The internet has allowed businesses to grow in ways that would have been impossible in the past. Unfortunately, it has also introduced new types of crime. Recent statistics show that over 2,200 cyberattacks happen every day. Small businesses are prime targets because many don’t have strong cybersecurity defenses. And hackers know small companies often provide products or services to large corporations, so infiltrating a small company’s IT system can give them access to a large company’s data.

Even large companies aren’t immune to data breaches. Many multinational corporations have been hacked. Here are some real-life examples:

In 2021, hackers hit Colonial Pipeline, the largest oil pipeline in the U.S. The attack shut down the pipeline for days, leading to fuel shortages and panic-buying throughout the Eastern U.S. The company reportedly paid nearly $5 million to the hackers to restore its operations.

In 2023, a ransomware gang exploited a known flaw in a widely used enterprise file transfer service, MOVEit. They initiated unauthorized file transfers and stole data from over 2,500 MOVEit customers. These included government, public and private organizations worldwide.

According to anti-malware company Emsisofit, the most impacted industries are:

No matter your industry, you need cyber liability insurance if you use the internet for your business. Read on to learn more about cyber risk and how to protect your business.

How are cyberattacks discovered?

You may not realize a hacker has accessed your systems until months later. According to IBM’s Cost of a
Data Breach Report 2023, data breaches were identified in the following ways:

And in 25% of the malicious attacks reported, the victim’s computer systems were inoperable. In any case,
repairing the damage after an attack will be difficult, time-consuming and expensive.

How might a cyberattack affect your business?

The consequences of a cyberattack vary depending on the severity of the attack, the time it takes to discover the breach and the data exposed.

If you suffer a ransomware attack, you will have to decide between giving a hacker thousands or millions of dollars and losing all your valuable data. And you can’t guarantee you’ll get your data back even if you pay the ransom.

Then you’ll need to hire a cybersecurity team to identify and remove malware from your system. You may even have to buy new IT equipment. You can expect days of immediate downtime after an attack, directly impacting your sales and services. Morale could suffer as employees struggle to do their jobs while the IT system is being repaired. And the hit to your reputation can last for years.

Legally, you’ll have to notify customers, suppliers and business partners if their data was compromised. Many people may decide not to work with you anymore because of the attack. If local journalists publish news of the attack, it could deter potential customers from working with you.

You’ll probably face legal action from affected individuals. And if you’re in the medical industry, you could
face fines for Health Insurance Portability and Accountability Act (HIPAA) violations.

It could take years to recover from a cyberattack. Some businesses never do.

What is cyber insurance?

Regular business insurance policies don’t cover damage caused by cyberattacks. Enter cyber insurance.

Cyber insurance covers damage caused by criminal hacks and data theft. How much coverage you will get depends on the policy and the deductible you set. Here’s what you can expect from a cyber liability insurance policy.

First-party cyber coverage

First-party cyber insurance protects your business from the fallout of a cyberattack. There are several ways
to customize a cyber insurance policy. For example, your policy could cover the following:

Third-party cyber coverage

Third-party cyber insurance addresses fines and legal action brought by other individuals or
organizations. It covers:

Technology errors and omissions insurance

Technology errors and omissions (E&O) insurance is sold as a separate policy. This type of policy is for
companies offering IT-related products or services, such as software manufacturers, IT technicians and
website designers.

A tech E&O policy covers you if you or one of your employees makes a mistake and a client suffers a cyberattack as a result. For example, if a website you designed gets hacked, your client could sue you. It covers legal fees, court costs, settlements and judgments. A tech E&O policy covers mistakes you make while doing your job but doesn’t cover damage caused by cyberattacks. For example, if a hacker steals data from your computer networks and uses it to breach a client’s account, your tech E&O policy wouldn’t respond. You’d look to your cyber liability insurance policy for help.

What doesn’t cyber insurance cover?

Cyber insurance has much to offer. Even so, it won’t cover:


Cyber liability insurance isn’t standardized. Each insurance company has its own version of coverage, exclusions, terminology and definitions. Using a seasoned agent who understands your cyber liability exposure and the coverage variations and gaps is critical to managing risk.

Who needs cyber insurance?

