Business owners who forego cyber risk insurance usually cite the cost as a deterring factor. But with the average cost of a cybercrime at $200,000 (and this is a conservative estimate!), you can’t afford not to have it. That amount might be a drop in the bucket for a Fortune 500 company, but for small and home-based businesses, it can spell disaster.
This is why we so strongly recommend cyber risk insurance for all types of business owners. Because you never know when you may become a target to this type of crime, protecting yourself at all times is essential.
But not all cyber risk insurance is created equal. Insurance carriers offer two types of cyber risk insurance: first-party and third-party. Both offer different types of coverage, but first, it’s worth mentioning why cyber risk insurance is so important.
Yes, even for you.
Cyber Risk Insurance: Not Just For The Big Guys
Small- and mid-sized business owners often assume they can fly under the radar of a cyber criminal. “I’m not a household name,” they think. “How would a hacker find me?”
Small- and medium-sized businesses tend to implement weak cybersecurity measures or even ignore them altogether. But your self-assured “no-one-can-find-me!” attitude is not the same as protecting yourself. But that would-be thief knows that you have next to no security…and that makes you the perfect target.
Think about it: if you accept Visa, MasterCard, or American Express, your business is a veritable warehouse of credit card info. Why wouldn’t you put a lock on the door and get an insurance policy on it?
What is First-Party Cyber Risk Insurance?
First-party cyber risk insurance covers you against losses that stem directly from a cyber attack. The “first party” is you, the insured.
First-party cyber insurance covers things like:
- Malicious or accidental destruction of data;
- Clean up from malware;
- Natural disasters and other accidents that cause data loss.
The financial cost of recovering from a data breach or other cybercrime can be a huge headache. When you lose data, you not only need to replace hardware and software, you need to spend the time getting everything cleaned up. You might also experience a loss of income if your business has to close while you clean up the mess.
This doesn’t even count the indirect loss of a damaged reputation following a cyber attack. This is why most first-party cyber insurance policies also include a PR campaign to help get your company’s reputation back on track.
If the Target Corporation, a national brand worth an estimated $62 billion, can be affected by a data breach, how do you think your company will survive? For many, the value of a PR campaign alone makes first-party cyber risk insurance well worth the cost of premiums.
What is Third-Party Cyber Risk Insurance?
“Third party” refers to your clients, business partners, vendors, or any other entity affected by a cyber attack on your company.
After a data breach, United States law requires businesses to notify all those affected and pay for one year of credit monitoring. Consider for a minute the time, money, and logistics involved in tracking down every single one of your clients (many of whom have moved four times since you last updated your system) and then paying for a year’s worth of credit monitoring for every single one.
For this benefit alone, third-party cyber risk insurance is more than just a “nice thing to have.”
Further, if a customer sues your company due to a loss caused by a data breach, third-party cyber risk insurance could cover legal costs like court fees, lawyer fees, settlements, and judgments.
“Do I Really Need Cyber Risk Coverage?”
First- and third-party cyber insurance each cover a form of risk that, no matter how improbable you may think it, happens everyday across the U.S.
Whether your data is held for ransom, your clients’ financial information is stolen, or your servers fell victim to a hurricane, cyber risks are everywhere. And in a world where data exists in digital form, you can’t afford not to protect it.
And your merchant processor is no substitute for a good insurance policy. Even if they offer some form of protection in the event of a data breach, their coverage is likely to fall short of your financial needs.
Unfortunately, more than half of small businesses fail within six month of a cyber attack due to the remediation costs involved. Cyber risk insurance ameliorates that risk.
Cover Your Business with Cyber Risk Insurance
You’d never open a business without the proper amount of commercial property insurance. So why leave your data at risk?
Whether you run a home-based business or a large corporation, data is more than numbers on a screen. Data is everything. Make sure your business is protected with the right level of first-party and third-party cyber risk insurance.
If you want more information about protecting your business, contact us for a free quote. Harry Levine Insurance has remained one of Central Florida’s premiere insurance agencies for more than 30 years and we have the knowledge, experience needed to protect your business from A to Z.