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Your Cyber Insurance Checklist for Small Business

Your Cyber Insurance Checklist for Small Business

| April 12, 2023

Risks come from every direction when running a business. And while it's true that larger companies experience the same risks as smaller firms, there's no denying that small businesses often face more significant challenges due to financial constraints and limited resources. That is one reason why cyber insurance is essential.

Malware and hackers are everyday threats to small business owners, and that's where a cyber insurance checklist can come in handy. If your business is the target of a cyberattack, you put yourself at risk of—and can be held liable for—data breaches. In addition, if you use web applications throughout your day-to-day business, your operations can be disrupted or halted.

Fortunately, acquiring the right cyber insurance can mitigate these risks. Here are some things to look for and consider in a policy before purchasing one.

Your Business's Cyber Risk Level

The first determination you should make before purchasing cyber insurance is how vulnerable your business is to a cyberattack. Depending on your company's size and the data it collects, it may be high-risk, low-risk, or somewhere between.

While you may get a good idea of your threat level on your own, hiring a cybersecurity expert to thoroughly and accurately assess things is always a good idea. Once you know your risk level, you'll better understand how much coverage your business needs.

Your Compliance with Regulations

Businesses must follow stringent requirements for storing customer data and sensitive information. Depending on your industry, these regulations can become stricter or more relaxed. With that being said, ensure that your business is fully compliant with all applicable regulations before you start looking for cyber insurance.

Key Coverage Areas

To guarantee that your company is well-protected, confirm that the policy you are looking into covers these critical types of cyberattacks:

  • Data breaches
  • Network breaches
  • Attacks on your data held by third parties (like vendors)
  • Attacks from anywhere in the world
  • Terrorist cyberattacks

If you want to err on the side of caution, consider asking your insurance broker if the policy covers emerging threat types, including social engineering schemes. Some policies will also address damages to your company's reputation, which can be exceptionally valuable.

Beware of surprisingly inexpensive policies! More expensive policies don't always equate to more extensive coverage.

Included Services

Insurance companies offer varying levels of support in the event of an attack. One of the most important things to check is whether the company will represent you in lawsuits or investigations of data breaches and other events. Usually, the phrase "duty to defend" indicates that the company offers such a service.

You should also find out whether your insurance company offers a 24/7 hotline. If you're the victim of a data breach, it's essential to take action as soon as possible, and a continuously-operated hotline will help you do that. In addition, try to get an idea of the insurer's incident response time. If it's considerably long, your company will more than likely be left hanging in the worst scenario.

First-Party vs. Third-Party Coverage

To minimize any cyberattacks' impact on your business, you should seek cyber insurance that offers first-party and third-party coverage.

First-Party Coverage

First-party coverage safeguards your business's data. It will usually include crisis management services, legal counsel to help you decide how and when to notify customers, and an investigation of how the breach happened. It will also typically cover fines, fees, and other costs that stem from the attack.

Third-Party Coverage

If your business has a data breach and customers or other third parties suffer damages from it, they may bring claims against your business. Third-party coverage helps your business with the associated costs, such as payments to those affected, along with legal fees and settlements, the latter of which can be pretty costly. As such, third-party coverage should be an indispensable part of your cyber insurance plan.

Compare Quotes Today

We hope you found this cyber insurance checklist helpful! At Good Life, our financial experts are ready and willing to help you reach your business goals, and if one of those is selecting the right cyber insurance policy, we can help you weigh your options and make the right decision.

As licensed financial professionals with years of experience and demonstrated success in helping small businesses, we'd love to work with you to help build a path to work toward your goals. To learn more, contact us today to schedule a complimentary consultation.

The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual.