What Is Cyber Security Insurance, and Why Do You Need It?

Would you leave your business doors unlocked at the end of the day? Of course, you wouldn’t!

Someone can break into your store and steal your inventory. Businesses would lose thousands of dollars if they left the doors open overnight.

Unfortunately, many businesses leave their digital doors open at all times. Hackers infiltrate companies and take them down.

Unlike a traditional robbery, hackers can get everything. They can obtain sensitive documents and the keys to your website. A single cyberattack can wipe out a small business.

There’s a reason cybersecurity investing is a hot trend. Cybersecurity venture capital firms see an increasing shift towards cyber security protection. 

Cyber security is necessary for businesses to survive in a hostile digital world. Each high-profile breach will further encourage companies to act before it’s too late.

Cyber security protocols keep the bad guys away from your website. However, hackers can still break into your website. Cyber security insurance comes to the rescue.

We will explore what to know about cyber security insurance and the industry.

What Is Cyber Security Insurance?

A cyber security insurance policy provides coverage for data breaches and other issues. This policy can help you recoup financial damages from a cyber attack.

Each cyber insurance policy comes with varying levels of protection. Traditionally, higher premiums lead to more protection.

Fewer protections result in lower premiums. If you don’t get hacked, you’ll be happy about the low premiums. However, if the policy does not offer enough protection during a hack, you will regret your choice.

Cyber security insurance policies can cover an array of issues, including:

  • Regulatory defense expenses and fines
  • Business interruptions
  • Cyber extortions
  • Forensic investigations
  • Crisis management expenses 

Cyber security insurance helps with financial damages and corresponding expenses. However, it does not restore your data.

Cyber security insurance agencies do not create a separate file containing your data. If you lose the data, it is gone forever. 

The hacker also has access to any stolen data. If hackers obtain social security numbers and birth certificates, they keep that information. Cyber security insurance won’t wipe the hacker’s mind clean.

You may be liable for keeping the digital doors open. If employees take you to court about their stolen data, a policy helps with legal expenses.

A cyber security insurance policy does not excuse you from practicing protocols. The insurance policy should inspire you to double down on your efforts.

Prudent safety measures combined with the right policy offer the best protection.

Network and Security Coverage

Some cyber security insurance policies come with network and security coverage. This coverage provides protection from unauthorized access to the sensitive data of others. 

You may incur legal costs from unauthorized access. If the laptop gets stolen or compromised, this coverage also covers the cost of a new laptop. The same rule applies to smartphones and other employee devices.

Miscellaneous expenses from unauthorized access also get covered in this provision.

Communication with Customers

The law requires all companies to notify customers about data breaches. A notification will lead to a complaints and customers leaving your business.

A cyber insurance policy will cover the costs of notifying customers and others. These costs can add up in a hurry.

However, a cyber insurance policy does not immediately restore your company’s reputation. The cyber security insurance policy only limits the damage. 

That way, your company can get back on its feet sooner. However, you’ll have an uphill battle ahead of you.

You Will Need a Forensics Team to Investigate

After a cyber-attack, you will need a forensics team. This team identifies the root cause of the attack and stolen data. 

They can close the opening to add extra fortification to your business. You must close openings after a cyber attack. Failing to do so lets hackers enter and re-enter at will.

A cyber insurance policy reimburses you for hiring a forensics team. This coverage will make you less likely to cut corners due to costs.

What’s Not Covered in a Cyber Insurance Policy

You won’t receive coverage for every possible issue. Combining other insurance policies will fill more gaps. 

Review the cyber insurance policy to see what it does not cover. Here are some events you typically won’t find in a policy.

  • Bodily injuries
  • Property damage costs and loss of property
  • Criminal activity
  • When hackers trick people into sending company funds

A commercial property insurance policy provides coverage for your property. You may need multiple insurance policies to provide the coverage you desire.

How to Lower Cyber Security Insurance Premiums

Many companies look for lower insurance premiums. They want optimal protection without a substantial investment. 

Cyber security premiums cost anywhere from $500 to $50,000 per year, depending on the business. Some companies need significant coverage, hence the high premiums.

The easiest way to lower premiums is by reducing your protection. A smaller coverage limit costs less money. However, it can leave you more exposed during a cyber attack.

Taking cyber security safety measures will also reduce your monthly bill. Security measures close more openings to hackers. If you leave the door wide open at all times, insurers will charge higher premiums.

We will soon explore several cyber security safety measures. These measures will result in lower premiums and provide extra protection.

Your claims history will play a role with any insurance policy. If you have filed claims in the past, expect higher premiums. Insurance companies offer you protection, but they also need to protect themselves.

Your company’s industry also plays a role in premiums. An online business is more susceptible to cyber-attacks. Brick-and-mortar companies with a low digital presence have fewer risks. 

Online business models receive higher premiums than brick-and-mortar companies. You can’t change anything about your industry or claims history. However, you can lower the premium with less coverage and more protocols.

How to Enhance Cyber Security for Your Company

The insurance policy adds some protection. However, it’s best to avoid a cyber attack altogether. 

Practicing cyber security protocols will also decrease your monthly premiums. Utilize these cyber protocols for your business.

Review Email Security

Many hackers infiltrate companies through insufficient email security. They may send phishing emails to your employees. Hackers will pretend to be your company or an individual.

Educate your employees on phishing schemes and what to look for in an email. Require your employees to change their company password every few weeks. Expiring passwords gives hackers less time to infiltrate your company.

Make sure you don’t share sensitive information across emails. Less sensitive information spreading around your company gives hackers fewer openings.

Set Up Two-Step Authentication

More companies are instituting a two-step authentication approach. You have probably witnessed this several times as a customer.

Have you ever logged into a site, but then you also have to enter a confirmation code? These companies will send an expiring code to your email or phone. Customers can select between the two choices.

Two-step authentication requires the username, password, and a time-sensitive code. Most of these codes expire within 15-30 minutes, leaving less room for hackers to invade.

Protect Virtual Meetings

Some hackers obtain virtual meeting information and stay silent during the meetings. If these hackers attend enough meetings, they may obtain sensitive information.

You may show a screenshot containing essential details about the company. Someone else may show or share more sensitive information.

Create a custom meeting ID and password for each meeting. This practice gives hackers a shorter window to obtain login credentials.

Train Your Employees on Cyber Security

Hackers rely on human error. Every employee account creates an opening for hackers. 

Empowering your employees will help your company combat cyber attacks. You can hire a cyber security expert to provide webinar training for your staff.

As more employees work from home, training them becomes more critical than ever. Employees working from home create more openings for hackers.

Create a Private Cloud Management Software for Sensitive Data

A hacker can steal customer data and delete it from your system. These types of attacks can send your business months or years back.

Back up essential data on private cloud management software. This practice allows you to recover data lost on your company’s cloud management.

You can also restrict access to the company’s cloud management software. Fewer people getting access creates fewer entry points for hackers.

The Hackers Are Not Going Away

Cyber hackers will continue proliferating within the digital world. Your business must be ready for any potential attack.

Cyber security insurance gives your business the best chance at rebuilding. The costs of a cyber attack can take down any small business. For a few hundred dollars a year, you can protect your company from this fate.

Cyber security’s continued importance gives investors a chance to reap profits. They can also support great companies. 

Option3Ventures connects venture capital investors with cybersecurity companies. Contact us to see how we can help.

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