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Any company with internet access and data is susceptible to a cyberattack. Cyber insurance is a modern necessity that helps protect its professional, personal and client data. — Getty Images/Petar Chernaev

As cyber threats like data breaches and ransomware become an ever-increasing risk for businesses, cyber insurance may be a worthwhile option for protecting yours. Many small business owners don’t believe their business is big enough to be at risk, but any organization that uses technology and collects data is vulnerable to a cyberattack that could do everlasting damage to its employees and customers. Having cyber insurance protects businesses from these attacks and helps them recover costs after a security breach.

[Read: Getting Serious About Cybersecurity]

Do you need cyber insurance?

Any company with internet access and data is susceptible to a cyberattack that could put it in a financial hole. Cyber insurance is a modern necessity that every business should investigate to help protect its professional, personal and client data.

Here are some specific ways that cyber insurance helps prevent cyberattacks:

  • Cyber insurance agents can recover lost data and devices that were targeted in an attack.
  • Agents will comply with all notification requirements, informing all of your customers of the breach and your response.
  • Insurance agencies will inform the proper authorities of the attack to start an investigation.
  • Your cyber security agency will help determine the extent of the breach and how to amend those insecurities.
  • Insurance can help cover the cost of business disruption, revenue loss and equipment damage.
  • Your insurance provider can help cover costs towards legal fees and public relations expenses.

[Read: The Pros and Cons of Transforming into a Virtual Company — Permanently]

Other factors that put companies at risk include how much web interaction they have with customers, if their employees use their own devices at work and how much the business relies on confidentiality.

How to get cyber insurance in 4 steps

When researching cyber insurance policies, search for one that fits you and your organization’s specific needs as well as your budget, keeping in mind any associated risks. Here is what you should consider when choosing your cyber insurance policy:

1. Decide what type of coverage best suits you

When looking at cyber insurance policies, there are two main types of coverage: first-party coverage covers the financial loss due to a data breach of the insured, while third-party coverage covers the financial loss resulting from a breach of other data, including that of your customers, partners, suppliers, vendors or other associates.

Many policies use a hybrid of the two types of coverage. When you're evaluating insurance policies, determine whose data you are trying to protect and to what extent. If your company does not deal with a lot of outside data, you may want your policy to only be internal. Most businesses do collect some sort of customer data, like names and contact information, though. Carefully consider the data of others that you collect and if necessary, look into covering the loss from a third-party data breach.

[Read: Workshop Wednesday: Protecting Your Business from Cyber Threats]

2. Know your contractual obligations

It is becoming more common for clients and vendors to require some form of cyber security insurance. Many put specific language in their contracts that outline what they require, so it is important to consider policies that meet your customers’ demands.

3. Evaluate your risk

While every company with internet access and data is vulnerable to a cyberattack, some organizations and industries are at a greater risk than others. Assess what type of sensitive information you and your company collect, such as payment information, personal identification information or protected health information. This type of data in particular is a common target of cyber attacks.

Other factors that put companies at risk include how much web interaction they have with customers, if their employees use their own devices at work and how much the business relies on confidentiality. Any company practicing one or more of these factors should make a robust policy a priority.

4. Learn what it takes for your policy to kick in

Like health and car insurance, certain terms and conditions must be met before coverage is triggered. Determine if you need a policy with blanket coverage or one that focuses on specific types of attacks. If there are exclusions to your policy, it may not be triggered during certain attacks.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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Published March 05, 2021