In 2021, a data breach cost companies an average of $3.86 million to $4.24 million. This was the highest average cost since IBM first began releasing its data breach report 17 years ago.
Unfortunately, data breaches and cybersecurity issues are no longer just a possibility in today’s online world. Now, they’re a probability. If you want to protect your company’s customers and bottom line, you need to invest in cybersecurity insurance coverage.
By buying cybersecurity insurance, you can offset costs after a cybersecurity incident. Additionally, you can minimize downtime and damages. The amount and type of coverage both depend on your organization’s needs and risk profile.
What Is Cybersecurity Insurance?
After a cybersecurity incident, cybersecurity insurance is designed to protect you from liability by covering some of your legal expenses and damages. Your cyber insurance policy will generally include coverage for legal expenses, incident response costs, forensic costs, damage expenses, restoration costs, social engineering expenses, incident management costs, and costs related to the interruption of your business.
For example, most cybersecurity insurance companies have a 24/7 response line, so you can instantly coordinate your response after a cybersecurity incident. After getting help with coordination, your coverage will pay for hiring a team to manage your response. Your policy may include coverage for the cost of replacing damaged equipment and restoring your company’s systems.
After a ransomware attack, the average downtime is 23 days. These costs can add up significantly, and cybersecurity insurance coverage typically includes losses from business interruption. Additionally, this kind of coverage can pay for credit monitoring, legal advice, incident management costs, crisis management, and forensic fees.
While social engineering coverage isn’t available with every plan, it is frequently an add-on feature. This kind of coverage helps you recover your company’s costs when an employee is tricked into giving cybercriminals money or access.
What Does Cyber Insurance Cover?
Your insurance can cover legal fees, damaged equipment, coordinated responses, and other costs related to mitigating the attack. It can also cover the price of your data restoration, customer notifications, business interruption, and forensic investigations.
Legal Fees
Unfortunately, a cyberattack can lead to major legal costs. Other than hiring an attorney for legal advice, you may be subjected to privacy lawsuits, errors and omissions claims, and privacy liability. As a result, your legal expenses can quickly mount up after an attack.
Incident Response Expenses
Hopefully, you haven’t suffered from a cybersecurity attack before. If you’ve never dealt with one, dealing with the incident response can be intimidating. Fortunately, your cybersecurity insurance cost should cover access to a 24/7 response line and the expense of getting an incident response team.
Equipment Replacements
While you won’t receive funds for improving your equipment, your insurance will pay to replace damaged equipment after an attack. Since a ransomware attack can hijack some or all of the computers on your network, these costs can quickly add up. Unless you have an impressive rainy day fund, you don’t want to pay for your equipment replacements out of your own pocket.
Forensic Expenses
To prevent an attack from happening in the future, you have to learn how you were attacked this time. Your cybersecurity insurance can pay for forensic experts to investigate the cause of the attack. Afterward, you can implement new measures to prevent similar attacks from happening later on.
Damage Repairs
Software systems can become damaged because of an attack. When you are insured, your insurance will pay the cost of repairing and restoring these systems.
Business Interruption Losses
A single attack can shut down your company for days or weeks, which can be financially devastating. With a good insurance policy, you can get your business interruption losses covered.
Incident Management Expenses
After a cyberattack, you will need to notify customers, help victims monitor credit reports, and handle other crisis-related issues. Your insurance can help you pay for credit monitoring, crisis management services, notification costs, and other incident management fees.
Social Engineering Losses
Insurance companies will typically cover the cost of cybercriminals hacking into your systems or installing ransomware. They don’t always pay for losses because of social engineering. With certain insurance plans, you can get coverage if hackers trick your employees into giving them unauthorized access or sending funds to a fake account.
There are a few things your cybersecurity liability insurance probably won’t cover. For instance, it won’t pay for lost value from intellectual property theft or lost future profits. You also can’t use your coverage for betterment, which involves improving security or upgrades after an attack.
How Much Does Cybersecurity Insurance Cost?
