BusinessInsights.

Do Small Businesses Need Cyber Liability Insurance?

Frank Dowie | September 21, 2022 | Insurance | 6 Minutes to read

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As a small business owner, there’s a significant risk that you may not be paying enough attention to – cyberattacks. It’s becoming more common for cybercriminals to go after small businesses, and many are not prepared to manage an attack. 

A 2021 poll by CNBC and Momentive found that among American small business owners, a net 56% said, “they are not concerned about being the victim of a hack in the next 12 months,” and out of those, 24% said they were, “not concerned at all.” 

As a result, many small business owners are ignoring an unfortunate reality. Verizon’s 2020 Data Breach Investigations Report found that 28% of cyberattacks and data breaches in 2019 targeted small businesses and more than two-thirds of small businesses had experienced a cyberattack at some point. 

The COVID-19 pandemic created even more exposure. Small business data breaches jumped 152% globally during 2020 and 2021 compared with the two prior years while breaches at larger companies only increased 75% in the same period. 

There are many types of data breaches: hacking, social attacks, ransomware or malware, phishing, credentials, stolen computers, misused data, network hacks, and more.  

As a small business, you may not have a state-of-the-art defense. Combined with insufficient cyber insurance and lack of cash access, data breaches can be financially crippling. 60% of small businesses who undergo a data breach or cyberattack go out of business in six months or less. 

Fortunately there are affordable ways to protect your business. 

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Adding Cyber Insurance to a Business Owners Policy

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Some insurance carriers allow you to include Cyber Liability Insurance into your Business Owners Policy (BOP). A BOP bundles three types of coverage that are recommended for small business owners:

  1. Commercial General Liability
  2. Property
  3. Business Interruption

When your carrier allows it, you can add Cyber Liability Insurance to the BOP. Cyber Liability Insurance can include protection for: 

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First-Party Coverage

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This type of coverage is for your non-legal costs. It includes:

  • Forensics – Efforts to determine if a breach occurred, how it occurred, the extent and significance of the breach etc.
  • Crisis management and PR – Restoring your reputation through public relations (PR) and hiring individuals to manage the crisis. After a breach, it is crucial to earn your customers’ trust again.
  • Notifications and monitoring credit – Usually, privacy laws require businesses to notify anyone whose data may have been compromised. Some states also require that you monitor their credit reports.
  • Business income and additional expenses – Coverage to replace lost income from the breach as well as cover new expenses incurred while restoring your business operations.
  • Reimbursement for extortion – If you had to pay a ransom to get your network back online or hire a security firm to negotiate with the attackers, reimbursement may be possible.
  • Damages to electronic data – Replacing or restoring any data that was compromised in the breach or attack.
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Third-Party Coverage

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This type of coverage pays others if you have legal costs. It includes: 

  • Regulatory proceedings – If you are brought in by a government regulator like Health Insurance Portability and Accountability Act (HIPAA) or a state agency, this can cover legal defense costs, penalties, and fines your business incurs.   
  • Lawsuits – You may also need coverage for legal defense costs, penalties, and fines if you are sued by partners, vendors, or clients for failing to provide adequate security. 
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How Can I Protect My Small Business from a Cyberattack? 

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Protecting yourself and your business, employees, and customers from cyberattacks is no small feat. To start, find out if your insurance company provides risk management services. Some may have free or discounted risk assessments, training for employees, and protective hardware or software to keep your technology and data secure. 

Verizon’s Data Breach Investigations Report also suggests tactics like two-factor authentication, long and complex passwords, regular software updates, offline backups, antivirus software, security guidelines for vendors, and consistent security training for employees. 

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How Can I Get Cyber Insurance for My Small Business? 

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NEWITY teamed up with Mylo Insurance to provide the best, most customizable coverage available, regardless of the size or scope of your business. If you want to discover your options for Cyber Liability Insurance – including securing a stand-alone Cyber Liability policy, or adding it to your Business Owner’s Policy (BOP) – you can talk to Mylo’s licensed agents for a custom consultation on what fits your business’ specific needs. 

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NEWITY + Mylo can help create a customized plan to protect your business from cyberattacks at the best value.