When you start a new business, you have a lot of decisions to make. Will you start from scratch, or purchase an existing business? Will you purchase or lease a brick and mortar site, or conduct your business online? Where will you find your financing, and how will you pay your staff?
So when you look at the field of insurance options that are available to you, it might be tempting to purchase the bare minimum and put off other insurance decisions for later, after you’re more established. Insuring your building against property damage and purchasing health insurance for yourself seem like obvious first steps. But there are so many other optional commercial insurance options that it’s hard to know which of those are worth your money and attention.
Today, we want to walk you through cybersecurity insurance. We’ll talk about what it’s for and who should buy it.
What Is Cybersecurity Insurance?
Businesses purchase cybersecurity insurance to protect themselves from the effects of online attacks, or hacking. The reason it exists is simple. Storing customer information online is inherently dangerous. Breaches happen every day. According to a report from the cybersecurity firm Shape Security, close to 90 percent of the login attempts made on online retailers’ websites were done by hackers. In the spring of 2018 alone, Facebook, Lord & Taylor, Panera Bread, Under Armour, and a fitness app called PumpUp all reported huge data breaches that affected hundreds of millions of customers. Summer and fall continued the tradition with many more millions of customers having their information stolen from other companies’ websites.
And it’s not just the big guys who are losing data. Every year, one in five small businesses will experience a cybercrime. Of those, 60 percent will fold within six months. Yikes.
Simply put, cybersecurity insurance prevents you from losing your business if you experience a data breach. When businesses store customer data online, as many do, they not only risk the data but the business’s own liability as well. Insurance could help you cover the many expenses associated with being a victim of this particular crime, including the costs of investigating the incident, notifying your clients that their data was stolen, and restoring your data. More than likely, your business will also experience downtime during which you can’t operate. And you’ll be liable to help your clients not have their lives ruined by identity theft. Cybersecurity policies can cover all of those costs.
Who Needs Cybersecurity Insurance?
Any company that does business online is at risk for this type of breach. So how do you know if your company needs cybersecurity insurance? Does everyone need it?
Let’s take a look at your particular level of risk.
If your business handles protected information, you have a lot at stake. Do you store electronic personal health information (ePHI) covered by HIPAA? What about personally identifiable information (PII), like credit card numbers, email addresses, and so on? Compromised data of this type is a major problem, not to mention a PR nightmare. The compliance violations alone could cost your company millions. If you handle protected data, our recommendation is to purchase cybersecurity insurance.
But even if your company doesn’t deal with ePHI or PII, cybersecurity insurance might be worth considering. Think of it this way: if your data or electronic information is hacked, cybersecurity insurance would help keep you in business. Take a look at your insurance options and security needs, and talk to your agent to see if this protection is right for you.