Your cybersecurity insurance cost can be as little as $1,500 per year for $1 million in coverage and a $10,000 deductible. Almost a third of small business owners pay less than $1,000 per year, and another third of businesses pay between $1,000 and $2,000 annually. For small businesses, the median cost of cybersecurity insurance coverage is about $140 per month and $1,675 per year.
Obviously, these costs can vary significantly based on the size of your policy, the kind of business you run, and the risks your company faces each day.
- Industry and company size:
If you work in the tech industry, you’ll most likely have to pay more for coverage than a mom-and-pop restaurant. You’ll also pay more if you have more employees and phishing risks. Before cybersecurity insurance companies give you a price, they’ll determine if your industry and company size give you a low, medium, or high risk.
- Current security measures:
When you’re already protected through a strong IT department, security software, training programs, and similar measures, it reduces the odds of a cybersecurity attack. As a result, you can pay less for insurance. If you are a high-risk business, your insurer may recommend new security protocols, software, and hardware for preventing a cybersecurity attack.
- Annual revenue:
Because your cybersecurity liability coverage will vary based on your business size and estimated downtime costs, your revenue will impact your insurance costs. In addition, you are more likely to be targeted by cybercriminals if you earn more money.
- Policy:
Do you want liability coverage or social engineering support? If your policy includes a low deductible, add-on services, and high liability coverage limits, you’ll end up paying more for it.
- Data:
A company has a low risk if they have a small customer base or limited amounts of data. Meanwhile, an online storefront might be a medium risk because they have a lot of customer financial information online. Finally, a high-risk company, like a bank or hospital, might have a great deal of sensitive information about a wide range of customers.
Who Needs Cybersecurity Insurance?
Considering the number of online threats out there right now, most businesses need some degree of cybersecurity insurance. The real question isn’t if you need cyber insurance, but how much you should get.
For example, you should get a cybersecurity insurance policy if your company carries out electronic transactions. Likewise, you may need an insurance policy if you have sensitive data from your clients or partners.
An estimated four out of 10 small business owners are somewhat or very concerned about being victims of a cyber attack in the next year. Unfortunately, many small businesses aren’t prepared for a potential attack.
In many cases, this is because these business owners think cybercriminals only go after large corporations. While large corporations might have more revenue at risk, thieves will still target small businesses because smaller companies are less likely to have cybersecurity protections. If your company falls into this category, you could be at risk.
During the last few years, many organizations have adopted remote working policies. Because more employees are working online and using technology in their day-to-day work, there is more information to steal. Additionally, there are more avenues for attacking an organization if everyone is working and shopping online.
You may need to invest in cyber insurance if your business deals with any of the following situations.
- You handle a great deal of electronic data.
- Your employees work online all or part of the time.
- Your organization handles electronic transactions.
- You have to store sensitive information for your customers, vendors, employees, or partners.
- You can’t afford to cover the costs of a cyberattack on your own.
- Your company stores important financial documents, proprietary information, or other sensitive data using computers or the internet.
Basically, all companies should get cybersecurity insurance coverage if they store any amount of digital data. Cybercriminals won’t target just large corporations or tech giants, so a company’s size doesn’t play a major role in the likelihood of being attacked. If you have electronic transactions, digital data, or online workers, you need to protect yourself from cybercriminals.
Get Cybersecurity First to Lower Your Cyber Insurance Costs
Before you even consider getting cybersecurity insurance, you need to make sure your company is protected from cyber attacks in the first place. Minimize the financial and legal risk of your business becoming a victim with reputable cybersecurity services. Once you have these protective measures in place, you could lower your cybersecurity insurance premiums and be subject to lower costs.
With cybersecurity insurance, you can reduce downtime and reputational losses after a cybersecurity breach. But more important than that, you should do all you can to prevent the breach before it happens. If you can prove to a cybersecurity insurance provider that you did all you could to avoid an attack, they’ll be more inclined to cover your losses.
If you’re looking for trusted cybersecurity solutions, look no further than the services provided by Makios Technology. We’ll protect your business from the user level all the way up to the top!
References: IBM,
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