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5 Reasons Why You Need Cybersecurity Insurance

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Cybersecurity insurance is among the hottest trends. It goes by many names, often called cyber insurance or cyber liability insurance. Whatever name you settle on, cybersecurity insurance is insurance for business to reduce risks surrounding data loss, cybercrime and IT disasters. Like any other insurance, a cybersecurity insurance policy transfers risk to an insurance provider for a fee. 

While a whole range of insurances have existed since 1871, cybersecurity insurance rose with the recent digital age. Like any new trend, it arrived with its own early adopters. Given how cyber risks fluctuate, cybersecurity policies must change and adapt frequently. Underwriters analyze data to calculate risk and set policy premiums, coverage and rates. Yet that process is not so simple with cybersecurity insurance since the industry data is limited for smaller businesses. Now if you think this unique kind of insurance hard to suss out for the geeks, small to mid-sized businesses (SMBs) might feel especially overwhelmed in their search for such coverage. Yet clearly, this product is here to stay. But fear not! We can certainly help SMBs navigate these uncharted waters. Explore with us some compelling reasons you should look into it yourself.

1. It’s an extra mote to defend your castle

Losing data to criminal activity has the potential to devastate any organization. It can send customers herding to the doors and tank your revenue. And to make matters worse, you could wind up on the hook and liable for any damages stemming from a third-party attack. Imagine being slapped with a lawsuit after falling victim — all while lacking protection for any of it.

Cybersecurity insurance is essential for businesses seeking to shield themselves against cyber risks. When you have coverage for cyber threats, you can remedy incidents swiftly and pull your business back from the brink.

2. Hacking is a matter of when, not if

Years ago in the ancient internet fossil beds of 2011, the PlayStation Network sustained a massive breach perpetrated by skilled hackers, exposing the private data of 77 million users. This breach resulted in PlayStation users being denied access to their services for over three weeks. This breach dented Sony to the tune of $171 million, and yet Sony could have recuperated some of those damaging costs if they had acquired a cybersecurity insurance policy beforehand – yet they never did! Therefore, Sony faced swallowing the costs completely alone. The ensuing battle in court landed a hard ruling: what insurance Sony actually did have covered physical damages only, which meant that the victims had to pay the costs of the losses from the cyberattack. Sorry! Thanks for playing!

Governments, militaries and large corporations are not immune from cyber attacks, and most now wisely assess the threat as a matter of when, not if. And if colossal entities remain on high alert, where do small businesses stand? According to the Cost of Cybercrime Study by Accenture, 43% of cyberattacks target small businesses, while an underwhelming 14% have even prepared for the risk. Furthermore, the National Cyber Security Alliance estimated that a jaw-dropping 60% of small businesses fail within six months after a data breach.

The lesson is clear: if your company exists for long enough, you will be touched. So be ready.

3. How cybersecurity insurance helps you

You’d probably recognize providers offering cybersecurity insurance, since they’re often the same ones offering business liability insurance or commercial property insurance. In most cases, cybersecurity policies cover the first party concerning direct losses impacting the company and third-party losses, viz., the losses of others precipitated by a cybersecurity incident, as determined by their connection to the insured entity. 

Before losses resulting from cyber incidents and events pile on, cybersecurity insurance comes to the aid by covering many of them. Moreover, it can even extend into helping with remediation costs, including procuring legal counsel, investigators, crisis communicators, customer refunds and loss incurred to customer accounts.

4. Your data is your nest egg

Cybersecurity insurance benefits companies that store, manage or generate electronic data like transactions, contacts, financial data, or credit card information. For these reasons, e-commerce companies should take a keen interest in cyber coverage. Besides the immediate financial loss, the resulting downtime can also potentially siphon away customers and your reputation. 

But be forewarned that just like any other form of insurance, businesses need to actually qualify for it. And also like any other form of insurance, not all applicants make the cut. You’ll need to prove reasonable care and good-faith efforts to secure your data to a clear standard. But if you’re unsure if your cybersecurity is up to snuff, that’s something we can help you figure out — and fix.

5. Cybersecurity Insurance casts a wide net

Whenever you explore an insurance policy for cybersecurity, comb the terms within the policy documents with care. Depending on the policy stipulations, you may spot coverage gaps for items you wanted to insure, or you might spot an excess of coverage for line items you don’t care about or weren’t even aware of. Common examples include the costs of notifying customers, legal fees, paying ransomware demands, data recovery costs, etc. When all is said and done, you have to be sure you’re happy with the terms and coverage when you sign your John or Jane Hancock.

Given the breakneck changes in technology and ever-evolving threats, policies and prices for cybersecurity insurance tend to vary widely in the industry, thereby placing the burden on businesses to prudently consider what they ultimately want in their cyber insurance policy. After all, even coverage types will vary widely from industry to industry.

But be encouraged! A good IT services partner will help you through the application process and can act as your best ally. At Cortavo, we can help sketch out the coverage your business will need and help you become and remain eligible to purchase it. 

The bottom line is this: if you don’t have cybersecurity insurance, it’s definitely worth it for you to at least investigate it. Without it, you may run the risk of paying a steep price just as Sony did. If you would like to discover more about cybersecurity insurance, take a look at our free qualification guide to begin your search and contact us today for a cybersecurity consultation.

 

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