By now, you've probably heard chatter about the massive data breach the US health insurance provider Anthem suffered (and if you haven't, you can get the facts about the breach from Anthem itself). In short, external hackers used a stolen password to break into the provider's database. There, they skimmed personal information – including Social Security numbers, medical IDs, birth data, names, and email addresses – from 80 million customers.
It's a massive attack with an equally massive price tag. According to a report by ZDNet, Anthem's data breach response efforts could reach well beyond its Cyber Liability Insurance policy's $100 million limit, which makes sense considering that amount will barely cover the cost of postage to mail out notices to 80 million people.
According to Anthem's data breach fact site, the company is doing more than just notifying affected customers by post, too. It is also offering…
- Credit-monitoring services for 24 months.
- Identity repair services.
- Identity theft insurance coverage.
- A toll-free hotline to answer questions about the breach.
Of course, all this is in addition to how much the company ends up spending to fix the security vulnerability. Plus, Anthem still has to rebuild its reputation as a trusted insurance provider once the dust settles, which could cost millions in advertising and PR expenses. Cyber Liability can cover these costs, but only up to the limits of the policy. (To learn more about what Cyber Risk coverage can do, read "Analysis Shows Less than 3% of Small Businesses Have Cyber Liability Insurance.")
Let's use Anthem's breach to learn a couple things about choosing insurance policy limits.
Choosing Insurance Limits: You'll Need More Coverage than You Think
At first glance, $100 million seems like a lot of money. When Anthem chose its policy, it probably had a slew of beautiful minds crunching numbers to determine how much coverage the insurance giant might need to cover data breach cleanup costs. Still, even with a seemingly exorbitant limit, the coverage likely won't be enough.
Though being underinsured is bad news for Anthem, it does serve as a good reminder for small-business owners:
- What seems like "a lot" of coverage may barely cover the cost of an unexpected disaster.
- Insurance is for the big, bad events that could close down your business. Invest accordingly.
So how do you choose the right amount of coverage? You work with an insurance agent.
Your insurance agent knows what policies address your risks and the limits that are usually adequate for small-business owners in your industry. Because insurance is their specialty, they follow cases like the Anthem one so they can help you avoid a similar fate.
Plus, an insurance agent can point you toward money-saving options that give you more coverage without breaking the bank. For example, if you want higher General Liability Insurance limits, your agent may recommend purchasing an Umbrella Insurance policy. Umbrella Liability Insurance can supplement your General Liability coverage once the policy limits have been reached. Umbrella limits come in $1 million increments and can cost as little as a couple hundred bucks a year. By contrast, raising your GL limits by just $1 million could significantly increase your premiums.
"But wait," you might be saying. "Surely Anthem worked with an insurance agent and look where that got it!" To which we'd say, "That brings us to part two of this lesson."
Updating Your Small Business Insurance Policies: Not Just for Overachievers
What may have seemed like a perfectly reasonable amount of coverage five years ago could be painfully out of step with today's risks. That is especially true for cyber risks, which seem to morph and multiply at warp speed.
That's why it's important to check in with your insurance agent when it's time to renew your policies. Your agent can review your coverage and recommend changes based on new or increased risk exposures in your field.
You should also update your policies whenever your business significantly changes (i.e., moves to a new location, hires new employees, or starts offering a new service). You don't have to wait until it's time to renew to update your policies for these kinds of changes, either. Inform your agent as soon as they happen to ensure your business doesn't get caught underinsured.
For more on that, read "When Is It Time for New Business Insurance Quotes?"