Insurance covers every aspect of our lives — our health, our homes, our cars, even our pets. Today, we live so much of our lives online that there’s a new form of liability insurance that’s becoming increasingly popular with businesses: cyber insurance.
Cyber insurance offers protection to help cover your company in the event of a data breach by mitigating the financial costs of a breach or even offering investigative services and reputation management.
Cyber insurance can help you stay afloat after a data disaster, but remember: Insurance is only helpful after the fact.
To protect yourself and your customers, you need to lock down your data to reduce the likelihood of ever needing to use your insurance.
Depending on the size and structure of your company, implementing the proper defenses to prevent data breaches can be a difficult and expensive task. It’s tempting to simply purchase an insurance policy and be done with it, but you can’t forgo best practices just because you have a policy in place. After all, you wouldn’t start driving recklessly just because you have car insurance.
Here are some things to remember about cyber insurance:
- To be covered, you need to be safe. Poor cyber security is the “preexisting condition” of data breach insurance. Most policies require at least a minimum amount of security to be in place before they’ll pay out. If your data protection is nonexistent or barely there, chances are you’re a losing proposition and won’t be covered.
- Insurance won’t pay for everything. Even if you have a strong policy in place, there are some losses that are intangible and can’t easily be paid out by an insurance company. Downtime or bad PR won’t be covered in full, and depending on your industry, the loss of time may be worse than the loss of money.
- Hackers can cost you more than money. When Code Spaces suffered a security breach, it wasn’t just a lack of funds that put the company out of business. A malicious hacker was able to delete a large amount of customer data stored on the company’s servers and erase its backups as well. No matter how much money an insurance policy might have given the company, this data was gone for good. The loss was unsustainable for Code Spaces, and the company went out of business.
- Customer trust can increase revenue. As data breaches continue to make national news, people are becoming increasingly cautious about where they store their personal data. Good security can do more than prevent a disaster; it can actually become a selling point for your company. If your customers know you take their security as seriously as they do, they’ll be more willing to do business with you.
Regardless of whether or not you have cyber insurance, you need strong security measures in place to guard against data breaches. However, no security is entirely foolproof, so it’s important to have contingencies in place to plan for a potential loss of income.
If your industry is heavily regulated, it’s especially important to protect yourself both coming and going. With healthcare regulation through HIPAA HITECH, companies with insufficient security measures in place will be forced out of the industry. In fields where customers’ sensitive data is in your company’s hands, it’s vital to prepare for every possibility.
You wouldn’t leave your business at night without locking the front door, so you can’t afford to leave your data wide open, either. Malicious attacks happen, so it’s important to be prepared for them. One in five small businesses falls victim to cybercrimes each year, and 60 percent go out of business within six months of the attack.
But with strong defenses in place, you can stop the majority of security attacks before they become a problem, and with good insurance, you can rest assured that you’ll be covered if something bad does happen.