In today’s business world, digital capabilities continue to grow. It’s easier than ever for retailers — big, small, and in between — to reach more customers. Unfortunately, opening yourself up to a whole new digital market also opens you up to more cyber risks.
What are the cyber risks?
Data breaches and cybercrimes can come in all different shapes and sizes, and they’re still evolving every single day. These modern-day risks include everything from data theft and ransomware to massive corporate espionage. No matter what kind of hacking scheme we’re talking about, the damage a business sustains can be enough to shutter its doors.
But I’m just a small business. Do I even need cyber liability coverage?
Absolutely. You may think that only large companies come with large targets, but they’re often well-guarded against cybercrimes. Small businesses, however, often overlook or can’t afford the proper security to protect themselves in the first place. Imagine you’re a burglar and there are two houses side by side with the same fancy jewels and big-screen TVs—you’re going to go after the one with the front door that’s wide open, right? Well, the same goes for cybercrimes.
What are the effects of a data breach?
Just like your company specializes in some sectors, so do hackers. They can perform different types of data breaches and cause a massive amount of chaos to several different parts of your business.
For example, say a group of hackers dive into a company’s database. They can siphon credit card numbers and customer data for months before anyone even knows they’re there. Once the problem is discovered, the company may have to halt operations and temporarily lose access to all customer data while the forensic teams do their work.
The effects on the company can include:
- Loss of potential income.
- Possible loss of current customers.
- Paying the pros to help discover the source of the problem and fix it.
- Paying a PR firm to help cool the situation down.
- Potential fines.
- Fees from credit card companies for processing new cards to affected customers.
- A fair amount of embarrassment.
Because so much is involved with fixing the problems a cyberattack creates, the bills can add up fast. In fact, according to TrustedChoice.com, the average cost of being infiltrated by a hacker is $1,060,213. Malware and viruses average out to $457,817 and wire transfer fraud around $167,806. Not many small businesses have that kind of extra cash just laying around for a rainy day, which makes cyber liability coverage so important.
Cyber liability protection doesn’t have to be that expensive, either. A huge corporation with many exposures who accepts digital transactions and receives customer information by the second will pay around $800,000 per year. But if you’re a small business with lower revenue, just $1,000 per year could mean the difference between your business thriving and your business failing.
Doesn’t my business liability policy protect me?
Unfortunately, no. When it comes to business liability insurance, there’s a gap in coverage right where digital damages would fall. Fortunately, you can close that space to help protect your business and keep your small business dreams afloat.
How do I get cyber liability coverage?
Some companies add cyber liability endorsements to existing policies, while others sell protection as a separate product. No matter how you get your coverage, you’ll be getting the same protections, including compensation for fees, fines, lost income, and in some cases, public relations assistance. No matter what, make sure you fully understand how your insurance provider handles cyber liability protection and how they plan to be there for you should the need arise.
Paul Martin, CPCU, is an insurance professional for Trusted Choice with over 30 years’ experience in the field. Throughout his career, his mission has been to advance the insurance industry through education to be better equipped to serve the public.