Why entrepreneurs need cyber insurance

If your startup suffers from stolen personal identifiable information data on day one, you won’t have a lot to lose. As you invest more time and resources in your company, however, you open yourself up to possible disaster if you don’t prepare properly, especially considering that data breaches are increasing. In fact, only33% of executives stated their company was breached in 2013, while 43% were breached the following year.

As a cyber consultant, I consistently watch as businesses suffer from losing data due to cyberattacks. While you may associate data breaches with large corporations, your business is just as at risk, and traditional insurance can’t help you if hackers come in and delete everything. This is where I recommend cyber insurance to act as the barrier between you and ruin.

Why Cyber Insurance?

Regulatory bodies require insurance on vehicles because someone who causes an auto accident might not have the funds to pay for the damages. Although regulations don’t require businesses to carry cyber insurance yet, doing business online without it in today’s technological economy is like driving in the fast lane without insurance: It’s not a good idea, and if something bad happens, you could be on the hook for money you don’t have.

If you run any type of service, liability insurance protects you against claims and lawsuits. It’s a standard operating procedure to have it. But businesses have already proven they can’t keep electronic data safe, and insurance companies know it.

 As a result, premiums for this type of coverage might be high, but the consequences of going without can be devastating. Smaller businesses with softer security than big-dollar firms make easy prey for hackers looking to make money on stolen consumer records.

The Federal Trade Commission strongly encourages business owners to invest in cybersecurity. This encouragement will likely become mandatory regulation in the next few years, but don’t wait for the government to force you to purchase cyber insurance.

Every small business has different needs, but if a hacker wipes out all of your data or ruins your reputation by stealing customer records, you’ll wish you had prioritized cyber insurance sooner. Don’t be blinded by profit and let security fall by the wayside; without proper precautions, it won’t matter if your startup makes $1 or $1 million when someone swoops in and takes it all away.

 

Purchasing Cyber Insurance

Most cyber insurance can cost anywhere from $2,000 to $5,000 for a small- to medium-sized business. But without it, you’ll lose a lot more when a data breach occurs. According to the 2015 Cost of Data Breach Study, the cost of a breach is $154 per lost or stolen record. Think of how many customers you have — how do the prices compare?

When deciding what type of cyber insurance works best for you, there are three things you need to do:

1.Create a checklist. Ask yourself some questions so you know precisely from which dangers you need protection. What’s the value of your stored data? If you suddenly go offline for a few hours or longer, what happens to your business? Consider whose data you’re keeping: customers, employees, or both? What is the worst-case scenario if someone were to steal or erase that data?

2. Research the “how.” Once you know what you need to protect, you need to know how. How could thieves harm your business? It doesn’t take an expert hacker to find information — sometimes, a simple malware-loaded USB or a response to a phishing email is all a thief needs.

3. Don’t go at it alone. Thankfully, you don’t have to figure it all out by yourself. Approach potential insurance partners about risk management, and find out if they see holes in your security. As cyber insurance policies become more common, insurance companies better understand which industries are more susceptible to certain attacks and write policies geared toward providing the best protection.

Don’t let your company fail because you neglected to protect it. If you have any chance of holding consumer data, you need a cyber insurance policy to augment your security arsenal and provide a safety net should the worst come to pass.

 

Source: Forbes