If your business stores or processes customers’ personal or financial information, you need cyber insurance. This holds true even if you’re self-employed. What matters is the amount of data you have or have access to, not the size of your business or how many people work for you. First-person coverage may be enough, but you should consider third-person coverage if you have the risk of a lawsuit.

If you provide goods or services to other businesses, you need all forms of coverage outlined above. This is because you have access to other businesses’ online accounts, and a breach of your system also puts these accounts at risk.

Hackers place no limits on who they will target. Schools, hospitals, universities, self-employed individuals, and businesses of all sizes and industries have been victimized. When Russian hackers successfully hacked multiple U.S. federal agencies in 2020, it was because they first breached the software company SolarWinds. The hackers were able to use the breach of SolarWinds to access its clients.

Without cyber insurance, you’re stuck dealing with the aftermath of an attack on your own. Up to 60% of small businesses shut down permanently after a cyberattack, as mounting expenses and dwindling income take their toll.

How much does cyber insurance cost?

Several factors determine how much you’ll pay for cyber insurance. They include your:

How do you pick the right cyber insurance policy for your business?

Have an expert audit your IT systems before you start looking into cyber insurance providers. An audit will show vulnerabilities you need to address and help you see which forms of coverage would benefit your organization. For example, if ransomware attacks are commonplace in your industry, you’ll want to choose a policy with a high ransom payment limit.

Once you know what you need, start looking for a company to work with. A good company for your business will have experience meeting the needs of firms in your industry. For example, cyber insurance policies tailored to health care institutions won’t always meet the needs of businesses in the financial or B2B market.

You’ll also want to take the size of your business into account. Some cyber insurance providers specialize in working with large corporations or small to midsize businesses. Choosing an insurance agency familiar with the laws of your state is wise, especially if your state has many regulatory requirements for cyberattack reporting.

Evaluating cyber coverage and customer service

When you’re considering an insurance company, check its track record to ensure it offers efficient services, 24/7 support and fast compensation for claims. Some insurance companies offer cyber training, network audits and consultations to review your exposure. You can find this information online or ask other businesses for recommendations.

You want to make sure you can get help immediately after a cyberattack. This will help you avoid delays in meeting regulatory requirements, informing customers of the breach and assessing the damage. Generally speaking, it’s best to pick a company that has been in business for a long time. Such firms are more stable and reliable than new companies that may not have the financial resources to cover a costly attack.

When you’re considering an insurance policy, check it carefully to see what it does and doesn’t cover. If you don’t understand something, ask for information and make sure the answer is in writing. If you’re allowed to set a deductible, choose one that ensures your company will have the financial resources it needs to recover from an attack. Remember, your policy isn’t just one more expense to cover. It’s a financial lifeline that will keep you afloat if your business is breached.

Balancing cost with coverage

You’ll also need to take cost into account when selecting a cyber insurance policy. If you find the cost of a good insurance policy is higher than you expected, talk with the insurers about things you can do to lower premiums.

For example, you could raise the deductible and take on a larger out-of-pocket expense. In other cases, you could lower costs by implementing strong cybersecurity guidelines, training employees or outsourcing cybersecurity to an IT company. But it’s best to have these cybersecurity controls in place before you apply for a policy. Be ready to show proof. If you have employee cybersecurity training, keep records and provide them as part of your application. The same goes for written incident response programs. If you run an internet-based company in a state with a lot of regulatory guidelines, consider moving to another state with fewer regulations.

Never compromise your coverage to save a bit of money each month. You don’t want to deal with the aftermath of an attack without the resources you need to recover.

Cyber insurance can save your business

Cyber insurance doesn’t replace sound cybersecurity tools or policies. However, it can provide the financial resources you need to deal with the aftermath of an attack. It can help you recover faster than would otherwise be possible. In today’s world, cyber insurance is essential for any company that works with, stores or processes third-party personal data.

Don’t know where to start? Call your insurance agent!

Cyberattacks are becoming increasingly common and no business is immune. Adequate coverage can spell the difference between recovering quickly and being forced to shut your doors in the wake of an attack. Call an experienced cyber insurance agent. They can help you prepare your application and match you with an insurance company that fits your business needs.

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