Software Advice's latest survey of small and midsized businesses sheds some light on the awareness of and interest in Cyber Liability Insurance. The study found…
- 98 percent of small businesses don't have Cyber Liability Insurance.
- 67 percent of small-business owners don't know that Cyber Liability Insurance exists.
- 75 percent of small businesses don't have a breach response plan, leaving them utterly unprepared if they're hacked.
If you've already read "Analysis Shows Less than 3% of Small Businesses Have Cyber Liability Insurance," the results of the survey may not come as such a shock. After all, you can't be expected to invest in something you don't even know exists!
Though business owners may not be aware of Cyber Risk Insurance, they do know this: data breaches are a lasting reality of the business landscape. In other words, not having a breach response plan means you're setting yourself up for failure.
If Cyber Liability Insurance Is So Grand, Why Haven't I Heard of It?
Point taken – you probably hear way more about the fallout caused by data breaches than you hear about ways to mitigate those damages. That's part of the problem, but there are a couple other reasons why small-business owners may be overlooking Data Breach Insurance:
- It's a relatively new product, and some providers don't even offer it yet.
- Some may not realize that data breaches happen far more often to small businesses than they do to big, newsworthy corporations.
The lack of preparedness may also boil down to plain old confusion. For example, many folks may think their General Liability Insurance covers data breach costs. That's an easy mistake to make – General Liability does cover your liability for damage to others' property.
However, in the insurance world, there is a huge difference between physical property and digital property. GL can only help out when you damage or lose a third party's physical property, not when you accidentally expose their credit card information. Learn more about that here: "Why Your General Liability Insurance Doesn't Cover Data Breaches."
Do I Need Cyber Liability Insurance?
Consider this: when your business is breached, each stolen or leaked record costs about $201, according to Ponemon Institute's 2014 Cost of Data Breach Study [PDF]. That same study also found that businesses that had a formal breach response plan (e.g., action steps plus Cyber Liability Insurance) prior to an attack saved an average of $17 per exposed record. It may seem like small beans, but those savings add up when you're dealing with hundreds (or thousands!) of records. Plus, if you have Cyber Risk Insurance, those breached record costs aren't all coming out of pocket.
That's because a Cyber Liability policy can help pay for the cost of notifying breached parties, offering credit-monitoring services, repairing your security, and more. Your business may seriously benefit from this coverage if you…
- Accept credit card payments.
- Have a website.
- Store customer or client information in the cloud.
- Have a bring-your-own-device (BYOD) policy.
Sound like your business? If so, ask your insurance agent about adding Data Breach coverage to your Business Owner's Policy. For very small businesses with low risk profiles, bundling Cyber Risk coverage with a BOP can cost as little as $500, though your rates will vary based on what your business does and where it operates.