. Third-party coverage is for claims made by affected customers and partners.
First-party coverage can include:
- Ransomware and extortion demands
- Data recovery and system restoration
- Forensics investigation and legal fees
- Regulatory fines and penalties
- Business interruption losses
Third-party coverage can include:
- Customer liability claims
- Lawsuit defense costs
- Regulatory fines and penalties
- Settlements and judgments
Don’t overlook policies that offer incident response teams, cybersecurity assessments, and employee training. These proactive services are just as important to preventing attacks as your security technology.
Cyber insurance is like having a standing army of security experts at your beck and call. If something goes wrong, you have a team of pros to help you figure out what to do and how to recover. No more panic and guesswork.
Choosing the Right Cyber Insurance Policy
This is where many small businesses make the same mistakes…
Not all cyber insurance policies are created equal. Some look great on paper, but read the fine print and you’ll find exclusions that leave you hanging when you need coverage the most. In fact, around 27% of data breach claims are denied due to exclusions, leaving businesses on the hook for at least some of the cost.
That’s a problem.
You need to read your policy carefully before you buy it. Make sure the policy covers the threats that are most likely to affect your business. For most businesses, that means ransomware, phishing attacks, and business email compromise.
When comparing policies, make sure you check:
- Coverage limits that align with your potential exposure
- Deductibles that you can afford
- Clear definitions of what is and isn’t covered
- No gaps in coverage between different parts of the policy
Most insurers will require basic security measures like multi-factor authentication, offsite backups, and employee training before they’ll even write you a policy. Don’t look at these as hoops to jump through. They are good security practices that will reduce your risk.
The Insurance Application Process
Let’s break down what the insurance application process looks like…
Cyber insurance carriers will ask detailed questions about your cybersecurity practices. They want to know what technology you have in place, how you handle data, and what steps you’re taking to prevent an attack from happening.
Don’t lie. Falsifying your application will void your coverage when you need it most.
Expect most cyber insurance applications to ask questions about your IT infrastructure, security software, employee training, and any previous claims history. Insurers use this information to evaluate your risk and price your premium.
The better your security, the lower your premium.
Businesses that take strong cybersecurity measures are rewarded with substantial discounts on their cyber insurance costs. It’s a win-win situation because you’re better protected AND you pay less.
Common Mistakes to Avoid
A few common mistakes that trip up most small business owners when buying cyber insurance are:
- Thinking their general liability insurance covers cyber events
- Waiting until after an attack to buy cyber insurance
- Buying low coverage limits to save money on the premium
- Ignoring policy exclusions
- Failing to meet the insurer’s security requirements
- Not updating their coverage as their business grows and changes
But the biggest mistake of all is thinking you’re too small to get hacked. That’s just not true. In fact, over 56% of all claims come from small businesses with revenue under $25 million per year.
Size doesn’t matter to hackers.
The Bottom Line on Cyber Insurance for Small Businesses
Cyber insurance is no longer optional for small businesses.
Attackers are getting better at finding new ways to exploit your systems and data. The cost to respond and recover continues to rise. The next attack could be the end of your business if you don’t have cyber insurance.
Cyber insurance isn’t a silver bullet. It should be just one part of your overall cybersecurity strategy. Strong technical security measures, employee training, and a solid incident response plan are just as important to prevent attacks.
Start by assessing your risk. What data do you collect? What would happen if your systems were down for a week? How much would it cost if you were breached? Then shop for coverage that fills those gaps.
Don’t just settle for the lowest premium. Make sure you actually have the coverage you need.
Now it’s Time for You to Act
Protecting your small business from cyber criminals is not optional.
Whether you’re a brand new startup or you’ve been in business for years, cyber insurance should be part of your risk management plan. Coverage is the least expensive part of a strong security plan compared to the cost of going out of business.
Don’t wait until after you’ve been breached to try to find coverage. By then it will be too late. Don’t let it get that far. Get cyber insurance coverage now.
