Cyber Liability Insurance: The SMB Guide

Forbes magazine reports that Americans lost over two billion dollars to IT failures in 2021. Many of these losses were incurred by small businesses that thought their cyber security system was adequate to the task.

With every advancement that we make in technology, hackers are with us, making their nefarious advancements to circumvent our cyber security plans. Small and medium-sized businesses have unique IT needs and unique vulnerabilities that make the need for cyber liability insurance very real.

What Is Cyber Liability Insurance?

Cyber liability insurance, also referred to as cyber insurance, is an insurance policy available to individuals and to businesses that can help mitigate financial losses due to a variety of cyber-related crimes and IT failures.

Technology is not perfect, and people make mistakes. Added to that we have employees with criminal intent entering companies to steal information, and we have a wide variety of hackers targeting small and medium-sized businesses across the nation.

Cyber liability insurance can make the difference between staying in business and closing up shop after a cyber security breach. A recent National Cyber Security Report indicates that 60 percent of small businesses go out of business completely after a cyber security breach or a hacker attack. In many cases, cyber liability insurance would keep those businesses going and they might be still thriving today. Basically, in today’s world, cyber liability insurance has become an essential IT investment for businesses.

What Does Cyber Liability Insurance for Small Business Cover?

Cyber liability insurance generally covers losses related to technology failures and hacking. It has become an essential part of IT cyber security plans for all small and medium businesses. It is essential to review your cyber liability insurance carefully, answer all questions honestly and thoroughly and negotiate any particulars that affect your specific business IT needs. Each carrier sets different standards, and the following checklist is just a summary of what is usually covered by a standard cyber liability insurance plan:

Network Security: This usually includes costs for hardware, software, network security liability and network security defense.

Business Interruption: Coverage for costs incurred due to business interruption as a result of a cyber event, such as an inability to provide services for some time if you are unable to access your IT systems or data.

Cyber Extortion:?Also known as a ransomware attack, cyber extortion might include the cost of hiring negotiators, investigators and even the ransom payment.

Business Interruption and Extortion:?Your policy may cover loss of business, money spent on crisis management and funds lost due to cyber extortion.

Employee and Customer Data Loss: Identity recovery, data compromise liability and data compromise response expenses including penalties and fines.

Third-Party Lawsuits: If your network security breach impacts a third party, then your policy will cover potential lawsuits.

Payment Fraud:?If you or your employees transfer money to a fraudulent destination, then this covers funds lost.

What Is Not Covered by Cyber Liability Insurance?

Each insurance company has different small business policy details, but in general, the following are not usually covered by cyber liability insurance:

· Financial losses due to employee theft.

· Predicted future financial losses after a breach.

· Failure to maintain minimum IT security standards.

· PCI fines and assessments.

· Claims related to bodily injury or property damage.

· War, terrorism, invasion, or insurrection (with exceptions for cyber-terrorism).

Endpoint Detection and Response Is Now Expected by All Insurance Companies

Due diligence is a must if you expect your cyber liability coverage to be honored by your insurance company in the event of an IT breach or a cyber event. According to Business Insider, there are cyber-insurance requirements determined by your insurance company that are essential to maintaining your small business cyber liability insurance policy. Some of those might include:

· Detailed written incident response plans.

· Master services agreements and service level agreements.

· Multifactor authentication.

· Third-party risk management.

· Patch management.

· Vulnerability management.

· Endpoint detection and response.

Endpoint detection and response (EDR) is a preventative strategy that insurers expect all businesses to have in place to mitigate damage from cyber threats. EDR refers to all of the strategies and tools that gather and analyze potential cyber threats from endpoints such as PCs, tablets, and servers.

It is important to realize the value of being protected by liability insurance, but equally important to maintain cyber security best practices. If you were requesting fire insurance but failed to keep a fire extinguisher in the office, your claim for fire damages is likely to be denied. Cyber liability insurance works similarly. Best practices help to prevent cyber-attacks, but they also make sure that in the event of a hack, your cyber liability insurance claim will be honored.

Don’t be a victim to hackers. To learn more about cyber liability insurance and how you can boost cyber security for your business,?book a complimentary call?with Erick Solms today. Click the link or scan the QR Code below.

Erick Solms?is the Founder of?Simplitfy?in West Palm Beach, Florida. Simplitfy provides IT and cybersecurity services to Small and Medium Business in South Florida.?To contact him personally or to inquire about information technology services, please email?[email protected]?or visit?www.simplitfy.com?or use the following link to book a call with him?https://go.simplitfy.com/schedule.